EZ Tax Filing Moves Ahead: The EZ Tax Filing initiative is moving ahead, with the Internal Revenue Service fielding both positive and negative reactions during the comment period, which ended Sept. 4.
While individual taxpayers favored the initiative (626 in favor and just three opposed) other segments were less enthusiastic. Accounting and legal tax professional associations were opposed to the initiative four to none, while individual accounting and legal tax professionals weighed in at two in favor and 54 opposed. Of eight tax software companies that commented, six gave positive responses and two gave a negative or mixed response.
One comment stated opposition to the initiative "on both economic and legal grounds and respectfully submits its grave concern that the agreement and the consortium are anti-competitive and illegal, will fail to accomplish their suggested objectives and will harm taxpayers and consumers of tax preparation and e-file services over the long term."
According to the IRS, free federal electronic filing of tax returns is pro-consumer and pro-taxpayer. Under the proposal, the IRS says that taxpayer privacy and security protections may actually be increased. Marketing of the free electronic filing service will be conducted to increase public awareness. However, federal tax laws strictly prohibit unauthorized marketing to taxpayers using a commercial tax preparation service.
Tax Shelter Disclosures Help ID Promoters: The Internal Revenue Service continues to benefit from its tax shelter compliance efforts as officials evaluate the information produced by the 120-day disclosure initiative that ended earlier this year.
"Over 1,000 taxpayers voluntarily disclosed questionable tax transactions that they had engaged in and submitted names of the tax shelter promoters who sold them the transactions," said IRS commissioner of Large and Midsized Business Larry Langdon. "We are working to audit and resolve the transactions disclosed by taxpayers as quickly and efficiently as possible."
In addition, the IRS is using the disclosures to identify tax shelter promoters and is aggressively examining the activities of those promoters, who are required by law to keep lists of all investors who bought tax shelters from them. Upon receipt of the investor lists from promoters, the IRS will be able to identify taxpayers who participated in tax shelters and failed to disclose them.
Although many of the types of complicated tax shelter transactions disclosed were known to IRS experts, the disclosure initiative also revealed a number of new tax shelter transactions. These transactions are now being analyzed by the IRS Office of Chief Counsel and the Treasury Department for possible identification as transactions that promoters and investors must disclose.
Senate Finance Approves Military Tax Relief: Members of the military may have a lot to be thankful for this year. The Senate Finance Committee voted to approve a bill which would restore provide broad tax relief for taxpayers in the armed services.
Among the provisions of the Armed Forces Tax Fairness Bill of 2002 (HR 5063) are provisions to address inequities in the capital gains tax exclusion for home sales by military personnel, extend the tax-filing period for military personnel working in contingency operations, offer an above-the-line deduction for overnight travel costs for members of the National Guard and Reserve and exclude from income children care benefits provided to military families.
Sen. Charles E. Grassley, R-Iowa, urged action on the bill, following the House’s lead in approving a similar package on July 9.
Oversight Board Wants Better Taxpayer Service: The Internal Revenue Service Oversight Board has called on the IRS to improve its service to taxpayers.
The board released a report that focuses on improving operations at the Office of Taxpayer Advocate. The OTA, created under the IRS Restructuring and Reform Act of 1998, was charged to improve taxpayer treatment, and operates to resolve both common and individual taxpayer problems.
In its report, the board found that some existing IRS operations cause significant problems, resulting in more hardship for taxpayers. The board called on the IRS to resolve individual taxpayer problems more quickly, and to make resolving problems a measure of progress in evaluating the IRS and senior executives’ performance.
In addition, the board said that the IRS should emphasize efforts within the OTA and the IRS to balance and strengthen their own taxpayer advocacy efforts and to provide effective training for those who are associated with resolving taxpayers’ problems.
