Tax planning

The controversial use of private debt collectors by the Internal Revenue Service may be little more than a stopgap to make up for the service's lack of funding to hire its own personnel - while opponents charge that the initiative is expensive and risks exposing taxpayer's privacy.In a recent report to Congress, National Taxpayer Advocate Nina Olson, a fierce critic of the strategy, said that contrary to the government's rationale, use of private collectors is not cost-effective, the cases assigned are not the promised "easy" cases, and the IRS is substantially different from other federal agencies that use private collectors.

By now, tax practitioners know that e-filing is here to stay. Every year, changing mandates increase the number of businesses required to file their federal tax returns electronically, and the Internal Revenue Service offers more and better ways for tax pros to interact electronically with the service.Even if the e-file mandate hasn't affected your clientele, do yourself and your clients a big favor: Prepare for electronic filing early and take advantage of all of the electronic services now available from the Internal Revenue Service.

Only time will tell whether the bane of the 2006 tax filing year for the Internal Revenue Service is the scam-prone telephone tax refund, or the confusion that seems destined to arrive soon surrounding a number of extender provisions that were not included on the agency's original forms.The agency urged taxpayers to check and see if they qualify for the telephone excise tax refund after more than 10 million early filers did not request the one-time refund. In the first release of the year's weekly filing season statistics, about 30 percent of all taxpayers had not requested the telephone tax refund. Nearly half of those returns - more than 4.8 million - were completed by a tax preparer. "We are surprised how many tax preparers are overlooking the telephone tax refund," said IRS Commissioner Mark Everson, in a statement.

The Internal Revenue Service and Treasury Department announced the release of proposed regulations that would disallow foreign tax credits for foreign taxes purportedly paid in connection with certain artificially engineered, highly structured transactions.

The Sarbanes-Oxley Act brought the tax manager into the financial statement reporting process as never before. As SOX Section 404 internal control certifications were made with respect to each input into the financial statements, it became clear that one of the weakest areas for SOX 404 compliance was accounting for income taxes.Under FASB Statement No. 109, Accounting for Income Taxes, the process of providing for deferred income taxes had become so subjective and subject to differing interpretations that certification of the results was difficult, and comparability across financial statements appeared to be lacking.

Despite continued controversy over whether the use of private debt collectors is a direction the Internal Revenue Service should be moving in, a new federal report gave high marks to the first phase of the agency’s pilot program.

Dallas-based law firm Jenkens & Gilchrist Corp. will pay $76 million to the Internal Revenue Service to settle charges over its aggressive marketing of questionably legal tax shelters to wealthy individuals.

After seven years of prosecutorial pursuit, telecommunications mogul Walter C. Anderson was sentenced to serve nine years in prison for failing to pay more than $200 million in taxes. He will receive credit for the two years he has already served.Anderson, 53, was also ordered to pay about $23 million to District of Columbia tax collectors, but a federal judge ruled that he won’t have to pay the Internal Revenue Service restitution ranging from $100 million to $175 million, because prosecutors listed the wrong statute in Anderson’s plea agreement. Judge Paul Friedman said he could have ordered Anderson to repay the money as part of his probation, but prosecutors has also omitted any discussion of probation from Anderson's paperwork.

The Government Accountability Office says that the Taxpayer Advocate Service needs to be collecting better data on the type of cases it handles, as well as how those cases are actually being handled.The office was originally asked to examine why the advocate service has experienced an increased caseload since 2004, how well the service has conducted its activities in terms of measures such as customer satisfaction and quality, and finally, how well the service measures and reports its advocacy efforts.

The Internal Revenue Service is alerting taxpayers about common mistakes made by individuals while preparing their federal income tax returns.

The Justice Department said that a California marketer has pleaded guilty to a conspiracy charge of defrauding the United States for his involvement in a tax fraud scheme.Todd Eugene Strand of Murrieta, Calif., pleaded guilty today in a Kansas City federal court this week. According to the government’s indictment, between June 1997 and April 2002, Strand and a trio of co-defendants -- Daniel Joel Gleason, Michael Craig Cooper and Jesse Ayala Cota -- operated a scheme to defraud the Internal Revenue Service and taxpayers.

Link2Gov Corp. announced that its Pay1040.com service, now in its fifth year of contracted electronic payment processing for the Internal Revenue Service, is experiencing a 63 percent year-over-year increase in the dollars being processed for federal tax payments.

Avalara, a provider of Internet-based sales tax compliance services for small and midsized businesses, announced that it has more than 10,000 registered users -- doubling the company’s year-ago figure.

A House subcommittee met yesterday to examine the impact of the alternative minimum tax on individual taxpayers, particularly middle-income taxpayers who were never intended to be subject to the tax.

The Treasury Inspector General for Tax Administration said that although the process to separate joint tax accounts in innocent spouse cases has been improved, additional action needs to be taken.The Internal Revenue Service separates joint tax accounts to help protect innocent spouses from enforcement action that may be taken against the spouse who actually owes the feds.

A local accounting firm has alerted its 4,000 clients that their private financial records -- including Social Security numbers, addresses, credit card information and signature documents -- have been stolen.Santa Rosa, Calif.-based Tax Service Plus told authorities that thieves stole the business’s back-up computer on March 7, which contained data on thousands of tax returns filed over the past three years.

Retailers and other businesses that sell prepaid phone cards for long-distance service can usually qualify for the telephone tax refund, according to the Internal Revenue Service.

In an effort to assist taxpayers who pay their taxes owed with a credit card, H&R Block Inc. has teamed with payment processing company Link2Gov to lower the convenience fee to 1.99 percent, from 2.49 percent.

Everyone has a story of the email they accidentally sent to the wrong recipient, or the computer that crashed and lost an entire day’s worth of work.The disaster recovery industry has proven to be a lucrative one in the age of information, and recent snafus at the Alaska Department of Revenue and the Canada Revenue Agency only serve to underscore that problems can happen -- and illustrate the different ways in which an organization can be prepared for the worst-case scenario.

Although I have been in professional publishing and writing for tax practitioners for over 30 years, a good Internal Revenue Service letter ruling or a Tax Court decision still excites me. This is especially true when they are taxpayer victories that tax practitioners can use to benefit clients that are similarly situated.