Tax research

A memo out of the Internal Revenue Service's Office of Chief Counsel makes the case that gender reassignment surgery cannot be deducted as a medical expense for tax purposes. The case, involving male-to-female gender reassignment surgery, is currently under consideration by the IRS Office of Appeals.The advice memorandum says that the taxpayer deducted an unspecified amount in expenses - including payments for various doctors, hormone treatments, psychotherapy, health insurance, transportation and lodging in connection with the surgery. Although the taxpayer appears to have offered extensive medical and legal documentation behind the decision to have the procedure, the chief counsel opinion offers legal support for the original IRS revenue agent defining the procedure as cosmetic.

Investors are increasingly seeking creative transaction structures to cash in on the heated real estate market.A strategy that uses preconstruction contracts in Section 1031 like-kind exchanges is one way that is gaining acceptance among investors, especially in areas with heavy condominium development.

Every year, Congress and the Internal Revenue Service help us justify a tax preparer's worth to clients by throwing a few new curves into the tax return preparation process. The 2005 tax return filing season is no exception.This year Congress even threw a few curves at the IRS and commercial tax software creators by passing year-end tax legislation with an impact on 2005 returns after the IRS had already done much of the work on its tax forms for the filing season. Here are some items to watch out for as you work through the 2005 return filing season.

Unclaimed refunds totaling more than $2 billion are awaiting about 1.7 million people who failed to file a federal income tax return for 2002, the Internal Revenue Service said.

Expanding the tax types eligible for electronic payment, the Internal Revenue Service is now accepting card payments for certain balance-due business taxes through Official Payments Corp.

President Bush said that he wouldn't allow the elimination of the mortgage interest deduction as part of suggested changes to the tax code.

Executives contemplating cross-border transactions in emerging markets view local legal, tax and accounting systems as the biggest challenges to completing a transaction, according to a poll conducted by Deloitte Financial Advisory Services LLP.

H.D. Vest Financial Services has issued an open invitation to tax professionals to attend its 20th annual Vest Fest conference in St. Louis.

California's Attorney General has filed a lawsuit against H&R Block in an attempt to halt the tax prep giant's loan program, which allows the company to take a percentage of clients' tax refunds in exchange for an advance.

The Internal Revenue Service has simplified the process for business taxpayers to file for an extension.

Banking firm HVB Group will pay $29.6 million in fines and restitution to avoid criminal prosecution from the U.S. Internal Revenue Service, settling charges that it helped wealthy Americans evade more than $500 million in taxes.

Internal Revenue Service officials announced that their latest estimates of the tax gap for the 2001 tax year comes to $345 billion.

Turns out in between the normal gossip, my friends and family had somehow neglected to spread a juicy bit of exciting Ocean State news with me -- I'm talking of course about the flat tax proposal that came out of the Rhode Island House of Representatives in early February.

IRS OPENS 2006 FILING SEASON: The Internal Revenue Service sent out 17.7 million 1040 tax packages during the first week of January to taxpayers who have previously filed paper returns. The number of paper tax booklets being mailed to Americans continues to decline as more people opt for electronic filing.The IRS expects to process about 135 million individual tax returns in 2006 and to see continued growth for its e-filing service. The agency passed a milestone last year as more than half the nation's taxpayers filed their tax returns electronically.

More than half of all professional liability claims against accountants are tax-related, according to insurance industry executives. As accountants plunge ahead into their busy season, they should take note of their increasing exposure.Although audit malpractice claims are the highest in terms of severity, the most frequent claims are those for tax services, said Joe Wolfe, assistant vice president for risk control at CNA, in an interview last fall. CNA is the underwriter for the American Institute of CPAs' professional liability insurance program.

In violation of a longstanding court order, the Internal Revenue Service has stopped providing detailed statistics about how the agency enforces the nation's tax laws, according to a motion filed in the United States District Court for the Western District of Washington.The legal challenge was brought by Susan B. Long, a professor of management information and decision sciences at Syracuse University's Martin J.Whitman School of Management. Long has used the IRS data to document its performance for more than 30 years. Since 1989 she also has been co-director of the Transactional Records Access Clearinghouse, a data-research organization that provides the public with detailed information about the operation of hundreds of federal agencies, including the IRS.

Practitioners and industry observers concur with the call by Taxpayer Advocate Nina E. Olson for tax simplification.Although legislation calls for the Taxpayer Advocate to list at least 20 of the most serious problems facing taxpayers, Olson went a step further and included a major section on tax simplification.

The Internal Revenue Service has come out of the gate in 2006 with a shiny new employment tax form for small employers.Effective January 1, employers who expect to owe no more than $1,000 in federal employment taxes for the 2006 calendar year will be required to file Form 944, Employer's Annual Federal Tax Return, replacing the quarterly Form 941.

Many of the 19 former tax professionals facing trial over the sale of KPMG tax shelters, whose legality has been questioned by the federal government, have asked for the dismissal of the charges in a variety of joint motions.More than 25 motions were filed in Manhattan's U.S. District Court, several requesting that the charges against the professionals be dropped entirely, as no court has ever actually ruled the shelters to be illegal. Many additional motions asked for the dismissal of charges because the defendants said that they were being unfairly singled out from other KPMG officials who sold similar shelters.

The Roth 401(k) contribution option, even with almost five years of advance warning, is taking a while to catch on.Reports are that fewer than 20 percent of eligible 401(k) plans now have them, with the rest sticking with tried-and-true pre-tax deferral contributions. If field data is accurate, however, this tepid reception is about to change. When employers, especially those also wearing the hat of the highly paid employee, begin to run the numbers, Roth 401(k) accounts are looking very attractive. This view is especially true following the recent release of favorable final regulations on Roth 401(k) contributions.