Tax news March 2007

Tax

8 in 10 Taxpayers Need Professional Help

Almost eight in 10 taxpayers don't have the right date circled to remind them when their tax return is due, and almost half don't know how much their telephone could be worth this tax season, according to H&R Block, Inc. More than 1,000 taxpayers, ages 22 to 64, shared their tax-season thoughts as part of an H&R Block consumer behavior survey.
A&A

Prepaid Phone Retailers Qualify for Refunds

Under the law, retailers and other businesses that sell prepaid phone cards for long-distance service usually qualify for the telephone tax refund. Normally, the phone card retailer, not the phone company that issues the card or the customer who uses the card, is responsible for paying the three-percent federal excise tax.
Tax

Connecticut Considers Income Tax Increases

The Connecticut Legislature is considering a measure that would increase the personal income tax rate for high income taxpayers and reduce the sales tax rate.While reducing the sales tax rate from 6 to 4.5 percent, the proposal, CT SB 1385, also would eliminate the property tax credit, establish a refundable credit equal to 20 percent of the earned income tax credit.The proposal also would increase the C corporation tax from $250 to $400 and increase the estate tax rate from 5 to 5.5 percent.
Tax

40 Frivolous Tax Positions to Avoid

The IRS issued guidance identifying 40 frivolous positions to avoid when filing tax returns. They have no basis for validity in existing law or have been deemed frivolous by the United States Tax Court or other federal court. If these or other frivolous positions are contained in a tax return, taxpayers could face a $5,000 penalty – 10 times the previous maximum.
A&A

Tax Gap Solutions Burden Small Businesses

Proposals recently issued by the Treasury Department to close the tax gap, which focus on small businesses and the self-employed, would generate only $2.9 billion in revenue, one percent of the estimated total, while they would increase the paperwork requirements on small businesses, and even turn them into tax collectors, bizjournals.com reports. “That’s 1 cent on the dollar,” Senator Max Baucus, (D – Mont.) told Treasury Secretary Henry Paulson.
Community News

Florida Bill Proposes Tax Tribunal

The Florida Legislature is considering a bill establishing a tax tribunal. The tribunal would settle all disputes sought under the state’s tax laws while holding the powers of an administrative court. The bill, FL HB 1369, would allow licensed accountants, enrolled agents and attorneys would be allowed to represent taxpayers before the tribunal.
Tax

Budget Blueprint Raises IRS Enforcement Funds

The budget blueprint for fiscal years 2008 through 2012 approved by the Senate Budget Committee provides special treatment to increased funding for IRS tax enforcement.The budget resolution would allow the government to break its discretionary spending limit for 2008 in order to total up to $399 million specifically earmarked for enforcement, if and when $6.83 billion was already provided for enforcement.President Bush previously requested $4.93 billion for IRS enforcement in his FY '08 budget.NAEA E@lert notes that the only binding feature of the budget resolution is its estab
Tax

U.S. Business Leaders Seek Reg. Reductions

A all-star panel of American business and government leaders pushed Tuesday for a rollback in regulations they say are necessary to keep U.S.
Tax

E-File, Extension Deadline Reminder

The Internal Revenue Service reminds certain corporations with assets of $10 million or more and whose tax year is the calendar year to e-file their returns or file for an extension by the March 15 filing deadline.
Practice

Identity Theft: Do Your Employees Have Too Much Access?

About a month after a woman was hired to help with receptionist duties, accounting, invoicing and filing at a small Midwest shipping company, she started calling in sick.When she was out, packages started arriving that were addressed to unknown recipients. Her boss sent them back. But on another day when the receptionist was out, a delivery person told the owner that one of the reclaimed packages was part of a potential fraud investigation.
Technology

Direct-Deposit Refunds Top $100 Billion

Compared to this time last year, direct deposits are up. So is the number of tax professionals using e-file. But, according to IRS e-News for Tax Professionals, about three in 10 tax returns are not requesting the one-time telephone tax refund. Although some of these taxpayers may not be eligible, others may qualify and not know it.
Tax

