CPA tax preparers’ attitudes toward their tax research services in some respects reflect a universal quandary of the Information Age: They’re pleased to have so much material at their fingertips, but despite modern aids such as keyword searching, are still often frustrated in tracking down a particular desired bit of
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TOPICS / TAX
Individual income taxation
Medical Deduction Allowed for In-Home Personal Care
The Tax Court held that payments made to an elderly woman’s providers of personal care that she required due to her diminished capacity qualified as long-term-care services and were therefore deductible under IRC § 213(d)(1)(C). Lillian Baral was diagnosed with dementia by her physician in 2004. After she was hospitalized
Roth Restructure “Too Good to Be True”
The Tax Court held on July 5 that the IRS properly assessed excise tax on a taxpayer’s excess contribution to a Roth IRA, since the attempted tax-free conversion of a regular IRA to a Roth IRA lacked economic substance. In addition, the court held that the taxpayer was subject to
SE Tax and Sporadic Activity
A common issue for taxpayers and their CPA return preparers is whether an activity for which the taxpayer received compensation during the tax year constitutes self-employment for purposes of self-employment tax. The answer can make a big difference in tax liability, since self-employment tax amounts to 15.3% of net self-employment
IRS Relents on Two-Year Limit on Innocent Spouse Equitable Relief
After winning appeals in three federal circuit courts of its two-year limit for requesting equitable innocent spouse relief, the IRS said on July 25 it will no longer observe that deadline. In Notice 2011-70, the IRS said it will now consider taxpayer requests for equitable relief from joint and several
Final Regulations Simplify Reduced Research Credit Election
The IRS released final regulations (TD 9539) further simplifying an election method by which taxpayers may use a standard rate to reduce a research credit under IRC § 41 in lieu of reducing their research expense deductions. The final regulations also clarify how members of a controlled group may make
IRS Updates, Clarifies Travel Allowances, Reinstates High-Low Method
The IRS issued an update and new guidance Friday (Revenue Procedure 2011-47) for use of a federal per diem rate to substantiate the amount of ordinary and necessary expenses for lodging, meals and incidental costs paid or incurred for business-related travel away from home. The IRS stated that this revenue
IRS Issues Guidance on Fingerprinting, Other Registered Tax Return Preparer Details
The IRS provided more details Wednesday of its still-developing requirements for all paid tax return preparers to be registered and undergo a background check, to include fingerprinting. The IRS said CPAs are exempt from fingerprinting “at this time.” It also said it will not require individuals to be fingerprinted prior
2010 Estate Tax Payment, Carryover Basis Election Extended
Executors of estates of most decedents who died in 2010 now can get an automatic extension until March 19, 2012, to pay any estate tax due as well as to file an estate tax return, the IRS announced Tuesday. The announcement, in Notice 2011-76 and News Release IR-2011-91, also postpones
President’s Jobs Bill Contains Many Tax Proposals
President Barack Obama submitted his American Jobs Act to Congress on Monday, and among its provisions are several tax items, including a temporary payroll tax cut, a limit on itemized deductions for certain high-income taxpayers, and a proposal to tax carried interests as ordinary income rather than capital gains. The
Estate Tax Form, Instructions Finalized for 2010; Due Sept. 19
The IRS on Thursday posted the instructions for Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, for decedents dying in 2010. For most 2010 decedents, the due date is Sept. 19. The form itself was posted on Sept. 3, but without instructions. For decedents who died between Jan.
IRS Expands Hurricane Irene Relief
On Friday, the IRS expanded its Hurricane Irene relief to include four counties in Vermont, after the president declared those counties federal disaster areas (VT-2011-34). The tax relief announced is similar to that already published for parts of North Carolina, New York, New Jersey and Puerto Rico. (For details of
Taxpayers Hit by Irene Get Postponement
Taxpayers in certain areas affected by Hurricane Irene have until Oct. 31 to file certain returns and make payments normally due before then, the IRS announced Thursday (IR-2011-87). The areas eligible for relief include parts of North Carolina, New Jersey, New York and Puerto Rico; the IRS expects to provide
Real Estate Transfer Taxes: Practical Considerations
Approximately two-thirds of U.S. states, as well as a number of municipalities, counties and other units of local government, impose a tax on taxpayers when they transfer real property to another party. As a practical matter, a real property transfer tax is typically triggered if a deed is recorded; however,
2011 Tax Software Survey
This year’s tax preparation software survey by The Tax Adviser and the JofA yielded more than 10,000 responses from readers, showing what tax professionals like and dislike about the tax preparation software they used this tax season. As in years past (see the 2010 survey here), price and ease of
Golfer Bogies Endorsement Income
Professional golfer Retief Goosen split a decision with the IRS in the Tax Court that partly redetermined the character and source of his income from product endorsements. Goosen is a native of South Africa and a nondomiciliary United Kingdom resident. He was well-known abroad before he won the 2001 U.S.
Deduction for Cat Expenses Get Second Life
The Tax Court permitted a deduction for a taxpayer’s unreimbursed volunteer expenses incurred while caring for foster cats in her home, since they were incurred “incident to the rendition of services” to a qualified organization. The court also held the recordkeeping requirements for cash contributions under $250 should apply to
No Reasonable Cause Defense for Preparer’s Omission
The Tax Court upheld an accuracy-related penalty, rejecting the husband-and-wife taxpayers’ argument that they had reasonable cause for a tax understatement caused by their return preparer’s apparently accidental omission of an item of income. The error involved omission of nearly $3.4 million in gain, which was slightly more than 10%
Health Care Premium Credit Rules Proposed
The IRS released proposed regulations Friday (REG-131491-10) implementing the health insurance premium tax credit, which was enacted last year by the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act and is effective starting in 2014. The proposed regulations are part of a “next step”
IRS Revises Actuarial Tables
The IRS issued final regulations Thursday relating to the use of actuarial tables for valuing annuities, interests for life or a term of years, or remainder or reversionary interests. The regulations (TD 9540) were necessary because IRC § 7520(c)(3) directs the IRS to update the actuarial tables to take into
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