A return filing date is not the only benchmark for measuring the six-year time limit within which the government must begin a prosecution for tax evasion under IRC § 7201. Criminal defendant Leonard Widman found that out when the U.S. District Court for the District of Connecticut denied his motion
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TOPICS
Tax
Executive Compensation: What’s Reasonable?
When a corporate client seeks words of wisdom regarding tax planning, most CPAs go through the litany of suggestions related to acceleration of deductions and deferral of income. Yet one of the biggest and potentially most dangerous tax issues facing corporations is the compensation paid to the top executives and
IRS Sets Procedures for Tax Return Preparer Penalties
The IRS has issued internal memoranda setting forth procedures for consideration of tax return preparer penalties in taxpayer examinations. A memorandum by the Large and Mid-Size Business Division (LMSB) describes procedures for tax return preparer penalty cases, and two audit technique guideline memos by the Small Business/Self-Employed Division (SB/SE) explain
State Taxation of Telecommuters
Walk into any office today—not just late on a Friday afternoon—and you might wonder where all the workers are. Most likely, they’re telecommuting, from home or anyplace they can plug in or catch a wireless signal and log on—and for a lot of good reasons. Employers don’t have to provide
Wacky Tax Deductions
Bankrate.com surveyed accountants nationwide for its fourth annual survey of their clients’ craziest attempts to reduce their taxes. Here are some stories to share at your next party or around the office: An Arizona client sought a home office deduction for the toilet paper he bought for his house.
Student Loans Can Hold Tax Surprises
Due to rising tuition costs, the number and size of student loans have increased dramatically in recent years. Once the exclusive domain of college financial aid offices and hometown banks, education loans are now the subject of cable TV commercials and e-mail solicitations from major credit card companies. Many students
“Reasonable Cause” Requires Extraordinary Circumstances
I read with interest the article on “Representing Clients With Tax Delinquencies and Deficiencies” (“Tax Practice Corner,” April 09, page 65), as this is part of my practice. Of particular interest was the paragraph on abatement of penalties because that is often a key concern of delinquent clients. The authors
Ponzi Guidance Welcomed
The Ponzi loss safe harbor recently set forth in Revenue Procedure 2009-20 and Revenue Ruling 2009-9 brought welcome clarity to permissible treatment of such losses as well as the possibility of expedited theft loss deductions, practitioners said. “It’s about as taxpayer-friendly as one could have hoped for,” said Rick Klahsen,
No Second Class of Stock
The Fifth Circuit Court of Appeals rejected an S corporation owner’s argument that the corporation’s payments to her father, one of the company’s founders, had created a second class of stock that had terminated the S election. The daughter had unsuccessfully sought by that reasoning to exclude from her gross
IRS Proposes Basis-Tracing Regulations
The IRS has issued proposed regulations that propose a comprehensive approach for stock basis recovery. The regulations, if adopted as final, would apply across a broad spectrum of transactions. They will create a single model for stock basis recovery if a shareholder receives a dividend under IRC § 301. These
IRS Notice Provides Work Opportunity Credit Definitions
The IRS has released a notice that defines the terms “unemployed veteran” and “disconnected youth,” for purposes of the IRC § 51 work opportunity credit (Notice 2009-28). The notice also gives transition relief to employers who hire employees from those targeted groups after Dec. 31, 2008, and before July 17,
Tax Amnesty Programs and Voluntary Compliance Initiatives: A Way to Mitigate Declining State Revenues
Since 2000, more than half of the states have offered tax amnesty programs one or more times (see Federation of Tax Administrators, “State Tax Amnesty Programs” (July 2007)). The programs allow taxpayers to “come clean” and report and pay delinquent tax liabilities. They are popular with taxpayers because they provide
New Expatriation Forms 8854 and W-8CE Now Available
A new version of Form 8854, Expatriation Information Statement, and new instructions were posted on the IRS Web site on May 14. The form expands the previous Form 8854 into parts A and B, with part B aimed at those new to the expatriation regime. The IRS has also issued
Revenue Ruling Gives Guidance on S Elections for Partnerships Converting to Corporations
The IRS issued Revenue Ruling 2009-15, which addresses the question of whether, when a partnership becomes a corporation for federal tax purposes, it is eligible to elect to be taxed as an S corporation in its first tax year. The ruling, issued Thursday, clarifies that a partnership that converts to
Administration’s International Tax Proposals Plan to Raise $210B Over 10 Years
President Obama released his plan to raise $198.3 billion from 2011–2019 by overhauling international taxes, which will affect multinational corporations. When combined with further international tax reforms that will be described in the administration’s full budget proposal, the proposed international tax reform package would raise $210 billion over the next
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SIXTH CIRCUIT UPHOLDS LIFE TABLES FOR LOTTERY LUMP SUMThe Sixth Circuit Court of Appeals ruled in Negron v. U.S. (No. 07-4460 (6th Cir. 1/28/09)) that the IRS annuity tables of IRC § 7520 provide a realistic and reasonable estate valuation of a state lottery prize paid as a lump sum
Third Party’s Activities Create Nexus
The U.S. Supreme Court declined to review a finding of substantial nexus by New Mexico for gross receipts tax on mail-order and online sales in that state by a subsidiary of Texas-based computer maker Dell Inc. The New Mexico Court of Appeals last summer affirmed an assessment of gross receipts
Strengthening Tax Services’ Foundation
The AICPA’s Statements on Standards for Tax Services (SSTSs) have been updated, clarified and streamlined in proposed revisions now available for study and comment by AICPA members. They can be found on the Tax Division pages of the AICPA Web site at tinyurl.com/5be2rk. The SSTSs are enforceable rules of conduct
Deduction Denied for ESOP Stock Redemption
The Eighth Circuit Court of Appeals denied food giant General Mills’ deductions for “cash distribution redemptive dividends” it paid participants in the company’s employee stock ownership plans (ESOPs). In so doing, the Eighth Circuit reversed a district court decision and ignored the Ninth Circuit’s ruling six years ago in Boise
Retirement Planning Using a Client’s Tax Return
Many CPAs never follow up with clients after tax season, but CPAs can provide valuable assistance by taking some time after busy season to use the tax return as a guide to helping clients prepare for retirement. A tax return is an excellent starting point for the personal financial planning
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