Practice Management

Individual taxpayers electronically filed 39.2 million returns through March 4 -- up 2.1 million or about 6 percent over last year's numbers, according to the Internal Revenue Service. The biggest increase came in home computer use, which was up 14 percent. Out of 55 million returns filed as of March 4, 72 percent were e-filed -- up from 67 percent the previous year. While this percentage will decline as April 15 approaches, the IRS expects for the first time to have more than half of all individual tax returns filed electronically. The jump in computer use coincides with another strong year for the Free File program, under which the IRS and a consortium of tax software manufacturers offer free services. More than 3 million returns came in through Free File through March 2, a 43 percent increase from 2.15 million returns for the same period last year. Record numbers of individuals are choosing to have their refunds directly deposited into their bank accounts. So far this year, 72 percent of all refunds are through direct deposit -- up from 68 percent over the same period last year.

The President's Advisory Panel on Federal Tax Reform held its third meeting in Tampa on Tuesday, with the objective of understanding how the existing tax system affects business taxpayers. "Small business and self-employed taxpayers, in particular, are burdened by the complexity of our tax code and bear a substantial proportion of the estimated $125 billion in compliance costs," said Connie Mack, chairman of the panel. "As we will learn, it is these same small businesses that are a powerful engine driving our country -- they employ over half of all private sector employees and generate 60 to 80 percent of new jobs." Small-business owner David Hurley told the panel that the tax code places a tremendous burden on the nation's leading job creators. "If you are a big corporation with a compliance department or a tax attorney on staff to help navigate the various tax laws at the federal, state and local levels, then compliance issues aren't nearly as thorny as they are for small businesses," he said. "But if you are a small business owner, in addition to dealing with compliance requirements, you might also be taking out the garbage, ordering inventory and hiring employees."

The President's Advisory Panel on Federal Tax Reform holds its third meeting Tuesday, March 8 at Sago Networks, here. The witnesses invited are expected to provide the panel with perspective on corporate tax reform and how the tax system affects businesses and entrepreneurs. They include Jack Levin, senior partner in the international law firm of Kirkland & Ellis LLP; Douglas Shackelford, a CPA and professor of taxation at the University of North Carolina's Kenan-Flagler Business School; William Gentry, associate professor of Economics at Williams College; Sam Gibbons, chairman of Gibbons & Co., a former congressman and chairman of the Ways and Means Committee; Roger Harris, president and chief executive of Padgett Business Services; Todd Flemming, chief executive of Infrasafe Inc.; David Hurley, owner and principal of Landmark Engineering and Surveying Corp.; and Donald Bruce, assistant professor in the Center for Business and Economic Research and the Department of Economics at the University of Tennessee, Knoxville. Sago Networks is a technology services company that provides solutions for all of its customers' bandwidth and custom telecommunications needs.

Maryland CPA and business advisory firms Linton, Shafer & Co. and Warfield Garrett & Associates have merged their practices. Terms were not disclosed. Going forward, the firm will operate under the brand Linton Shafer Warfield & Garrett. The newly merged entity will have six partners and a total staff of 30. Linton Shafer was founded in 1965, while Warfield Garrett began in 1993. The now-consolidated firm offers tax planning and preparation, management consulting, and audit and accounting services.

Sidney I. Roberts, one of the country's foremost authorities on the complexities of international tax law, died at his home here following a bout with pneumonia. He was 91. Roberts authored some 10 books and countless articles on the tax implications in such areas as overseas stock ownership and dual residences. Roberts & Holland -- the firm he co-founded in 1957 -- evolved into one of the largest international tax firms in the country. He retired as a partner in 1986. In 1967, he co-authored "U.S. Income Taxation of Foreign Corporations and Nonresident Aliens." Roberts also was an adjunct professor at Columbia Law School.

Federal Reserve Chairman Alan Greenspan told the President's Advisory Panel on Federal Tax Reform that a consumption tax, such as a national sales tax or value added tax, would spur economic growth because it would encourage saving and capital formation. However, Greenspan cautioned that moving to a different system than the current one would raise a challenging set of transition issues. Joining Greenspan at the panel's second meeting were former Secretary of State and Secretary of the Treasury James Baker, and Commissioner of Internal Revenue Mark Everson. The panel is charged with examining the existing system and formulating options for reform, which will presented to the Secretary of the Treasury by July 31, 2005. The third meeting will be held March 8 in Tampa, Fla., and will focus on how the tax system affects businesses and entrepreneurs.

At the mid-point of tax filing season, taxpayers have used e-filing at a record rate, according to the Internal Revenue Service. Out of 47 million returns filed through Feb. 25, 74 percent of them were e-filed -- up from 69 percent last year. While this percentage traditionally declines as April 15 approaches, the IRS expects for the first time to have more than half of all individual tax returns filed electronically. Of the 35 million returns that have been e-filed so far this year, the biggest jump comes from self-prepared tax returns filed with a computer, which have increased nearly 14 percent to 8.7 million returns. The jump in computer use coincides with another strong year for the Free File program. More than 2.77 million returns came in through Free File through Feb. 23, which is a 42.6 percent increase from last year's 1.94 million returns. "E-filing is making a strong start," said IRS Commissioner Mark W. Everson. "Taxpayers and tax professionals are becoming increasingly comfortable with e-filing." The growth in e-filing comes as record tax refunds are being sent to taxpayers. The average refund so far is $2,436 -- a record amount and more than $200 more than last year. So far this year, three out of four taxpayers receiving refunds have used direct deposit.

Tri-state area CPA and business advisory firm Eisner has divested Eisnerfast LLC, its fund accounting and back-office affiliate, to SS&C Technologies Inc., a Windsor, Conn.-based provider of financial management software and outsourcing services. Under the terms of the sale, SS&C will pay $25.3 million in cash for the unit, which delivers back-office accounting and administration services to on- and off-shore hedge and private equity funds, funds of funds, and investment advisors. Eisnerfast provides more than 250 funds with an internal accounting infrastructure, including portfolio accounting, investor accounting, books and records, tax reporting, and performance analysis. Rahul Kanwar, managing director of Eisnerfast, will continue in that capacity under the new ownership. Eisner said that due to the current regulatory climate, the firm decided to focus on its core audit and tax services

The Internal Revenue Service has finalized a regulation that would limit the use of life insurance and annuity contracts as a way to avoid current taxation of investment earnings. The regulation will prevent taxpayers from turning otherwise taxable investments in hedge funds and other entities into tax-deferred or tax-free investments by purchasing the investments through a life insurance or annuity contract. Life insurance and annuity contracts receive favorable tax treatment in recognition of the importance of protecting loved ones against the potentially devastating financial consequences of death or the risk of exhausting savings while in retirement. The new regulation will help taxpayers purchasing a life insurance or annuity contract to be secure in the knowledge that the contract complies with the tax laws, according to the IRS.This regulation is part of the effort to modernize the rules for these contracts, in recognition of the developments that have occurred in the financial markets in recent years.

-- The Thomson Corp. has acquired Atlanta-based Tax Partners, a provider of sales and use tax compliance services, and will fold the concern under its RIA Compliance unit umbrella. Terms were not disclosed. RIA Compliance is a division of Thomson Tax & Accounting. "Adding Tax Partners to our offerings will provide Thomson Tax & Accounting with an important tax compliance service component, enabling us to offer an end-to-end solution to our clients," said Brian Peccarelli, executive vice president of Thomson Tax & Accounting Corporate Markets and general manager of RIA Compliance, in a statement. In 2004, Tax Partners filed more than 540,000 tax returns and remitted $7.5 billion in taxes for clients.