On Friday evening, the IRS issued guidance on the time and manner for making the election not to have estate tax apply to estates of decedents who died in 2010 (Notice 2011-66). The election must be made by Nov. 15, 2011. The notice also discusses how donors can elect out
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TOPICS / TAX
Individual income taxation
2011 Tax Software Survey: Individual Product Survey Responses
The JofA and The Tax Adviser surveyed our readers to determine what they liked and did not like about their tax preparation software. The survey was conducted in May 2011 and received 10,026 responses. As in past years, three products led the pack in the number of respondents using them.
Client Tax Fraud and the CPA
Your client just called and left the following message: “I answered the door at my home today, and an agent who said he was from the IRS Criminal Investigation Division wanted to ask me some questions. What should I do?” While you may never get a call from a client
Prohibited Transactions Wipe Out Bankruptcy Exemption for Self-Directed IRA
The Court of Appeals for the Eleventh Circuit affirmed a district court decision (which had previously affirmed a bankruptcy court) that all funds in two of an individual’s IRAs and part of a third were not exempt from his bankruptcy estate under Bankruptcy Code (USC Title 11) section 522(b)(3)(C). These
Managing an IRS Correspondence Audit
The IRS has expanded its use of correspondence examinations in lieu of field examinations of individual income tax returns. While this trend has allowed the Service to collect additional revenue more efficiently, it has also caused difficulties for some taxpayers and CPAs representing them. The IRS has had problems in
IRS Finalizes Circular 230 Regulations
The IRS issued final regulations (TD 9527) implementing components of its initiative to register and regulate all paid tax return preparers. The regulations, which finalized proposed regulations issued in August 2010 (REG-138637-07) revise Circular 230. Paid preparers of all or substantially all of certain tax returns and claims for refunds
Fourth Circuit Joins Others Upholding Two-Year Innocent Spouse Limit; Tax Court Again Rejects It
The Fourth Circuit Court of Appeals joined the Third and Seventh circuits in validating Treasury regulations limiting to two years the period in which taxpayers may apply for innocent spouse equitable relief under IRC § 6015(f). The decision overruled the Tax Court, which has consistently reached an opposite conclusion, including
Congressional Committee Checks In on Registered Tax Preparer Program
While tax professional communities offered diverging opinions of the registered tax return preparer (RTRP) program to a congressional subcommittee, all agreed on one thing—the IRS made a significant effort to listen. Although the program when initially proposed got off to a “rocky start,” a representative of the National Association of
Practitioners, Policymakers Welcome IRS Change on Innocent Spouse Relief
Tax practitioners, legislators and taxpayer advocates said the IRS’ announcement that it would no longer require taxpayer requests for innocent spouse equitable relief under IRC § 6015(f) to be made within two years of the beginning of collection activity was a long overdue change. “It’s not surprising at all; the
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 Monday 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 liability
IRS Discontinues High-Low Method for Substantiating Travel Expenses
On Tuesday, the IRS announced that it is discontinuing the high-low method for substantiating lodging, meal and incidental expenses incurred in traveling away from home (Announcement 2011-42). Last year, the IRS asked for comments on whether the high-low method was still needed, and it received no comments. Under the high-low
Comments Sought on IRS Continuing Education Provider Standards and Process
The IRS on Monday invited public comments on its process for approving continuing education providers and on the standards that should apply to such providers (Notice 2011-61). Under final Circular 230 regulations issued in May, registered tax return preparers will be required to meet continuing education requirements by completing courses
IRS Offers Open Houses on Saturday to Help With Lien Withdrawals, Other Taxpayer Issues
The IRS is holding open houses at its Taxpayer Assistance Centers across the country this Saturday, July 16, to assist taxpayers who need help with tax issues. The open houses are especially designed to assist taxpayers who wish to have a lien on their property withdrawn. The IRS in February
Phased Implementation of FATCA Requirements Announced
On Thursday, the IRS announced plans to phase in the requirements of the Foreign Account Tax Compliance Act (FATCA) (Notice 2011-53). The IRS has received numerous comments about the difficulty of implementing aspects of the FATCA requirements. The notice’s phased implementation is designed to give both foreign financial institutions and
100,000 Preparers Did Not Comply With PTIN Rules
The IRS announced on Tuesday that it has identified approximately 100,000 tax return preparers who did not comply with the new rules for preparer tax identification numbers (PTINs), and it is sending them letters informing them of the problem (IR-2011-74). All tax return preparers (including CPAs, attorneys and enrolled agents)
AICPA Offers Guidance on Registered Preparer Competency Exam
In a July 7 letter to IRS Commissioner Doug Shulman, the AICPA offered its perspective on the agency’s development of the registered tax return preparer examination. The IRS anticipates that it will begin offering the exam this fall to prospective candidates. In general, CPAs and employees under their supervision will
Tax Court Allows Deduction for Payment to Long-Term Caregivers
The Tax Court held that payments made to an elderly woman’s caregivers for 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) (Estate of Baral, 137 TC no. 1 (2011)). Lillian Baral was diagnosed by her physician
State Income Tax Credit Is a Capital Asset
The Tax Court held that a taxpayer’s sale of a state income tax credit resulted in a capital gain, not ordinary income, since the payments received from the sale were not a substitute for ordinary income. Capital assets consist of all assets except those listed in eight categories in IRC
Loan Loss Held Not Personal
The Tax Court ruled that a taxpayer’s loan to a business associate was made in connection with the taxpayer’s trade or business, and therefore, the forgiveness of that loan was a bad-debt loss under IRC § 166(a). The IRS had argued that the loan was personal and therefore subject to
National Taxpayer Advocate Warns Against IRS Budget Cuts
National Taxpayer Advocate Nina E. Olson warned Congress on Wednesday that cuts in the IRS budget could hurt the federal government’s ability to collect revenue and may result in harm to taxpayers. In her Fiscal Year 2012 Objectives Report to Congress, Olson asserts that recession-related legislation such as the
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