GRASSLEY, BAUCUS INTRODUCE FUEL FRAUD PREVENTION ACT: Sen. Chuck Grassley, R-Iowa, chairman of the Committee on Finance, and ranking member Sen. Max Baucus, D-Mont., have introduced the Fuel Fraud Prevention Act.

Grassley noted in his floor statement that the point was not “just moving around a few numbers on a tax return.”

“Today we will begin closing the loopholes that have created millions of gallons and billions of dollars of missing fuel and missing tax dollars,” he said. “This problem not only robs the U.S. Treasury, it also robs the American taxpayer.”

The issue is more than just lost revenue, according to Grassley. “We need to know where all of this fuel is going. What makes us think that if we cannot find the fuel to collect the tax, that we could find the fuel to stop the terrorist acts?”

FEDERAL COURT BARS NATIONWIDE ‘EXPATRIATION’ TAX SCAM: A federal court has permanently barred a Fort Collins, Colo., couple and their organization from promoting a tax scam.

Chief Judge Lewis T. Babcock of the U.S. District Court for the District of Colorado ordered Austin Gary Cooper, Martha Cooper, and their organizations — Taking Back America and The Ten Foundation — to stop promoting a tax scam in which customers are falsely advised that they can avoid federal income taxes by renouncing their U.S. citizenship in favor of “American” citizenship.

The permanent injunction requires the defendants to stop promoting the scam, to give the Justice Department a list of customers who have bought materials from the defendants, and to post the order on the defendants’ Web site. The order makes permanent the preliminary injunction entered last month against the defendants.

“It is a victory for all law-abiding taxpayers when the government shuts down a tax-scam promotion,” said Eileen J. O’Connor, assistant attorney general for the Justice Department’s Tax Division. “Stopping these illegal schemes is a top priority for the Tax Division.”

According to the Justice Department, the couple sold their “expatriation” scam for as much as $1,600 to as many as 2,000 individuals nationwide. Evidence showed that the defendants and Taking Back America gave customers fraudulent instructions on how to prevent their employers from withholding taxes from their wages and furnished customers with form letters to send to the Internal Revenue Service and Social Secur­ity Administration requesting a return of back taxes.

IRS EXPLAINS HOW MILITARY PERSONNEL CAN GET NEW LAW’S TAX BREAKS: The Internal Revenue Service is helping taxpayers use a new law providing income exclusions for death benefit payments and certain home sales. Both provisions are retroactive, so some qualifying taxpayers must file amended returns to claim these tax breaks. The IRS asks them to put the words “Military Family Tax Relief Act” in red at the top of such returns to speed processing.

The new law doubled the benefit that is paid to survivors of deceased armed forces members to $12,000, made the entire amount tax-free and made the changes effective for deaths occurring after Sept. 10, 2001. Previously, only $3,000 was tax-free. Recipients who have already paid tax on benefits received for deaths after the effective date should file an amended return on Form 1040X, reducing their adjusted gross income by the $3,000 they had reported as taxable. Those who receive such “gratuity” benefits in 2003 and future years will not have to report them on their tax returns.

Taxpayers may exclude gain on a home sale, provided that they have owned and used the home as a principal residence for two of the five years before the sale. A reduced maximum exclusion may apply to those taxpayers who satisfy part of the two-year rule.

The new law allows persons on qualified extended duty in the U.S. armed forces or the Foreign Service to suspend this five-year test period for up to 10 years of such duty time.

This change applies to home sales after May 6, 1997. A taxpayer may use this provision for only one property at a time and may exclude gain on only one home sale in any two-year period. Although an amended return must usually be filed within three years of the original return’s due date, the law gives qualifying taxpayers who sold a home before 2001 until Nov. 10, 2004, to file an amended return claiming the exclusion.

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