Tax planning

Three weeks into the clean-up effort following the massive flooding at its Washington headquarters, the Internal Revenue Service said that the office -- which houses some 2,700 workers -- won't reopen until early 2007.

During his administration's mid-year congressional review, President Bush said that high tax revenues were responsible for helping the government reduce the budget deficit faster than originally anticipated.

Whether accounting firms and tax practitioners should be allowed to seek patent protection for the tax advice they offer is a question being raised on Capitol Hill in response to a recent upsurge in patent applications by the developers of new tax reduction strategies.

While practitioners are still scrambling to make sense out of the recent tax reconciliation legislation, significant changes in tax legislation are already in effect for 2006 - changes that may have a huge impact on the tax pro's 2007 tax filing season. And since it's an election year, tax pros will have to keep a close watch on any additional legislation that makes it into law impacting 2007 filings.How the practitioner community prepares for those changes now will make a big difference in the success of that filing season, which is really just a few months away.

The energy industry hopes that anticipated public guidance regarding Section 45 of the Internal Revenue Code will provide significant clarity on tax credit issues for projects producing electricity from open-loop biomass projects."Currently, there's a logjam when it comes to doing deals involving open-loop biomass projects as the industry does not have clear guidance on various issues," said David S. Lowman Jr., a tax partner in the Energy Practice Group at Hunton & Williams LLP in Richmond, Va., who works with clients on issues related to various energy tax credits.

With the tax filing season over, tax software vendors hope to get a head start on next season's sales by offering special summer season discounts and tryouts. At the same time, preparers have some time to tinker with different software to find a solution that fits their practice.Meanwhile, the recent enactment of tax legislation, such as the Tax Increase Prevention and Reconciliation Act of 2005 - with the promise of more to come - gives preparers additional motivation to consider new software solutions. Publicity over legislative changes will drive increasing numbers of taxpayers to seek professional help, according to observers. It also means more sales for tax prep vendors, since more preparers are expected to enter the field to service the additional taxpayers seeking professional advice.

The Internal Revenue Service announced regulatory revisions that the agency hopes will remove impediments to e-filing for corporations and shareholders."This is a win-win situation for businesses, shareholders and the IRS," said Commissioner Mark W. Everson. "Businesses and shareholders will be relieved of excessive reporting obligations that really no longer made sense, while the IRS will still receive the information it needs for compliance. As a bonus, a number of roadblocks to IRS e-file also will be removed."

Congressional investigators have uncovered a new breed of tax chiselers - deadbeat charities that shortchange the government and their own employees by failing to pay millions of dollars in payroll taxes.As tax-exempt organizations, or EOs, charities are excused from income tax liability, but are required to withhold and pay employment taxes for their workers. With one in 12 U.S. civilian workers now employed by exempt organizations, even a small percentage of non-compliance by charities can add up to a significant drain for federal tax collectors.

The Internal Revenue Service will issue guidance clarifying the 20 percent penalty for executives divesting a deferred compensation arrangement.

Looking at criteria that includes business taxes and state incentives, a recently released survey has found that Philadelphia is the most expensive city to do business in, while Cheyenne, Wyo., took the honors at the opposite end of the scale.

At the beach earlier this week, my sister found herself on the receiving end of a delivery from a seagull -- much to her horror at the moment, and the amusement of everyone I've told the story to since.

The Senate Finance Committee approved legislation that would empower the Internal Revenue Service to hit sex traffickers with major fines and lengthy prison sentences for failing to file employment paperwork and withhold taxes for the women and girls under their command.

State tax revenues for all 50 states totaled $146.6 billion in the first quarter of 2006, up 6.8 percent from the same period in 2005, according to t he Nelson A. Rockefeller Institute of Government.

While the Internal Revenue Service's reward program for turning in tax cheats does a good job bringing in money, it's still in need of some revamping, a ccording to a report from the Treasury Inspector General for Tax Administration.

The chairman of the House Ways & Means Committee has introduced a new bill to permanently raise the estate tax exemption level to $5 million in 2010.

The Internal Revenue Service is providing additional time -- through Oct. 16 -- to file 2004 and 2005 individual income tax returns for taxpayers hit hardest by Hurricane Katrina.

All sorts of press releases and product announcements come my way throughout the course of a week, besides all the material I go out seeking to consider running on WebCPA.

The tax-exempt status of more than 550 hospitals appears to be the latest nonprofit segment coming under scrutiny by the Internal Revenue Service.

The ink was barely dry on President George W. Bush's signature before critics and proponents of provisions in the new tax reconciliation legislation voiced their reactions, and practitioners began studying planning opportunities for their clients.What began life as bipartisan 2005 reconciliation legislation became a political football involving months of negotiations, infighting and eventual compromise before a bill was passed that includes a number of extenders, tax breaks and revenue raisers.

The Taxpayer Advocacy Panel has released its 2005 Annual Report summarizing its new recommendations for improvements in the way the Internal Revenue Service does business.The report forwarded suggestions to the IRS representing a variety of concerns, including six suggestions regarding refunds and refund anticipation loans, and recommendations to change the instructions for offers in compromise.