When the Science Applications International Corporation (SAIC) filed its 1999 tax return, it made a huge mistake based on a misreading of the tax law. That mistake led them to overpay their state taxes by millions of dollars. Combined with other amounts they had paid (about $4.9 million) they still got a refund of over $685,000. Here's where the mistake occurred. SAIC, a California- based company also had offices in Maryland. In 1999 they sold stock, in Network Solutions, Inc, which they had held for investment, resulting in a gain of $716 million.

The IRS has issued guidance on how an employer determines the amount of income required to be withheld for tax purposes relative to payments of supplemental wages paid under nine differing circumstances. Employers determine withholding on payments of supplemental wages under either an aggregate method or an optional flat rate method.

Tax preparers are warning taxpayers: If you get more than one stimulus check, it's no windfall. You'll get caught if you try to cash it.A Chicago-based technical writer, who did not give her name, told MarketWatch that she opened her mailbox to find a $600 stimulus check - after she had already deposited a $600 stimulus check.The problem appears to be isolated. MarketWatch reported that it found just one tax preparer who said a client received two payments.

If Hurricane Katrina destroyed your primary residence, The Internal Revenue Service (IRS) has again extended the time you have to sell the lot that the house stood on and enjoy more favorable tax benefits.Normally, federal law gives owners of homes that are destroyed two years to sell the lot that remains and still be able to qualify for tax advantages. But beyond two years, the sale of these properties is considered the sale of vacant land and larger tax implications apply, according to The Times-Picayune.This month, the IRS extended the deadline by 16 months.

An Internal Revenue Service tax examiner has been charged with snooping into the tax records of nearly 200 actors, celebrities, professional athletes, and even his next-door neighbor.John Snyder, of the Covington, KY IRS processing center, allegedly looked up personal information on actors Kevin Bacon, Alec Baldwin, Sally Field, Vanna White, and the late Eddie Albert.

The economic stimulus payments that taxpayers have received will not be considered taxable income by the Internal Revenue Service but some of this money may end up in the coffers of individual states, which are free to decide how to treat the payments. Few will tax the money directly as income - currently, only Alabama is considering this option - but most anticipate additional revenue from sales or excise taxes, or indirectly, in some states, from a decrease in a deduction.

The Internal Revenue Service has announced that interest rates for the calendar quarter beginning July 1, 2008, will drop by one percentage point. The new rates will be: Five percent for overpayments [four percent in the case of a corporation]; Five percent for underpayments; Seven percent for large corporate underpayments; and Two and one-half (2.5) percent for the portion of a corporate overpayment exceeding $10,000. Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis.