IRS TAKES ON CREDIT COUNSELORS' TAX EXEMPTION: The Internal Revenue Service said that it plans to revoke the tax-exempt status of the 41 credit-counseling agencies it has audited as part of a crackdown on industry practices.Over the past two years, the IRS has audited 63 credit-counseling agencies, representing more than half of the $1 billion industry's revenues. The 41 organizations whose audits have been completed have either already had their exemptions revoked, or the IRS has proposed revocation and the groups are appealing, a process that can take several months.
"Over a period of years, tax-exempt credit counseling became a big business dominated by bad actors," said IRS Commissioner Mark W. Everson, in a statement. "They have poisoned an entire sector of the charitable community."
The investigation comes on the heels of the passage of the Bankruptcy Reform Act of 2005, which requires anyone filing for bankruptcy to first visit one of the agencies. The Justice Department's U.S. Trustee Program, which oversees the nation's bankruptcy courts, decides which credit-counseling agencies can give pre-bankruptcy advice. Although tax-exempt status is not required to win approval, nearly all of the 150 credit-counseling firms approved have been tax-exempt.
Many of these agencies were found to offer little or no counseling or education, and appeared to be primarily motivated by profit. In many instances, these agencies also served the private interests of related for-profit businesses, officers and directors. Based on the examination findings, the IRS is taking two additional steps - issuing expanded guidance for the IRS to consider in its reviews of the organizations, and sending compliance inquiries to each of the remaining 740 known tax-exempt credit-counseling agencies not already under audit.
In addition, the IRS has tightened up its review of new applications by credit-counseling firms for tax-exempt status. Since 2003, about 100 applications have been reviewed, but only three have been approved.
IRS WILL OFFER CREDIT FOR CFPS: The Internal Revenue Service announced that it has reached an agreement with the Certified Financial Planner Board of Standards to offer continuing education credits at the IRS Nationwide Tax Forums scheduled for this summer.
The agreement marks the first time that the IRS has registered as a CE sponsor for CFPs. The agency is already a CE sponsor for enrolled agents and CPAs.
Twenty-four of the 36 seminars at each tax forum are eligible for the credits. The locations and dates of the 2006 tax forums are: Anaheim, Calif., June 27-29; Chicago, July 11-13; Atlanta, July 25-27; Orlando, Fla., Aug. 1-3; Las Vegas, Aug. 22-24; and New York, Aug. 29-31. The three-day seminars are conducted by IRS experts and tax industry leaders from the American Bar Association, the American Institute of CPAs, the National Association of Enrolled Agents, the National Association of Tax Professionals, the National Society of Accountants and the National Society of Tax Professionals.
For more information, visit www.taxforuminfo.com.
'SURVIVOR' WINNER'S NEXT TEST IS 51 MONTHS IN JAIL: A federal judge has sentenced Richard Hatch, who won the first season of the CBS reality show Survivor, to 51 months in prison for tax evasion. Hatch, 44, was found guilty in January on three counts of tax evasion and filing a false return for failing to report income of more than $1.4 million from the television series and other sources. U.S. District Judge Ernest Torres also ordered Hatch to pay taxes that he owes for 2000 and 2001, which the Internal Revenue Service calculated at $474,971, plus interest and penalties. Torres upped Hatch's sentence for obstruction of justice, saying that he believed Hatch committed perjury on the witness stand and failed to disclose assets to the Probation Office.
Hatch has been detained in a Plymouth, Mass., jail since the conclusion of the trial, when the court deemed him a flight risk. A grand jury investigation was launched in March 2005 when Hatch backed out of a deal to plead guilty to two tax evasion charges that carried a maximum 10-year prison sentence and a $500,000 fine. Lawyers for Hatch said that an appeal is already underway.
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