Tax news July 2007

Tax

New provision would change tax preparers' role and increase fees

The American Institute of Certified Public Accountants (AICPA) is urging Congress to modify a provision it approved that has resulted in a fundamental change in the role of tax return preparers and will likely cause an increase in preparer fees for taxpayers.
Tax

House and Senate zero in on taxation of fund managers

The House and Senate have introduced bills that would dramatically change the income tax treatment of "carried interest" profits earned by fund managers in their capacity as general partners of investment partnerships. Hedge fund managers, private equity fund managers, and real estate operators are the targets for legislation that would eliminate the perceived benefits derived from doing business through partnerships.House of Representatives ProposalH.R.
Tax

Senate fights back on recent Supreme Court nexus issue

A bill has been introduced in the U.S. Senate that would require businesses to have a physical presence in a state in order to be subject to income and "other business activity taxes." This proposed legislation is offered in direct response to the recent U.S. Supreme Court refusal to consider two cases wherein states assessed income and franchise taxes on companies with no physical presence in the state.The Supreme Court's inaction in the matters of Lanco, Inc. v. Director U.S. and FIA Card Services N.A. f/k/a MBNA America Bank, N.A. v.
Tax

Electronic excise tax filing is coming

The Internal Revenue Service will add three excise tax forms this year to the ever-expanding list of federal tax returns and schedules that can be filed electronically."Electronic filing is a key component to modernizing our tax system," IRS Acting Commissioner Kevin M. Brown said.
Tax

Results are in from AICPA tax gap survey

The American Institute of Certified Public Accountants has issued the results of its Internet-based membership survey regarding the federal tax gap. The AICPA surveyed 1,290 participants in an effort to gain a better understanding about the tax gap.
Tax

New Mazda vehicles certified as qualified hybrids

The Internal Revenue Service has acknowledged the certification by Mazda Motor of America, Inc., that several of its Model Year 2008 vehicles meet the requirements of the Alternative Motor Vehicle Credit as qualified hybrid motor vehicles.The credit amount for the certified 2008 model year hybrid vehicles are:Mazda Tribute 2WD Hybrid — $3,000 Mazda Tribute 4WD Hybrid — $2,200 The Tribute is Mazda's first gasoline-electric model.
Technology

DOJ is NOT sending e-mails about the IRS

The Department of Justice has recently become aware of fraudulent spam e-mail messages claiming to be from DOJ. Based upon complaints from the public, it is believed that the fraudulent messages are addressed "Dear Citizen." The messages are believed to assert that the recipients or their businesses have been the subject of complaints filed with DOJ and also forwarded to the Internal Revenue Service. In addition, such e-mail messages may provide a case number, and state that the complaint was "filled [sic] by Mr.
Tax

Revised innocent spouse form now available

The Internal Revenue Service has announced a redesigned Form 8857, Request for Innocent Spouse Relief, that will help reduce follow-up questions and reduce the burden on taxpayers.The form will ask more questions initially, but collecting critical information early in the process will mean faster processing of the request. Previously, Form 12510, Questionnaire for the Requesting Spouse, was separate from Form 8857. The redesign will combine and streamline the two forms.
Tax

IRS can now tax nonphysical injury awards

The United States Court of Appeals for the District of Columbia Circuit has ruled that the IRS can tax damage awards for nonphysical injuries such as mental distress or injury to reputation.In a case that overturns a decision by the same court just last summer, the judges ruled that a tax upon nonphysical damages "is within the Congress’s power to tax."To many analysts, the surprise in this instance was not the reversal of the original decision as much as it was the original decision itself, which led some legal experts to claim it was a threat to the ability of the IRS to collect taxe
Tax

They're back! IRS resurrects random audits

The Internal Revenue Service has announced plans to return to its practice of selecting random tax returns for audits this fall. Beginning in October, the Service will target approximately 50,000 income tax returns from 2006.The random audit process had been discontinued five years ago when the IRS began its mission to be recognized as a kinder, gentler agency.Traditionally, a random audit is a full-blown audit where the chosen taxpayer is subjected to an examination of every item on the tax return and must provide justification for each item.
Tax

Mellon Bank reaches settlement over lost tax returns and checks

Pittsburgh-based Mellon Bank has agreed to pay the federal government $16.5 million to settle all claims relating to the destruction of 77,000 federal individual income tax returns and checks in 2001.Mellon had a contract to collect and process returns and payments for the Internal Revenue Service during the peak busy season in the spring of 2001.
Tax

Washington State joins Streamlined Sales Tax Project

The State of Washington is the latest to join the Streamlined Sales Tax Project (SSTP), a coalition of now 22 states that have agreed to work together to modify sales tax rules in their respective states for purposes of allowing retailers to collect sales tax on Internet sales made to out-of-state purchasers.Washington's membership in the SSTP will go into effect on July 1, 2008, but retailers in the state can begin collecting sales tax under the program immediately.
Tax

Maine governor breaks new ground with student tax credits

The state of Maine has raised the bar when it comes to college tax credits.
Tax

ETAAC report addresses IRS shortfalls, recommends future plan

The Electronic Tax Administration Advisory Committee (ETAAC) has issued its annual report to Congress providing information about the IRS's progress in furthering electronic tax return filing.
Tax

IRS Free File program not living up to expectations

The Treasury Inspector General for Tax Administration (TIGTA) has released a new report indicating that the IRS's online Free File program needs better administration and should be expanded.Free File is an IRS program that offers links to tax software service providers who agree to provide free electronic federal tax return filing for certain qualified taxpayers.

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