Finance

The Internal Revenue Service will begin processing both e-file and paper tax returns that include claims for the major “extender” provisions enacted by Congress on Feb. 3.

Joining an increasingly loud chorus, National Taxpayer Advocate Nina E. Olson released her annual report to Congress, designating the alternative minimum tax and the federal tax gap as the most serious problems facing taxpayers.Olson also reserved a healthy dose of the 80-page-report’s scorn for concerns about the Internal Revenue Service’s collection policies and the transparency of IRS information to the tax-paying public.

Senators Max Baucus, D-Mont., and Chuck Grassley, R-Iowa, introduced legislation on the first day of the 110th Congress to repeal the individual alternative minimum tax beginning in the 2007 tax year.It’s just the most recent attempt the men have made to get the legislation passed. Congress has taken to patching the AMT one year at a time -- six years in a row -- usually by increasing the exemption amount. According to the Joint Committee on Taxation, in 2007 the patch will cost about $50 billion and hold the number of affected taxpayers at close to the 4 million taxpayers affected this year. Without a patch, about 23 million households would have been affected by the AMT.

Rep. Barney Frank said that wage inequality among U.S. workers is his No. 1 priority as he prepares to take over chairmanship of the House Financial Services Committee this week.In a speech at the National Press Club, Frank, D-Mass., said that he will hold hearings about wages over the next two years in an attempt to address the gap between economic growth and workers' wages.

After four months, the Securities and Exchange Commission has already revisited its rule on disclosing executive compensation.In a statement issued Dec. 22, SEC Chairman Christopher Cox said that the new requirements will make it easier for companies to prepare statements and for investors to understand the cost of stock options.

With the Tax Relief and Health Care Act of 2006 now signed into law, the Internal Revenue Service has rolled out guidance to help taxpayers filing in 2007 claim the extended deductions and other tax advantages contained in the act.

As expected, President Bush signed a massive bill that would extend expiring tax, health and trade legislation.

Once again Congress has amazed me in how it handles tax legislation. It should come as no surprise because I have been reporting on tax legislation for over 30 years, but Congress still makes it much more difficult for taxpayers, practitioners, and tax prep software providers than it has to be. Congress, rather than passing the “Tax Relief and Health Care Act of 2006” just before it adjourned last week, could have done so at the beginning of 2006. But in reported attempts to pass other unrelated legislation, the tax provisions supported by both sides of the aisle were tacked onto controversial legislation. When those proved unsuccessful, the tax provisions eventually were separated from any controversial legislation and the “Tax Relief and Health Care Act of 2006” was passed last week. Here is explanation of the ramifications of the delay by Senator Baucus on the floor of the Senate: “Congress's delay in extending these tax provisions caused uncertainty. And the delay until now will have real consequences for taxpayers. Just this week, I received a report of the contingency plan at the IRS for the 2007 filing season. The IRS identified about 60 tax forms and products that will be affected by this delay. “The Form 1040 has already gone to the printer. That happened back in November. More than 120 million taxpayers use that form. The IRS will not reprint those forms. “The IRS expects taxpayer confusion. The IRS expects more phone calls to the IRS with questions. The IRS expects delays in filing. The IRS expects incorrect returns. And the IRS expects more amended returns. “Further, the IRS will need at least six weeks to reprogram its systems to accommodate the changes. It is simply too late for the IRS to implement the 2007 filing season on time. This means delays in starting to process and issue refunds. And it means money. It may cost the IRS millions in additional costs because of our delay. And the cost to taxpayers could be even greater. “In September, I brought a display of the draft Form 1040 for next year. Already, the classroom teachers' deduction and the college tuition deduction were gone. Millions of families that normally take those deductions, and other popular incentives like the state sales tax deduction, will wonder why those lines no longer appear on the Form 1040. And, unless taxpayers are willing to get on the Internet and search, they may never know that we extended these incentives in the nick of time.” Tax prep software providers will face similar problems in rushing modifications to the programs for the 2006 tax year. This reminded me of tax legislation that came down many years ago right after Christmas. Tax practitioners had only to end of the year to advise some of their clients of what to do to take advantage of a tax benefit added by the legislation. This time of the year is hard enough for those with a vested interest in the tax season, whether it be the IRS, tax practitioners, tax prep software providers, or taxpayers, Congress seems to have no qualms about making it more difficult, expensive, and frustrating for those interested parties or adding greatly to the possibility that taxpayers will not take advantages of tax benefits because they aren’t listed on tax returns where they are supposed to be and could easily have been put. Will Congress act any differently in the future? I think you know my answer based on 30-plus years of observation.

