IRS, TREASURY ISSUE GUIDANCE ON NEW PENALTIES ON POTENTIALLY ABUSIVE TRANSACTIONS: The Treasury Department and the Internal Revenue Service issued interim guidance on two new penalty provisions enacted as part of the American Jobs Creation Act of 2004.
The AJCA creates a new penalty for the failure to disclose information about "reportable transactions" - transactions that the Treasury and the IRS have determined to be potentially abusive. Notice 2005-11 provides interim guidance regarding application of this penalty to taxpayers who are required to disclose reportable transactions.
"Up to this point, there were no monetary penalties for failing, when required, to disclose these transactions," said IRS Commissioner Mark W. Everson. "This provision puts teeth in the regulatory scheme."
In addition, the act creates a new penalty if a taxpayer understates its tax liability relating to a reportable transaction. A higher penalty will apply if a taxpayer doesn't adequately disclose the facts of the reportable transaction. If the taxpayer discloses the transaction, the penalty may be avoided if the taxpayer had reasonable cause and acted in good faith. Notice 2005-12 provides interim guidance to taxpayers regarding these provisions, including when a taxpayer may rely on the advice of a tax advisor to establish reasonable cause and good faith.
Public comments on the new provisions may be e-mailed by Feb. 28 to notice.comments
BUSH TAPS TREASURY DEPUTY CHIEF TO TAX REFORM PANEL: President George W. Bush said in late January that he will appoint Jeffrey F. Kupfer, Treasury deputy chief of staff, to serve as executive director of his bipartisan Advisory Panel on Federal Tax Reform.
The nine-member panel, created earlier in January, is charged with arriving at options to reform the tax code to make it "simpler, fairer and more pro-growth." Bush named former senators Connie Mack III and John Breaux to serve as chairman and vice chairman of the panel.
Kupfer has been at the Treasury since January 2001, where he assists in managing the day-to-day operations of the department and coordinating the development and implementation of its policy priorities, as well as serving as a senior advisor to the deputy secretary. He previously served as the department's executive secretary and as special assistant for policy in the White House chief of staff's office from May until December 2003. Earlier in his career, Kupfer served as a tax counsel for the Senate Finance Committee and was a trial attorney in the Department of Justice's Tax Division.
ACORN OPENS FREE TAX PREP CENTERS IN 45 CITIES: The Association of Community Organizations for Reform Now, or Acorn, will provide free tax preparation services for low- and moderate-income families in 45 cities nationwide from now through the end of tax season.
The program, in partnership with the Internal Revenue Service's Volunteer Income Tax Assistance program, will help taxpayers who cannot afford to have their returns prepared through traditional paid preparers. The Acorn Free Tax Preparation Centers will electronically file current-year taxes and also provide fast refunds for taxpayers who would like their refunds direct-deposited into their bank account.
Although the program will generally follow the Earned Income Tax Credit guidelines in determining eligibility for the free tax filing, it may vary by locale, according to Acorn spokesman Jeff Karlson. "While the credit is phased out for those with over $35,458 in earned income, the centers won't be too particular," he said. "Taxpayers in the $40,000 to $50,000 range may be eligible in some areas."
Acorn national president Maude Hurd said that the group will particularly focus its efforts on ensuring that more eligible families are claiming their Earned Income Tax Credit.
"The EITC is the federal government's most successful antipoverty program," she said. "Unfortunately, almost a quarter of all EITC eligible families do not claim their credit every year, amounting to more than 7 million families who could be missing out on over $12 billion in tax benefits. We are out to change that."
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