NEW TAXPAYER ACCOUNT, PROCESSING SYSTEM DEBUTS: A modernized system designed to replace the Internal Revenue Service central database of taxpayer account information has processed its first live returns, the IRS announced.

The Customer Account Data Engine started processing an initial set of 1040EZ tax returns in late July, marking the first time in 40 years that the IRS is processing returns and issuing refunds on a new computer system, noted IRS Commissioner Mark W. Everson.

CADE will be used to process more than 2 million 1040EZ tax returns during the 2005 filing season. The CADE system will be phased in over several years, processing increasingly more complex returns in stages, and ultimately replacing the 40-year-old system that the IRS now uses to process data.

When fully operational, CADE will be a modern database that will house tax information for more than 200 million individual and business taxpayers. When completed, the IRS said that it will provide such benefits as faster refunds and daily postings of transactions and updating of accounts.


GRASSLEY, BAUCUS MOVE TO ENSURE CONTINUED “SON OF BOSS” ENFORCEMENT: Sen. Chuck Grassley, chairman of the Committee on Finance, and Sen. Max Baucus, ranking member, will revise their anti-tax shelter legislation to make sure that several hundred taxpayers who used the “Son of Boss” tax shelter don’t escape paying the taxes they owe.

“The Internal Revenue Service gave Son of Boss participants a chance to come forward voluntarily,” Grassley said. “A large number of them didn’t come forward. They’re apparently hoping that the clock will run out on the statute of limitations, and they’ll get off scot-free. That would be unfair, both to the Son of Boss users who came forward and to honest taxpayers who don’t buy into these schemes.”

Grassley and Baucus plan to revise provisions in the Senate-passed Jumpstart Our Business Strength Act to extend the Aug. 15 statute of limitations for Son of Boss investors who didn’t participate in the IRS’s voluntary settlement program. Also, they plan to revise the interest suspension rules for Son of Boss investors and other tax shelter investors.

“We intend to give the IRS adequate time to pursue those who rejected the terms of the voluntary settlement program,” said Baucus.

Both the Boss and Son of Boss shelters were structured using derivatives, noted Selva Ozelli, CPA, an international tax attorney with RIA, a Thomson business.

“Derivatives are used in tax shelters because of their uncertain tax treatment, limited financial statement disclosure and uncertainty regarding their valuation,” said Ozelli. “The IRS is combating this problem from several different angles.”


H&R BLOCK CO-FOUNDER DEAD AT 78: Richard Adolf Bloch, who together with his brother Henry parlayed a family-run bookkeeping business into tax-prep conglomerate H&R Block, died in Kansas City, Mo., of heart failure.

He was 78.

Richard and Henry Bloch began expanding their 12-employee business by advertising their tax preparation services in local papers. In 1955, due to an overwhelming response, the brothers altered the spelling of their company surname to the easier-to-pronounce “Block.” The company soon branched out to major cities such as New York and went public in 1962.

By the late 1970s, H&R Block was preparing one of every nine tax returns in the United States. Today, the company has nearly 11,000 offices in 11 countries.

After battling lung and colon cancer, Richard Bloch sold his interest in the company in 1982 and became a full-time advocate for cancer patients, establishing one of the country’s first cancer hot lines in 1980. He also founded the R.A. Bloch Cancer Foundation Inc., the R.A. Bloch Cancer Management Center and the R.A. Bloch Cancer Support Center at the University of Missouri-Kansas City.

He is survived by his wife and three daughters.

“Dick was a true entrepreneur, and his energy and talents helped create the path that makes H&R Block the professional and accessible company it is today,” said Mark Ernst, the company’s current chairman and chief executive.

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