IRS TO START CHARGING FOR INDIVIDUAL TAX STATSWASHINGTON - The Internal Revenue Service announced that it will now sell individual income tax return statistics by Zip code - charging $25 per state, or $500 for the entire nation.
In previous years, the data, based on addresses shown on the returns filed with IRS, had been made available for free. Zip code tables for both the 2002 and 2004 tax years are available for purchase.
Information broken out in the tables includes the number of returns filed; the number of exemptions; adjusted gross income, as well as salary and wages; dividends and net capital gains; adjustments to income for payments made to an IRA and self-employed pensions; total itemized deductions, including charitable contributions deductions; and the number of returns prepared by paid preparers.
An Excel spreadsheet containing a sample of the available data, for a North Dakota Zip code with just over 300,000 taxpayers, can be accessed at www.irs.gov/pub/irs-soi/04zipcde.xls. More information is available by contacting the SOI Statistical Information Services Office at (202) 874-0410, or by e-mailing firstname.lastname@example.org.
TIGTA RELEASES REPORT TO CONGRESS
WASHINGTON - The Treasury Inspector General for Tax Administration released a report to Congress outlining a trio of priority objectives for the upcoming year. The report highlights the office's audit and investigative work conducted between April 1 and Sept. 30, 2006. During those six months, TIGTA reported that it completed 118 audits, and in the process identified more than $258 million in total cost savings and $1.4 billion in increased or protected revenue.
In a letter accompanying the report, Inspector General J. Russell George outlined his three priorities for 2007, which include:
* Overseeing Internal Revenue Service efforts to modernize technology;
* Enhancing TIGTA's ability to protect tax administration from corruption; and,
* Monitoring IRS initiatives to improve tax compliance, which now include the use of private debt collection agencies.
Now in its eighth year, the IRS's modernization program has cost more than $2 billion, and George noted that the recent contractor failure to implement a redesigned Electronic Fraud Detection System demonstrated the significant consequences - the inefficient use of more than $20 million in contractor payments, and the agency's inability to identify potentially millions of dollars in fraudulent refunds during the 2006 filing season - of inadequate supervision of IRS contractors.
George said that his agency has investigated more than 1,500 cases over those six months that involve protecting tax administration from corruption - including reports of possible identity theft in the private and public sectors, and alerting the public to possible Internet "phishing" schemes.
Finally, George said that his office continues to work with the tax agency to find an appropriate balance between enhancing taxpayer assistance and providing tools for effective enforcement to close the tax gap.
The full report is available at www.ustreas.gov/tigta/semiannual/semiannual_dec2006.pdf.
IRS HEADQUARTERS RE-OPENS, REPAIRS RUN TO $25M
WASHINGTON - The Washington headquarters of the Internal Revenue Service re-opened to the agency's employees in early December, following some $25 million in repairs made necessary after massive flooding last June.
Torrential rains closed the building beginning June 26, after an estimated 5.5 million gallons of water flooded the building's basement and sub-basement, causing extensive damage to electrical equipment and air handlers. In mid-July, the agency announced that the office - which housed some 2,700 workers, mostly tax attorneys, law enforcement agents and administrative staff - wouldn't re-open until early 2007.
IRS employees, who had been scattered across 15 other buildings in the Washington Metro area, will be moved back into the building, located at 1111 Constitution Ave. NW, in stages. By late December, over 1,800 employees had returned.
The General Services Administration spent more than $25 million repairing the building. While the electrical and air systems have been repaired, construction work will continue on other basement areas until sometime in April. The building has been tested extensively by a variety of health and safety officials, and a team of industrial hygienists has continually monitored the facility since the flood to ensure that the environment was safe for anyone entering the building.
With the re-opening of the headquarters, the temporary procedures for submitting certain requests and submissions will no longer be in effect, and taxpayers should make their submissions as they normally did before the flood.
IRS: IN ONE CASE, CLASS-ACTION SETTLEMENT IS DEDUCTIBLE
WASHINGTON - In a letter released in December, the Internal Revenue Service said that a publicly traded acquiring corporation can deduct amounts that it paid to settle a class-action securities litigation lawsuit against the target entity that was triggered by misstatements in the entity's reported earnings. The ruling was directed only to the taxpayer requesting it, and may not be used or cited as precedent.
According to the letter, generally, amounts paid to settle lawsuits are only deductible if the acts that led to the litigation were performed in the ordinary conduct of the taxpayer's business. However, if the litigation arises from a capital transaction, then the settlement costs and legal fees associated with such litigation are characterized as acquisition costs and must be capitalized.
However, some business expenses are not converted into capital expenditures because they have some connection to a capital transaction. In determining whether litigation costs are deductible expenses or capital expenditures, the courts and the agency have looked to the "origin of the claim."
In the case examined by the IRS, under the origin of the claim test, the acquiring corporation argued that the costs of settling all the claims made against it and the target entity were attributable to the alleged fraud occurring during the defendants' ordinary course of business activities, and did not originate in the merger of the two companies or any other capital acquisition.
The letter is available at www.irs.gov/pub/irs-wd/0649011.pdf.
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