The Taxpayer Advocate Service (TAS) changed its criteria for accepting individual taxpayer cases for assistance, reducing the instances in which it will accept cases. The TAS said it took this action so that it can focus on cases “where we can add the most value.” In a notice to taxpayers
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TOPICS / TAX
Individual income taxation
2012 tax software survey
In this year’s survey by the JofA and The Tax Adviser, more than 6,000 CPAs assessed the software they used to prepare 2011 tax returns, revealing what they liked and disliked about their software. Overall, respondents were pleased with their software: On average, the products rated 4.3 out of 5.
IRS changes stance on application of Sec. 6662 penalty to frozen refundable credits
The IRS announced, in Program Manager Technical Advice (PMTA) 2012-16, that it would no longer impose a penalty under Sec. 6662 for a substantial understatement of tax when a taxpayer claims a refundable tax credit he or she is not entitled to, but the IRS does not pay the refund
AICPA provides guidance on FSA certification letters
In response to a Farm Service Agency (FSA) initiative requesting that CPAs certify some clients’ income, the AICPA has worked with the FSA to create a certification letter CPAs can use and is providing its members with sample engagement and disclosure letters to be used in connection with providing a
IRS Chief Counsel’s office issues advice on identity theft returns
In Program Manager Technical Advice 2012-13, the IRS Office of Chief Counsel explained in a memorandum to Small Business/Self-Employed Division attorneys what the IRS can do when a return is filed by an identity thief in order to generate a fraudulent refund and the IRS has issued a statutory notice
Removal of two-year limit on innocent spouse claims does not revive taxpayer’s case
The U.S. District Court for the District of Massachusetts dismissed a taxpayer’s claim that she was entitled to innocent spouse relief under Notice 2011-70, which announced the removal of the two-year limitation period for claims for equitable innocent spouse relief under Sec. 6015(f) (Haag, No. 11-CV-11591-PBS (D. Mass. 8/13/12)). The
First Circuit strikes down Defense of Marriage Act but stays tax remedies
The First Circuit Court of Appeals on May 31 declared part of the federal Defense of Marriage Act unconstitutional, upholding a Massachusetts federal district court decision. The appeals court held that the act’s denial of federal benefits to lawfully married same-sex couples violates the Equal Protection Clause of the U.S.
Supreme Court upholds health care law
In a much-anticipated decision, the U.S. Supreme Court declared the mandate in IRC Sec. 5000A, requiring U.S. citizens and legal residents to maintain minimum essential health coverage, to be a permissible exercise of Congress’s taxing powers under the Constitution (National Federation of Independent Business v. Sebelius, Sup. Ct. Dkt. No.
TIGTA, Congress target identity theft
On May 8, the House Ways and Means Oversight and Social Security Subcommittees held a hearing on tax fraud involving identity theft. The same day, the Treasury Inspector General for Tax Administration (TIGTA) released a report saying the IRS does not handle identity theft issues well (TIGTA Rep’t No. 2012-40-050).
Charitable deduction erased by statement’s omission
The Tax Court upheld a disallowance of more than $22,000 of a couple’s charitable contribution deduction solely for the lack of a contemporaneous statement from their church, the donee, that the couple received no goods or services in return. The taxpayers, David and Veronda Durden, made the contributions by check,
Are frequent flyer miles taxable?
Earlier this year, Citibank surprised many of its customers by issuing Forms 1099-MISC, Miscellaneous Income, to report the value of frequent flyer miles the customers had received in exchange for opening new accounts as part of an ongoing promotion. Understandably, the customers were upset because, the value of the miles
Prop. regs. would clarify who is subject to Sec. 274(n) limit on meal expenses
The IRS released proposed regulations under Sec. 274 clarifying which party is subject to the rule under Sec. 274(n)(1)(A) that limits the deduction for meals to 50% of the expenses incurred (REG-101812-07). As the IRS emphasized, only one party is intended to be subject to the limitation, and there has
False internet rumors about “real estate transaction tax” worry taxpayers
The National Association of Realtors has some tax advice for users of the internet: Don’t believe everything you read. There has been a recent flare-up of chain emails purporting that, come Jan. 1, all real estate transactions will be subject to a 3.8% federal sales tax. The problem: That’s not
Taxpayers who did not establish insolvency must recognize COD income
Taxpayers who settled a credit card debt for $4,412 less than they owed in 2008 had to include that amount in income because they did not prove they were insolvent under Sec. 108(a)(1)(B) at the time of the debt discharge (Shepherd, T.C. Memo. 2012-212). Sec. 108(a)(1)(B) excludes cancellation of debt
Tax Court upholds regulation requiring dependents be citizens in year tax benefits are claimed
On Thursday, the Tax Court upheld Regs. Sec. 1.152(a)(1), which requires that children be U.S. citizens at some time during the calendar year for which the children are claimed as dependents, as a valid interpretation of Sec. 152(b)(3)(A) (Carlebach, 139 T.C. No. 1 (2012)). The taxpayers and their six children
Self-employed can deduct Medicare premiums, IRS Chief Counsel advises
Explaining a recent reversal of a long-held IRS stance, the Office of Chief Counsel advised IRS attorneys on Friday that self-employed individuals may deduct Medicare premiums from their self-employment income. Chief Counsel Advice (CCA) 201228037 clarifies an IRS position that previously has appeared only in instructions to Form 1040, U.S.
Debtors’ taxes are not discharged in bankruptcy where tax return was filed late
A federal appeals court held that bankrupt debtors who filed their income tax return 17 months after their income taxes were assessed were not entitled to have those taxes discharged in the bankruptcy proceeding (In re Wogoman, No. CO-11-084 (B.A.P. 10th Cir. 7/3/12)). In doing so, the court considered what
IRS looks into international activities
Many tax-exempt entities participate in the global economy by engaging in charitable or other exempt activities overseas and/or making foreign financial investments. These activities have drawn attention from the IRS and other federal agencies as they examine the flow of tax-exempt funds around the world. FOREIGN BANK ACCOUNTS The first
Independent contractors and the Section 530 safe harbor
In September 2011 the IRS announced a new voluntary classification settlement program (VCSP) providing partial relief from retroactive federal employment tax assessments for eligible taxpayers that agree to prospectively treat their workers, or a class or group of their workers, as employees (see “Tax Matters: IRS Offers Employee Reclassification Agreement,”
Unmarried co-owners must allocate mortgage interest limits
The Tax Court held that, in calculating qualified residence interest, unmarried taxpayers must apply the debt limits for home acquisition and home equity loans to their total joint indebtedness on qualified residences rather than to each of their shares of the indebtedness. Sec. 163(h)(3)(A) permits taxpayers to deduct interest paid
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SPONSORED REPORT
Preparing clients for new provisions next tax season
As the 2025 filing season approaches, H.R. 1 introduces significant tax reforms that CPAs must be prepared to navigate. These legislative changes represent some of the most comprehensive tax updates in recent years, affecting both individual and corporate taxpayers. This report provides in-depth analysis and guidance on H.R. 1.
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