NATP warns of the AMT: The Alternative Minimum Tax could take a big bite out of taxpayers this year if they don’t plan carefully to avoid having to pay it, the National Association of Tax Professionals warned.
While the AMT originally targeted only high-income taxpayers to ensure that they paid federal income tax, it has trickled down to many middle-class taxpayers who may not realize that they could be affected.
Some strategies to avoid paying the AMT include planning ahead before deferring or accelerating income and deductions to future years, and recognizing that state tax, personal exemptions and other deductions aren’t deductible under the AMT.
The NATP is a nonprofit association formed to serve professionals who work in all areas of tax practice and includes as members individual practitioners, enrolled agents, CPAs, attorneys and financial planners.
New Regs Limit Penalty Defenses: New proposed rules will limit the penalty defenses for transactions that taxpayers fail to disclose on their returns.
"We are raising the stakes for taxpayers who fail to disclose potentially abusive transactions to the IRS," said Treasury Assistant Secretary for Tax Policy Pam Olson. "Taxpayers who choose to hide their transactions from the IRS will lose their ability to rely on a tax opinion as a penalty defense."
According to Olson, the regulatory change is necessary because too many tax advisors have counseled clients against disclosing their transactions with the expectation that the advisors’ opinions will allow the clients to avoid penalties.
The proposed regulations prohibit taxpayers from relying upon an opinion or advice from a tax practitioner as a defense to the accuracy-related penalty for potentially abusive transactions that are not disclosed. They also will not be allowed to rely upon a tax opinion as a penalty defense if they fail to disclose transactions that are based on a position that a regulation is invalid.
H&R Block Preparer Charged with ID Theft Scam: Customers who used an H&R Block preparer to prepare their taxes over the past two years got less than they bargained for. The employee apparently stole their identities to redirect tax refunds and set up credit card accounts for her own shopping sprees.
The U.S. Postal Inspection Service said that more than two dozen customers were victimized by preparers, including Ivy Johnson, who worked at a Block office in White Plains, N.Y., between December 2000 and April 2001. Johnson allegedly stole names, addresses, Social Security numbers and other confidential information from at least 27 customers.
Johnson and three other suspects, LaTasha Edwards-Hamlett, Catherine Pointer and Charles Griffin, allegedly used the information to open credit card accounts and divert tax checks of up to $8,000.
In a statement, William Kezer, postal inspector in charge of the New York division, pointed out the seriousness of the alleged crime. "In many cases, identity theft victims failed to safeguard certain personal identifying information. That is not the case with the victims of this fraud," he said.
IRS Creates Office Of Professional Responsibility: The Internal Revenue Service has created a new Office of Professional Responsibility, charged with enhancing the oversight of tax professionals. It replaces the office of the Director of Practice. Brien Downing was named director.
"The creation of the Office of Professional Responsibility and the appointment of a senior executive to lead the office are examples of our continuing commitment to ensuring the integrity of the American tax system and recognition of tax professionals as an integral part of effective tax administration," said Acting Commissioner Bob Wenzel.
The new office will have more than twice the staff that was available under the previous organization. In addition to licensing enrolled agents, the office will investigate allegations of misconduct and negligence against agents, attorneys, accountants and other professionals representing taxpayers before the IRS.
"My office will coordinate its efforts with the associations of tax professionals in dealing with representatives who fail to meet the standards of professional conduct," Downing said.
