Tax
Data Point: 56%
Households filing tax returns in 1996 that moved to a different income quintile by 2005. Source: Income Mobility in the U.S. From 1996 to 2005, www.treasury.gov.
Paper Chase
The IRS lacks an effective means of keeping track of paper case files, sometimes hampering its litigation and forcing it to abandon revenue claims, a Government Accountability Office study found. In two audits by the GAO, the IRS couldn’t produce between 10% and 14% of the case files requested. In
Pre-Tax Benefits Often Go Unused
FINANCIAL PLANNINGAnother year, another opportunity for tax savings—but only if you opt in. According to the American Payroll Association’s 2007 Getting Paid in America survey, 80% of employers offer tax-advantaged payroll deduction programs, including cafeteria plans, dependent care flexible spending accounts, travel reimbursement incentive programs and health savings accounts, but
The Service Ships Small Business Help
TAX NOTESThe IRS is now offering complimentary copies of its Small Business Resource Guide (SBRG) on CD-ROM. Small business owners and tax practitioners can order up to five copies for free on the Service’s “Small Business/Self-Employed” Web site, www.irs.gov/businesses/small/index.html, or by calling 800-829-3676. The CD-ROM,
Abusive Insurance Plans Get Red Flag
The IRS in Notice 2007-83 identified as listed transactions certain trust arrangements involving cash-value life insurance policies. Revenue Ruling 2007-65, issued simultaneously, addressed situations where the tax deduction has been disallowed, in whole or in part, for premiums paid on such cash-value life insurance policies. Also simultaneously issued was Notice
Auditing
For news from the AICPA and state societies, visit www.cpa2biz.com, which also offers online CPE, AICPA professional literature, practice management aids and links to state society Web sites. The findings were based on inspections conducted between 2004 and 2006. The PCAOB released a report on the deficiencies to help
Donor-Advised Funds: Preparing for Closer Scrutiny
EXECUTIVE SUMMARY Donor-advised funds (DAFs), as an alternative to private foundations, have been a popular means of charitable giving, but fund managers, donors and their advisers must reckon with new laws and regulations stemming from the Pension Protection Act of 2006. A DAF allows the donor
New Accounting-Change Process Proposed
The IRS is requesting comments on a proposal to revamp how taxpayers may obtain the Service’s consent to change their method of accounting for tax purposes. Notice 2007-88 describes a “standard consent process” that would become the exclusive method not only for changes currently eligible for automatic consent but other
IRS Simplifies Late Filing Relief
In Rev. Proc. 2007-62 (released Oct. 9, 2007), the IRS has provided a new simplified method for taxpayers to request relief for late S corporation elections. A small business corporation may make an election to be an S corporation at any time during the preceding tax year or at any
Indianapolis Power & Light Trips Circuits
In a split decision, the Third Circuit Court of Appeals required a grocer to include in gross income a payment characterized as a loan from a supplier. The loan could be forgiven if the grocer, Karns Prime and Fancy Foods Ltd. of Harrisburg, Pa., purchased a certain volume of goods.
Ease the Burden of Busy Season
With busy season just around the corner, here are some suggestions from firms that have learned how to make what could be their annual trial by fire less stressful and more productive. By treating their staffs with an extra measure of consideration and carefully planning and analyzing
Double Take: Unequal Taxation of Equals
by Lester B. Snyder Vandeplas Publishing, 2007, 281 pp. In the backward world envisioned 135 years ago by Samuel Butler in Erewhon , taxation is regressive, on the theory that a business fortune is evidence of society’s esteem toward its holder. Rather than the social Darwinism that Butler parodied, however,
No Theft Loss for “Phantom” Income
The section 165 theft loss deduction seldom benefits taxpayers to the extent they think it should. This can be especially true if the thief is their investment manager and they discover only belatedly they’ve been paying taxes on investment income that never existed. Between 1992 and 2000, Michael and Anita
A Point of No Return
Is filing of a return required for a conviction of false return preparation? A recent case held it was not. Linda Borden of Florida was convicted by a federal jury in March 2007 of 27 counts of preparing or presenting false or fraudulent returns under IRC section 7206(2). However, she
Give and Take at the SSA
Starting in January 2008, the maximum earnings subject to Social Security tax will rise 4.6%, from $97,500 to $102,000, marking the first time the taxable maximum exceeds $100,000. The Social Security Administration expects nearly 12 million workers will pay higher taxes as a result. The $4,500 increase in maximum taxable
Circular 230 Revisions Finalized
The Treasury Department issued final regulations amending a number of Circular 230 standards, including sections on conflicts of interest, contingent fees, conduct for which practitioners may be sanctioned and publicity of disciplinary hearings. Most of the changes became effective upon their issuance on Sept. 26. The final regulations concerning conflicts
New Form 990 Taken to Task
The IRS is assessing hundreds of comments, including those by an AICPA task force, on its draft revised Form 990, Return of Organization Exempt From Income Tax . The task force suggested a new summary should emphasize exempt purpose and activities, rather than compensation and fundraising and total expense ratios.
Saving Taxes in Transfers of Personal Goodwill
While many of the reasons for a family business to choose being a C corporation have been eliminated over the years (the deduction of shareholder health insurance, for example), there are still situations in which the limitations on S corporation ownership are an issue. However, businesses, other than personal service
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