Practice Management

TREASURY, IRS UPDATE ANNUITIES RULES: The Treasury Department and the Internal Revenue Service issued proposed regulations addressing the tax treatment of an exchange of property for an annuity contract.The proposed regulations would apply the same rule to exchanges for both private annuities and commercial annuities, tightening a popular tax-deferral strategy.

With the Democrats winning control of the U.S. House of Representatives and Senate, the tax legislative outlook has shifted to new priorities and concerns, according to Mel Schwarz, a partner in Grant Thornton’s National Tax Office.

Business tax reform needs a bipartisan, national consensus, but is absolutely necessary for the country to remain competitive in a global economy, according to Senate Finance Committee chair Chuck Grassley, R-Iowa."I think the consensus is there that the business tax system is in desperate need of reform," he told a recent hearing on the business tax system. "But we need to start building consensus on how to do it."

The use of private annuities to shelter gain on appreciated property has come to an abrupt halt, if the Internal Revenue Service has its way.Whether the IRS can withstand pressure to withdraw or substantially amend new proposed regs before they are made final, or whether the final regs can withstand judicial challenge, remains to be seen. For now, however, effective for annuity transactions after Oct. 18, 2006 (subject to a relatively brief six-month "estate planning" exception), the division between "old rule" and "new rule" is dramatic.

After working with Anchorage-based Dudley Consulting on accounting software projects for the past decade, CPA firm Finley & Cook announced the two businesses will merge.

Accounting firm Elliott Davis LLC has acquired the Galax, Va.-based practice of Larrowe and Co. PLC.Financial terms of the deal, which became effective Nov. 17, were not disclosed.

CCH, a Wolters Kluwer business, announced the creation of a new Small Firm Services group, which will comprise the employees, services and products of two recently-acquired businesses.The formation of the entity follows the August and September deals for tax-prep software suppliers ATX/Kleinrock and TaxWise.

Internal Revenue Service Commissioner Mark Everson said he’s happy with the agency’s enforcement efforts for the 2006 fiscal year -- with tax collections totaling some $48.7 billion.Everson, who’s now been on the job for three and a half years, has long stressed the need to improve on his agency’s collection efforts. “The bottom line for our enforcement efforts shows that dollars collected rose again last year,” he said in a statement.

The Internal Revenue Service encouraged U.S.-based employees and former employees of foreign embassies, foreign consular offices and international organizations to participate in a one-time settlement initiative to resolve tax matters related to their employment.The offer is only open to U.S. citizens, green-card holders and foreign employees with a U.S. tax obligation. Accredited diplomatic personnel are generally exempt from income taxes on their wages under international treaties or agreements.

After previous testimony from the Government Accountability Office that federal contractors have abused the tax system with little consequence, the office was asked to review the Internal Revenue Services coding of tax debt excluded from the Federal Payment Levy Program.The levy program is an automated system used to collect unpaid taxes from certain federal payments, and the GAO estimated that as of Sept. 30, 2005, over 500,000 tax records -- equated to about $2.4 billion in tax debt -- contained inaccurate codes that IRS systems used to exclude tax debts from the program. Among the inaccuracies were tax debts coded as having active installment agreements, even though the tax debtor had stopped making payments.