Tax
AICPA Tax Division to Teach Quality Control
The AICPA Tax Division’s proposed Statement on Standards for Tax Services no. 9, Quality Control, will provide a basis of an educational effort by the Tax Division. The proposed standard was exposed for public comment in December 2005. After reviewing the comments, the AICPA Tax Executive Committee decided early this
Turn the Spotlight on Tax-Friendly Benefit Options
Young employees are in the dark when it comes to retirement planning, and as a result, potential tax savings are slipping through their fingers, according to a taxpayer survey by CCH and Harris Interactive. Employees ages 18 to 24 were least likely to use company-sponsored 401(k) plans—participation rates sit at
Counting Escrows
The First Circuit Court of Appeals has upheld the Tax Court in Burke v. Commissioner , 99 AFTR 2d 2007-941. In so doing, the courts underscored the IRS’s position that distributed income from a partnership must be recognized as taxable income even when it is held in escrow by the
Feeling the Tax Sting
Mutual fund investors were hit hard in 2006, paying the IRS more than $23.8 billion on their reinvested distributions. Equity fund shareholders paid more than 60% ($14.4 billion) of the total tax burden on their capital gains. Investment companies distributed $418.5 billion last year, surpassing the previous record high of
No Gain, Some Pain for Another Lottery Winner
The Second Circuit Court of Appeals joined other courts holding that a taxpayer’s sale of rights to future installments of lottery winnings is ordinary income and not capital gain. Shirley Prebola won $17.5 million in the New York State Lottery. The winnings were to be paid in 26 annual installments.
Look to Audit Bottom Line, Says IRS
Experience from its expanded number of audits of corporate returns will allow the IRS to work smarter in the future, the agency said, as it acknowledged spending more time on audits that came up empty of additional tax. The IRS rebutted a report in April by a research organization associated
Where Taxpayers Are Most Likely to Pay the AMT in 2007
State Percentage of all filers Connecticut 25% Maryland 25% New Jersey 25% Massachusetts 24% California 20% Minnesota 19% New York 19% Virginia 19% Wisconsin 19% District of Columbia 18% Michigan 18% Pennsylvania 18% Source: Institute on Taxation and Economic Policy, www.ctj.org/itep.
Service Boosts Number of Correspondence Examinations
The IRS is increasingly relying on correspondence examinations, rather than face-to-face office or field examinations, to audit taxpayers’ returns. In a correspondence examination, the Service asks the taxpayer to explain questionable items and send supporting evidence by mail. Correspondence examinations increased by 170% during fiscal years 2002–2005
Rollover Ruling
The IRS ruled a nonspouse beneficiary of an inherited IRA may spread required minimum distributions (RMDs) from the IRA over his or her life expectancy so long as a rollover is completed before the end of the year following the year in which the plan participant died. The rule, which
Tax Patents Considered
EXECUTIVE SUMMARY The U.S. Patent and Trademark Office since 1998 has granted patents to business methods. In recent years, these patents have come to include strategies to minimize tax, a development many observers find troubling. Tax strategy patents complicate tax advising, return preparation and compliance, since
Disallowed Idemnity Deduction Blues
From time to time, corporate officers and shareholders agree to indemnify their corporations for certain expenses and losses. The taxpayer would prefer to claim an ordinary loss deduction instead of a capital loss or, worse, a nondeductible payment. The Sixth Circuit Court of Appeals recently denied such a claim. Isaac
Data Point: $48.7 Billion
Tax receipts from individuals on April 24, 2007, a one-day IRS record. Source: Reuters.
Bills Target Contractor Scofflaws; Fed Workers Delinquent
U.S. Rep. Ed Towns, D-N.Y., in April introduced the Contractor Tax Enforcement Act, HR 1870, to bar federal tax debtors from contracting with the government. Another bill, introduced by Brad Ellsworth, D-Ind., would require contractors to certify they don’t owe a federal tax debt. The proposed legislation followed by a
Practice Makes Perfect
Tax practitioners have enough concerns without having to fear the specter of a professional liability claim resulting from a preventable mistake or oversight. Many of these slip-ups can be prevented by simply jotting a contemporaneous note recording the rationale for an election or flagging a filing deadline
The Dreaded Kiddie Tax
EXECUTIVE SUMMARY Since 1987, taxpayers wanting to shift income to children subject to lower tax rates had to consider the kiddie tax when the children were under 14 years old. TIPRA, which became law in May 2006, made a significant change in the kiddie tax retroactive
Highlights
FASB issued an exposure draft that calls for expanded disclosure about financial guarantee insurance contracts. The ED, Accounting for Financial Guarantee Insurance Contracts—an Interpretation of FASB Statement No. 60, would, among other things, reduce diversity in the way financial guarantee insurance contracts are accounted for by insurers. That diversity has
Whose Fraud?
The statute of limitations does not protect a taxpayer from a deficiency assessment for fraudulent returns when the fraud was committed by a preparer, the Tax Court ruled. In 2005, Vincent Allen was assessed a deficiency of $12,212 for income taxes in 1999 and 2000, based on false itemized deductions
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