TIGTA SAYS TAX GAP COULD EXCEED PROJECTIONS: According to a report from the Treasury Inspector General for Tax Administration, the nation's tax gap - the annual difference between federal taxes owed and those paid - could in fact exceed the current $345 billion estimate from the Internal Revenue Service. The agency said that the IRS projection of the tax gap probably underestimated things like non- or underreporting filers. The IRS arrived at its figures following a study of 46,000 audits for the 2001 tax year.In its report, the TIGTA said, "We concluded the IRS still does not have sufficient information to completely and accurately assess the overall tax gap and voluntary compliance."
In response to the TIGTA conclusions, the IRS said that it would investigate establishing a tax gap advisory panel.
SENATORS REQUEST TAX INFO ON OIL AND GAS COMPANIES: As their colleagues floated talks of $100 gas-rebate checks for taxpayers, the heads of the Senate Finance Committee asked the Internal Revenue Service to provide tax and financial information on the nation's largest oil and gas companies. Senate Finance Committee chair Chuck Grassley, R-Iowa, and ranking member Max Baucus, D-Mont., announced that they are planning a comprehensive review of federal taxes paid by oil and gas companies on profits.
In a letter to IRS Commissioner Mark Everson, the senators asked to inspect the annual federal corporate income tax returns for the past five years for the 15 largest oil and gas companies, based on sales. The senators said that the information will help them better understand the federal tax posture of the industry.
IRS PARTNERS WITH STATES AGAINST MONEY LAUNDERING: The Internal Revenue Service announced agreements with 33 states and Puerto Rico to begin sharing information to ensure that money services businesses are complying with laws to report unusual cash transactions and other suspicious activities.
Passed in 1970, the Bank Secrecy Act requires financial institutions to help the government prevent money laundering by keeping records on customers' cash purchases of negotiable instruments, filing reports of daily cash transactions exceeding $10,000, and reporting suspicious activity.
The IRS already has agreements with states for the exchange of tax information. The new agreement will allow the agency and participating states to share enforcement leads and coordinate their efforts to make sure they are performing the necessary checks on the businesses without overlapping efforts.
Colorado, Hawaii, Montana, New Hampshire, New Mexico and Montana cannot enter into such agreements with the IRS, either because state law prohibits them from doing so, or because they don't have the authority themselves to regulate the industry.
KPMG MAKES PROGRESS ON SHELTER LAWSUIT: KPMG moved a bit closer to putting another piece of its tax shelter troubles in the past, filing court papers that more than 200 investors have agreed to a settlement in a class-action lawsuit against the accounting firm and law firm Sidley Austin Brown & Wood LLP.
Of the 284 eligible investors, 55 opted out of the settlement, down slightly from the 64 individuals who had forced the parties to shelve a $195 million settlement agreement in early February. With more than 80 percent of eligible participants now on board, spokespeople for KPMG and lawyers at Milberg Weiss Bershad & Schulman said that the settlement should now move forward without additional problems.
The settlement covers four tax shelters offered by KPMG that the Internal Revenue Service has said are abusive and helped the 600 taxpayers who bought them avoid about $2.5 billion in taxes. Investors opting out of the settlement can still pursue individual claims.
The two firms agreed to pay plaintiffs' legal fees of up to $30 million as part of the settlement. KPMG, which sold the questionable tax shelters, will cover the bulk of the settlement, while Chicago law firm Sidley Austin, which gave legal advice on the structures, will pay about 20 percent of the settlement.
KPMG admitted criminal wrongdoing in creating the shelters and agreed to pay $456 million in penalties in September, as a grand jury in New York indicted more than a dozen former KPMG executives and a lawyer for Sidley Austin. Former clients have since brought dozen of lawsuits against KPMG.
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