Tax strategies

Like many of you who were once college freshman, I can vividly recall my first formalized session of “orientation,” those mandated get-togethers where a group of impressionable 17-and 18-year-olds receive a veritable laundry list from upperclassman and administrators of the do’s and don’ts in academe.

The Internal Revenue Service has identified a significant refund scheme involving hundreds of people living in the Commonwealth of the Northern Mariana Islands.According to the agency, many nonresidents and locals of the islands filed income tax returns requesting refund checks including the earned income tax credit. But CNMI residents are not required to file a return with the IRS and are not eligible to claim the credit.

The Government Accountability Office wants to see better descriptions and more cost and expected performance information on the Internal Revenue Service’s new initiatives in the agency’s future budget submissions.The IRS’s budget request for 2008 includes a spending increase of almost 5 percent, to $11.6 billion, and the GAO noted that the agency’s budget proposes shifting a greater proportion of spending to enforcement, continuing a trend.

Embarrassingly for Senate Finance Committee Chairman Max Baucus, one of the loudest proponents of reducing the tax gap, two mistakes he made in recent years on his own property taxes have recently come to light.A political ad sponsored by the Montana Republican State Central Committee has brought to light local property taxes in both Washington and Montana that tripped up Baucus, D-Mont.

The Treasury Department issued rules last week aimed at dismissing some of the uncertainties around Roth 401(k) plans.

Effective immediately, newly credentialed New Jersey CPAs will have to attend an orientation program within six months of qualifying as a CPA.Thanks to a bill signed last week by acting New Jersey Gov. Richard Codey, the state Board of Accountancy will now get to work determining what exactly that program curriculum will include. Ralph Albert Thomas, executive director of the New Jersey Society of CPAs, which supported the bill, told a local newspaper that at minimum, the program will contain a course on New Jersey law and ethics.

The Internal Revenue Service announced that while the phase-out of the tax credit for Toyota and Lexus hybrids continues, General Motors Corp. and Nissan hybrids still qualify for the full credit.

Practitioners considering making an offer in compromise to the Internal Revenue Service on behalf of a client are faced with significant changes to the program. While negotiating an OIC has not been an option for most taxpayers, the changes in several key features mean that it will no longer be a feasible option for some.Topping those new OIC guidelines is a rule in which taxpayers filing a lump-sum offer must pay a non-refundable deposit of 20 percent of the offer amount with the application.

Efforts to rid the European Union of the massive confusion caused by having its enterprises dealing with 27 different corporate tax systems could now come into effect as early as 2010.

The Internal Revenue Service is preparing to redesign its Form 990, “Return of Organization Exempt From Income Tax,” according to published reports.

In recent hearings before the House Ways and Means Subcommittee on Select Revenue Measures, both the American Institute of CPAs and the New York State Society of CPAs called for the repeal of the oft-debated alternative minimum tax.

The New York State Society of CPAs will host the 28th Annual New York CPA Business & Technology Show & Conference on May 16 and 17 at the Hilton New York Hotel.

Lacerte users want respect from their tax software vendor. And if they don’t get it soon, they’re going to look at alternatives.

The Treasury Inspector General for Tax Administration has released preliminary data for the tax-filing season on returns received and processed as of March 10.

A federal jury has found a Florida tax preparer guilty on 50 charges of preparing fraudulent individual and trust income tax returns, impeding the enforcement of tax laws, and criminal contempt.Louis Wayne Ratfield, of Lake Worth, Fla., was originally indicted on 56 counts for a tax fraud scheme that prosecutors said involved hidding income and assets in bogus trusts. According to the indictment, Ratfield’s scheme caused a tax loss to the federal government of more than $6.4 million.

The Virginia Society of CPAs has named Stephanie R. Peters as its new president and chief executive.

The Internal Revenue Service has issued for public comment draft versions of revised Form 1120-F, U.S. Income Tax Return of a Foreign Corporation, and related schedules, including Schedule M-3, new for 2007.Taxpayers with $10 million or more in total reportable assts filing Form 1120-F for tax years ending on or after Dec. 31, 2007, will be required to file Schedule M-3. Three other new schedules for Form 1120-F include: · Schedule H, Deductions Allocated to Effectively Connected Income Under Regulations Section 1.861-8; · Schedule I, Interest Expense Allocated Under Regulations Section 1.882-5; and, · Schedule P, List of Foreign Partner Interest in Partnerships. The new schedules will provide for increased disclosure of information regarding such items as allocable interest expense and home office deductions, as well as effectively and non-effectively connected income that is included in Form K-1 reported by a partnership to a foreign corporate partner and that is reportable by the partner on Form 1120-F. The new schedules also provide a consistent reporting format for all taxpayers. In addition, Schedules M-1 and M-2, previously included in Form 1120-F, are now separate forms. Schedule M-1, Reconciliation of Income (Loss) per Books with Income per Return is used by corporations with assets under $10 million. Schedule M-2, Analysis of Unappropriated Retained Earnings per Books, is used by corporations of all asset sizes. The draft form and schedules are available on www.IRS.gov, and any comments should be submitted by May 25, 2007, via e-mail to SchM3@irs.gov.

When it comes down to it, it’s with surprisingly little debate or complaint that the general populace submit to the payment of taxes.

The Internal Revenue Service is calling for nominations to its Internal Revenue Service Advisory Council, a group that provides an organized public platform for IRS officials and public representatives to discuss relevant tax issues. Applications will be accepted from May 1, 2007, through June 15, 2007. The IRSAC is comprised of up to 30 members, who are appointed to three-year terms by the commissioner. Nominations are currently being accepted for five to seven appointments that will begin January 2008. IRSAC membership includes representation from the tax professional community such as tax attorneys, CPAs, enrolled agents, enrolled actuaries and appraisers, as well as members of the large and small business communities. More information is available on the tax professional's page at www.irs.gov.

Accounting firms are getting more creative and innovative, and many see the value in receiving independent recognition for their efforts and publicizing that fact. The innovations help improve the firm’s bottom line, and the recognition and publicity aids in attracting and retaining top talent. It also substantially enhances the firm’s brand, as existing and prospective clients see increased value in being associated with an innovative firm.