How to Apply for an ITIN

Use the January 2007 revision of Form W-7, Application for IRS Individual Taxpayer Identification Number to apply. Attach a valid federal income tax return unless you qualify for an exception, and include your original or certified proof of identity documents.Because you are filing your tax return as an attachment to your ITIN application, you should not mail your return to the address listed in the Form 1040, 1040A or 1040EZ instructions. Instead, send your return, Form W-7 and proof of identity documents to:Internal Revenue ServiceAustin Service CenterITIN OperationP.O.
Tax

Affected Farmers, Fishermen Can Seek IRS Waiver

The Internal Revenue Service announced that farmers and fishermen may ask the IRS to waive any estimated tax penalties if they were affected by the snowstorms that began on February 19, 2007.The timing and suddenness of the storm, as well as the resulting power outages, may have affected the ability of many farmers and fishermen to file their 2006 calendar year return by March 1, 2007. Generally, farmers and fisherman can avoid an estimated tax penalty if they file their returns and pay the full amount of tax shown on their return by March 1, 2007.
Tax

Avoiding a Tax Bite on Inherited IRAs and 401(k)s

Like life insurance, beneficiaries of individual retirement accounts (IRAs) and workplace accounts (401k, 403b and 457 plans) inherit the proceeds directly without having to go through probate court. And IRAs and 401(k)s have become popular in many estate plans in recent years because they are not subject to probate costs. But unlike life insurance, inherited tax-deferred accounts can trigger a big tax bill for beneficiaries if they transfer the funds to their banks before they talk to their accountants or financial advisers, SFGate.com reports.
Tax

NAEA Chairman Testifies on Tax Gap Closures

National Association of Enrolled Agents (NAEA) Government Relations Chair Roger Harris Wednesday testified before the Internal Revenue Service Oversight Board about potential options for closing the tax gap. “While economists and statisticians may parse IRS data and arrive at any number of conclusions, common sense seems to indicate that any serious strategy to narrow the tax gap will of necessity include measures aimed at shoring up reporting compliance,” said Harris.
Tax

IRS Extends Tip Income Program

The IRS has extended the 2007 deadline until June 30 for restaurant or beverage businesses to elect to participate in the Attributed Tip Income Program.The extension is in response to requests from restaurant and beverage industry members and is only applicable for the 2007 calendar year.Normally, eligible establishments must elect to participate in ATIP by Feb.
Tax

How to Avoid Schedule K-1 Errors

A recent study found that many unnecessary notices issued to taxpayers could have been avoided if Schedule K-1 entity information was accurate when the forms were filed and if offsets against income reported on Schedule K-1 were reported correctly.In response, the Internal Revenue Service has provided tips to businesses, individuals and tax professionals to avoid errors involving Schedules K-1.Income, deductions and credits from partnerships, S corporations, estates and trusts are reported to investors on Schedules K-1.
Tax

Tax Change for Donations Sparks Goodwill Reminder

Goodwill Industries is reminding tax preparers that donations of used clothing and household items qualify as tax deductions as long as they are in good condition.“It used to be that people would keep general records and write something like, ’four boxes of clothing’ on a Goodwill receipt,” says George W. Kessinger, President and CEO of Goodwill Industries International.
Tax

IRS Guidance on Car Value Treatment

The Internal Revenue Service and the Treasury Department announced that they will work to publish guidance for automobile wholesalers, manufacturers and dealers regarding the proper treatment of the dollar-value, last-in, first out (LIFO) inventory method for pooling purposes of crossover vehicles, which have characteristics of trucks and cars, reports IRS e-News for Small Businesses.“The accounting issue confronting the automobile industry has been selected for the Industry Issue Resolution (IIR) Program, which provides guidance to help clarify complex tax issues.
A&A

Maryland Hopes Tax Preparers & Massage Parlors Soothe Deficit

Faced with a $1.5-billion budget deficit, Maryland legislators are focusing on widening the list of taxable services to extend the tax base. And they’ve lumped tax preparers in among escort services and massage parlors as targets of new sales taxes.Under bill MD HB 448, Maryland would charge the state’s sales and use tax for such commercial services as tanning salons, massage parlors, escorts and tax preparation.The bill is scheduled for a hearing on March 14.

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