The Center for Audit Quality issued a set of white papers to address issues practitioners may encounter as a result of the “liquidity crisis” spurred by deterioration in the markets for subprime mortgages and related securities. The CAQ Professional Practice Executive Committee said firms would benefit from the
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Tax
IRS Revises Measure of Ability to Pay
The IRS has updated the Collection Financial Standards used to determine a taxpayer’s ability to pay a delinquent tax liability. The changes went into effect Oct. 1. For bankruptcy purposes, the new tables are not effective until Jan. 1, 2008. The revised standards include some basic changes such as the
Tax Patents Reportable Transactions
The IRS and Treasury Department issued proposed regulations that add patented transactions to Treas. Reg. § 1.6011-4 on reportable transactions. REG-129916-07 also makes conforming changes to IRC section 6111 on disclosure of reportable transactions by material advisers. Comments and public hearing requests are due by Dec. 26. The AICPA and
AICPA Assesses Form 990 Redesign
The AICPA proposed a list of suggestions for the IRS to mitigate what the Institute considers increased burdens that will result from the new draft of Form 990, Return of Organization Exempt From Income Tax. The AICPA’s 990 Task Force said the changes improve transparency of reporting, aiding in performance
Government Employment Tax Delinquencies Improved
The IRS has improved its coordination among offices to collect approximately $45 million in delinquent payroll taxes owed by federal government units, plus that owed by state and local governments, the Treasury Inspector General for Tax Administration reported. The report followed a 2002 TIGTA audit finding that more than 12,000
Five-Card Withhold ’Em
On the heels of a Tax Court decision that held a poker tournament to be a wagering activity subject to IRC § 165 gambling loss limitations (Tschetschot v. Commissioner, TC Memo 2007-38, appeal pending in Eighth Circuit, filed 9/7/07, docket no. 9498-03), the IRS has issued a revenue procedure specifying
Horses, Houses and a Profit Motive
Taxpayers who deduct as business expenses what the IRS might regard as spending on an unrelated hobby generally run a distinct risk of an underpayment assessment. In one recent case, however, the Tax Court accepted that two seemingly dissimilar undertakings could be treated as a single activity for purposes of
Work Product Stands Up to IRS Summons
The decision in United States v. Textron gives taxpayers a boost in efforts to protect tax workpapers from an IRS summons, although the Service’s Chief Counsel Donald Korb cautions the victory “may be short-lived.” The U.S. District Court in Rhode Island said the work product privilege applied to the corporate
Estate Tax Take Little Changed
Despite higher exemptions of taxable estates and far fewer returns filed, revenue collected from the estate tax slipped only slightly from 2001 to 2005, the IRS said. The number of returns fell 58%, but total estate tax revenue declined only 8% to $21.6 billion. The phenomenon indicates that estates with
QSub Is Employer
The IRS issued final regulations under which qualified subchapter S subsidiaries (QSubs) and other disregarded entities—rather than the entities’ owners—are responsible for reporting and paying employment taxes. The rules represent a change from temporary provisions of Notice 99-6, under which either the entities or their owners could be regarded as
Embezzlement No Excuse
The Third Circuit recently affirmed a district court’s opinion holding a corporation liable for payroll taxes embezzled by its payroll agent. Pediatric Affiliates PA of New Jersey (Pediatric) hired PAL Data Processing Inc. (PAL) to handle its payroll needs. PAL’s founder, Menachem Hirsch, would routinely send Pediatric a tax form
Banking
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. Loan-loss provisions totaled $11.4 billion in the quarter, a 75.3% increase from the year-ago period. The value of loans and leases
Deferred Compensation Documentation Deadline Extended
Employers now have an extra year, until Dec. 31, 2008, to bring documentation of nonqualified deferred compensation into compliance with final regulations under IRC § 409A, issued in April. Although IRS Notice 2007-78 also provided other transitional relief, it did not postpone the regulations’ Jan. 1, 2008, effective date.
Hiring Incentives Target Veterans, Rural Counties
The work opportunity tax credit (WOTC) has been in existence for years; however, the Small Business and Work Opportunity Tax Act of 2007, P.L. 110-28 (SBWOTA), expanded the definition of some of the target groups, creating tax incentives that will affect more clients than originally expected. SBWOTA
Corporations and Partnerships to Tell More About Ownership
The IRS issued proposed revisions to Form 1120, U.S. Corporation Income Tax Return, and Form 1065, U.S. Return of Partnership Income , that would ask for more ownership information. Corporations would be required to identify individuals who own at least 50% of the voting power of all classes of the
Son of BOSS Goes Into Overtime
As a general rule, the statute of limitations on income tax returns is three years, extended to six years under section 6501 for a substantial omission of gross income. Courts in recent tax shelter litigation involving overstatement of basis have declined to apply the longer period. However, a recent district
IRS Issues FIN 48 Field Guide
The IRS Large and Mid-Size Business Division analyzed implications of FASB Interpretation no. 48, Accounting for Uncertainty in Income Taxes, in an industry directive and field examination guide. The summary and 10 questions and answers of LMSB-04-0507-045 cover some questions extensively discussed elsewhere, such as FIN 48 workpapers falling within
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