IRS DETAILS TAX RELIEF FOR TERROR VICTIMS: The Internal Revenue Service has issued Publication 3920, explaining how to file claims under the Victims of Terrorism Tax Relief Act of 2001.
The new booklet is available now at www.irs.gov - and printed copies may be ordered in a few weeks by calling 1-800-TAX-FORM.
Under this law, the federal income tax liability of those killed in terrorist attacks within the United States is erased for at least two years. It applies to victims of the September 11th and anthrax attacks last year, as well as the April 1995 Oklahoma City bombing. The law also exempts from tax certain payments received by the survivors of those killed and disability payments received by those injured in the attacks.
The publication - "Tax Relief for Victims of Terrorist Attacks" - has worksheets to figure the amount of tax forgiven, including one for married persons who filed jointly. There are details on required documentation and where to send returns claiming the relief. Publication 3920 also explains what types of disaster relief payments would be tax-exempt, which taxpayers would qualify for tax deadline postponements granted by the IRS, and estate tax reduction available for victims' estates under the law.
TAX SHELTER DISCLOSURE CONCERNS ADDRESSED BY IRS: Midway through the 120-day window of opportunity for people to voluntarily disclose tax shelter transactions, the Internal Revenue Service has taken new steps to protect the right for taxpayers to assert attorney-client and work-product privileges when they voluntarily disclose tax shelter transactions.
Since the IRS began the initiative on Dec. 21, 2001, taxpayers have come forward and disclosed losses totalling more than $1 billion.
The disclosure initiative is part of efforts by the IRS and the Treasury Department to identify and shut down tax shelter activity. The IRS hopes to encourage taxpayers to disclose tax shelters and other questionable items that may have resulted in an underpayment of tax by waiving certain accuracy-related penalties that might apply to the transactions. A taxpayer is not required to agree that the disclosed tax shelter or item resulted in an underpayment of taxes in order to avoid penalties.
The disclosure initiative will not apply to taxpayers involved in fraud, criminal conduct, the concealment of a foreign financial account or foreign trust or the treatment of personal expenses as deductible business expenses. Disclosure creates no inference that the taxpayer's tax treatment of the item was improper or that the accuracy-related penalty would apply.
To make a disclosure, taxpayers should submit the information to their assigned IRS Team Manager or, if not under Examination, submit the information to: IRS Office of Tax Shelter Analysis, LM:PFTG:OTSA, 1111 Constitution Ave, NW, Washington, DC 20224. Those who need more information may call the IRS Office of Tax Shelter Analysis at (202) 283-8425.
IRS WON'T TAX BIZ-RELATED FREQUENT FLYER MILES: The Internal Revenue Service said Thursday that it won't go after taxpayers for not including in income their personal use of frequent flyer miles from business travel.
The IRS says that it hasn't taxed these benefits in the past because there are numerous technical and administrative issues, including the timing and valuation of income and the identification of personal use benefits attributable to business expenditures versus those attributable to personal expenditures.
The issue about taxing miles surfaced again in December when the president signed the National Defense Authorization Act. Among other provisions, the new law authorizes federal agency employees to retain and make personal use of promotional items such as frequent flyer miles, upgrades or access to carrier clubs or facilities received as a result of certain official travel.
Consistent with its prior practice, the IRS will not assert that any taxpayer has understated his federal tax liability by reason of the receipt or personal use of frequent flyer miles or other in-kind promotional benefits attributable to the taxpayer's business or official travel. Any future guidance on the taxability of these benefits will be applied prospectively.
This relief does not apply to travel or other promotional benefits that are converted to cash, to compensation that is paid in the form of travel or other promotional benefits, or to benefits used for tax avoidance, according to the IRS.
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