For the second time in a week, a federal circuit court of appeals has handed the IRS a defeat on the issue of whether an overstatement of basis amounts to an omission from gross income for purposes of invoking the longer, six-year limitation period for assessing tax under IRC §
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IRS practice & procedure
Another Circuit Says Overstatement of Basis Is Not an Omission From Gross Income
The ongoing controversy over whether a taxpayer’s overstatement of basis triggers a six-year statute of limitation period continues as the Fourth Circuit has held that the extended period does not apply (Home Concrete & Supply, LLC, No. 09-2353 (4th Cir. 2/7/11)). The taxpayers had artificially overstated the bases in their
IRS Announces Second Offshore Voluntary Disclosure Program
On Tuesday, the IRS announced that it is starting a new program designed to bring money held in foreign accounts back into the U.S. tax system and to help taxpayers with income from offshore accounts to comply with federal tax law. Under the program, taxpayers that disclose previously undisclosed foreign
IRS Guidance on Court-Ordered Restitution
In a piece of informal guidance, the IRS Office of Chief Counsel provided an outline of its understanding of the IRS’ new authority to assess and collect court-ordered restitution for failure to pay tax (CCA 201105037). The Firearms Excise Tax Improvement Act (PL 111-237), enacted in August 2010, amended IRC
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NEW FORM 1099 REQUIREMENT FOR RENTAL INCOME Taxpayers receiving income from renting real estate should be aware of their new information-reporting responsibilities under IRC § 6041(h)(1), as amended by the Small Business Jobs Act of 2010 (PL 111-240). The law requires them to report payments they make totaling $600 or
Some Forbearance Payments Deductible, Some Not
The Tax Court held that a corporation could deduct forbearance payments made to its shareholders in return for their promise not to exercise their stock redemption rights under the first two of several agreements. However, the court also held that payments under a subsequent agreement had to be capitalized, since
New 1099 Rules: President’s Speech Offers Hope for Some Relief; Exceptions for Rental Income Reporting Remain Vague
For small businesses that were dreading the thought of having to produce a Form 1099 for every payee to which they paid at least $600, President Barack Obama offered the prospect of relief in his State of the Union speech Jan. 25 when he said, “We can start right now
Audit Guide Covers Capitalization Rules
Practitioners have been making use of a resource arising from the IRS’ ongoing audit initiative concerning capitalization rules. The IRS issued Capitalization v. Repairs Audit Technique Guide (LB&I-4-0910-023) as a framework for examining agents to follow when determining whether a business’s expenses should be capitalized or an immediate deduction allowed,
Bill Introduced to Address Tax Strategy Patents
On Tuesday, Sens. Max Baucus, D-Mont., and Chuck Grassley, R-Iowa, introduced legislation intended to stop the granting of patents for tax strategies. The Equal Access to Tax Planning Act of 2011 (S 139) would provide that “any strategy for reducing, avoiding, or deferring tax liability” is deemed to be “prior
IRS Targets 1040 Schedules, Procedures in Preparer Compliance Visits
In its current round of office visits involving tax preparer compliance, the IRS is targeting practitioners who prepare a high percentage of returns with certain Form 1040 schedules and is checking preparers’ procedures and recordkeeping. For a second tax season, the IRS has sent reminders to tax preparers of their
PTINs a Pain for Some CPAs
As the start of tax filing season looms, some CPA preparers are reporting difficulties meeting the new IRS requirement to register and obtain or renew a preparer tax identification number (PTIN). All paid tax return preparers, including CPAs, now must use a PTIN when signing all tax returns, forms or
Shulman: CPA Firm Nonsigning Preparer Relief Likely
In late October, IRS Commissioner Doug Shulman said the Service would probably provide relief from proposed testing and continuing education requirements for nonsigning tax preparers working under the supervision of a CPA or other federally authorized tax practitioners, such as an attorney or enrolled agent, in a CPA or other
IRS Exempts CPA-Supervised Nonsigners From New Preparer Rules
On Thursday, the IRS released guidance on the implementation of new regulations governing tax return preparers (Notice 2011-6), and provided an exception to its return preparer regulation plan for nonsigning preparers supervised by a CPA, attorney, enrolled agent or other Circular 230 practitioner. The notice also provides an exception for
IRS Updates Guidance on Adequate Disclosure of Positions
The IRS has released updated guidance identifying when a taxpayer’s disclosure of an item or position in an income tax return is adequate for purposes of reducing the understatement of tax penalty and the tax return preparer penalty for understatement due to unreasonable positions (Revenue Procedure 2011-13). The IRS regularly
Preparer Mandatory E-File Guidance Proposed
The IRS on Wednesday issued proposed guidance on how return preparers may meet their new electronic filing requirement for individual and fiduciary income tax returns starting Jan. 1, 2011. The proposed regulations (REG-100194-10) and a proposed revenue procedure (Notice 2010-85) provide for a hardship exception to the requirement and specify
Innocent Spouse Relief: Alternatives After the Lantz Case
This past June, the Seventh Circuit Court of Appeals in Cathy M. Lantz v. Commissioner (docket no. 09-3345, 6/8/2010) reversed the Tax Court and upheld the IRS’ position that innocent spouses seeking equitable relief under subsection (f) of IRC § 6015 are subject to the same two-year filing deadline that
Tax Court Again Strikes Down Innocent Spouse Filing Limit
Despite its recent reversal on the issue by the Seventh Circuit, the Tax Court again ruled invalid IRS regulations requiring innocent spouses to request equitable relief under IRC § 6015(f) within two years of the beginning of collection activity. For more, see “Innocent Spouse Relief: Alternatives After the Lantz Case,”
SBA Supports Bill to Repeal “Burdensome” 1099 Filing Requirements
The head of the U.S. Small Business Administration called for the repeal of a vast expansion of 1099 filing requirements scheduled to begin in 2012. In an open letter to small business owners, SBA Administrator Karen Mills repeated President Barack Obama’s Nov, 3 statements that the expanded requirement for small
AICPA Urges Repeal of Expanded 1099 Reporting Requirements
In letters to members of the House of Representatives and the Senate, the AICPA on Nov. 16 expressed its concerns about the compliance burdens being placed on businesses (including rental property owners) by recently expanded Form 1099 information-reporting requirements. The letters, signed by Patricia Thompson, CPA, chair of the AICPA’s
Expanded Form 1099 Reporting “A Nightmare”
The article “The Coming 1099 Revolution: Are You and Your Clients Ready?” (Aug. 2010, page 40) provided much useful information on the tremendous increase in burdensome paperwork that will be imposed on American businesses by section 9006 of the Patient Protection and Affordable Care Act. As the largest coin and
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Preparing clients for new provisions next tax season
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