Though revenues from the U.S. Government rose 12 percent over fiscal 2006, to $2.4 trillion, the future costs for social insurance programs such as Medicare and Social Security will be trillions more than initially projected.

Five Treasury nominees were sworn in this week, including a new assistant secretary for tax policy, whose appointment has been held up by a senator for nearly five full months.Last week, Sen. Max Baucus, D-Mont., the ranking member of the Senate Finance Committee, agreed to release his block on Eric Solomon’s nomination. After approving the appointment of Treasury Secretary Henry Paulson in July, Baucus said that he would refuse to allow the committee to vote on any other nominations until he was satisfied with the agency’s plans to close the tax gap -- the difference between taxes paid and taxes owed in the country, which his estimates put at some $300 billion annually.

Retroactive beneficial tax legislation, such as the just-passed “Tax Relief and Health Care Act,” is always welcome.The legislation, which President Bush is expected to sign shortly, contains numerous tax provisions, including a slew of tax benefit extenders, energy tax incentives, health savings account changes, tax administration modifications and technical corrections to earlier tax legislation.

With Democrats scheduled to take charge of both Houses of Congress in 2007, most of the Bush administration's top tax priorities figure to be shuttled to the legislative back burner for the next two years.But there is at least one island of common ground that has both sides of the aisle and the accounting profession clinging to hope that the next Congress may finally find the political will to resolve a looming nightmare for many Americans - the alternative minimum tax.

Senators Chuck Grassley, R-Iowa, and Max Baucus, D-Mont., struck an agreement with House lawmakers on bipartisan, bicameral legislation to extend expired and expiring tax, health, trade, and other provisions.

The 2006 elections saw the Democrats taking control of both the House and the Senate for the first time in 12 years. The shift in the House is probably the most significant.In the House, the majority party controls the agenda: what hearings are held, what legislation gets taken up by committees. The Democratic majority is a narrow one, just as the Republican majority had been a narrow one. Many of the newly elected Democrats were chosen to appeal to moderate voters, so it is far from clear that there has been a major shift in the view of House members on tax issues. Still, control of the agenda will tend to mean that Democratic proposals, rather than Republican proposals, will emerge from the House Ways and Means Committee.

Politicking is still causing a number of popular tax breaks to be held up in Congress.With the 109th Congress scheduled to wrap up its business at the end of next week, a number of expiring tax measures still have yet to be renewed.

A partner in the Washington office of law firm Venable LLP since 2003, Sam Olchyk provides general tax advice for businesses and individuals, as well as tackling federal tax issues that require representation before Congress, the Treasury Department and the Internal Revenue Service.Prior to joining the firm, Olchyk spent eight years as a tax attorney for Congress -- first as tax counsel with the Senate Finance Committee, and then as legislation counsel with the Joint Committee on Taxation, where his main responsibility was helping with the development of tax legislation affecting domestic business activity. During his time on Capitol Hill, Olchyk, who is also a CPA, worked on numerous proposals that were enacted into law, including pieces of the Job Creation and Worker Assistance Act of 2002, the Economic Growth and Tax Relief Reconciliation Act of 2001 and the Community Renewal Tax Relief Act of 2000. In 2001, he worked on a joint committee study regarding the simplification of the federal tax laws.

Home mortgage giant Fannie Mae announced that it will reduce its earnings by $6.3 billion to correct accounting problems dating back to 2001.

The Internal Revenue Service has allocated nearly $1 billion of tax credits to nine planned clean coal projects.The Energy Policy Act of 2005 authorized the tax credits, and, working within a number of set parameters, the IRS consulted with the Department of Energy to allocate the credit to specific projects.

The Committee on Capital Markets Regulation, which has the support of Treasury Secretary Henry Paulson, released a report urging legislators to consider overhauling the country’s enforcement policies and litigation system.

Sometimes, I feel bad for Comptroller General David Walker and his staff at the Government Accountability Office.I imagine it’s the same sort of sadness most people feel for the geeky guys in high school comedies. You know, the good guys who never get the girl, but are there throughout the course of the plotline, providing some sort of insight into the inner workings of the social machination that exists all around them.