Final regulations issued on Wednesday provide guidance on determining the amount of taxes paid for purposes of determining the foreign tax credit (TD 9535). The regulations are designed to curb certain transactions that, the IRS says, “produce inappropriate foreign tax credit results.” The final regulations adopt proposed regulations issued in
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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
IRS Makes Dodd-Frank Mandated Language Changes to Regulations
To comply with requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act (PL 111-203), the IRS has issued temporary and proposed regulations that remove all references to “credit ratings” from the Treasury regulations (TD 9533 and REG-118809-11). The regulations provide substitute standards of credit-worthiness. The Dodd-Frank Act requires
A Sea Change for Gift and Estate Planning
Martin Shenkman, Esq., CPA/PFS, is the author of numerous books and articles on tax and financial planning, including the AICPA-published Estate and Related Planning During Economic Turmoil, and with Steve R. Akers, Estate Planning After the Tax Relief and Job Creation Act of 2010: Tools, Tips, and Tactics. His firm,
Line Items
AICPA URGES STREAMLINING M-3 The AICPA recommended that the IRS reduce unnecessary or redundant information required on Schedule M-3, Net Income (Loss) Reconciliation. The suggestions were made in late April in a letter from Patricia Thompson, chair of the AICPA’s Tax Executive Committee. The IRS introduced Schedule M-3 in 2004
Section 179 Expensing for Noncorporate Lessors
While 100% bonus depreciation may be the “flavor of the month” when it comes to accelerated depreciation, it is limited to original-use property and is currently scheduled to sunset for most property at the end of 2011. IRC § 179 expensing therefore remains a prime option for small businesses, especially
Estate Tax or Carryover Basis?
For decedents dying in 2010, Congress provided two systems of taxing estates and determining basis of their assets. Executors of those estates must determine the better course. To do so, especially for valuations of gross estates above the new $5 million exclusion, they must take many factors and considerations into
Common Reporting Errors on Form 990
The redesigned Form 990, Return of Organization Exempt From Income Tax, has been the subject of much discussion since the IRS released it in 2007. As the exempt sector and practitioners have been adjusting to the new filing requirements, areas of confusion have been identified. Earlier this year, an IRS
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
PFP Services Guidelines
CPAs providing personal financial planning services to individual clients in estate, retirement, tax, investment and/or insurance planning need to ensure they are meeting their professional responsibilities. The AICPA Statement on Responsibilities in Personal Financial Planning Practice (SOR) provides guidance that can help protect against unforeseen risks of litigation. Here are
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
“Associated-Property” Regs Survive “Strong” Challenge
The U.S. Court of Federal Claims upheld regulations requiring imputed interest on the basis of business property temporarily removed from service to be included in capitalized costs of property improvements. Virginia electric and natural gas utility Dominion Resources Inc. replaced coal burners in two of its electric generating plants, which
Government Contractor Withholding Delayed to 2013
The IRS issued final regulations (TD 9524) further postponing implementation of mandatory 3% withholding on payments from government entities to contractors and providing interim guidance. The final regulations also adopt a $10,000 withholding threshold for any single payment and provide a transition rule under which interest and penalties will not
IRS Addresses Accounting Software Audit Concerns
In a March 29 letter from Patricia Thompson, chair of the AICPA’s Tax Executive Committee, to Chris Wagner, commissioner of the IRS’ Small Business/Self-Employed Division, the AICPA communicated its concerns regarding the Service’s program to request the accounting software files of certain small business taxpayers under examination; the letter cites
W-2 Health Insurance Reporting Detailed
The IRS released guidance (Notice 2011-28) in question-and-answer format on the new requirement that employers include the “aggregate reportable cost” of employer-sponsored group health insurance on Form W-2, Wage and Tax Statement. The requirement was added for tax years beginning after 2010 by the Patient Protection and Affordable Care Act
The Most Popular Stories of 2011 (So Far)
Use this list of the most popular articles to catch up on important news you may have missed in the past six months. Here are the Top 10 most popular articles from the JofA’s January through June print editions, based on the clicks they received on journalofaccountancy.com: “Maximizing Tax Season
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
IRS Addresses Tax Treatment of Tax-Free Exchanges of Annuities
The IRS, in Revenue Procedure 2011-38, has given taxpayers guidance on the tax treatment of exchanges of annuity contracts under IRC §§ 72 and 1035. Under IRC § 1035(a)(3), taxpayers generally recognize no gain or loss when they exchange one annuity contract for another annuity contract. Congress provided this tax-free
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