Tax planning

President George W. Bush has named two former senators to lead a new nine-member bipartisan panel charged with arriving at options to reform the tax code.

In his State of the Union address this week, President Bush pushed his plan to overhaul Social Security and add optional private accounts for younger workers, as the White House unveiled some new details of how that plan would work.

The Internal Revenue Service has revised the form used by municipalities and other issuers of tax-exempt bonds to make arbitrage-related payments.

The Internal Revenue Service can use the efforts of CPAs and other tax practitioners as a springboard to leverage IRS initiatives to improve taxpayer compliance, Tom Purcell, chair of the American Institute of CPAs' Tax Executive Committee, told the IRS Oversight Board.

Thomas Wilson, former Large and Mid-Size Business Division industry director for the telecommunications, media, high technology, publishing, entertainment, sports and gaming industries at the Internal Revenue Service, has joined PricewaterhouseCoopers as a managing director in the Washington National Tax Service's IRS Service Team, the Big Four firm said.

Tax prep giant H&R Block has launched a new business employing CPAs to serve the needs of small business owners.

Members of the Association of Community Organizations for Reform Now, or Acorn, announced plans to protest at Liberty Tax offices in more than 60 cities throughout the U.S. and Canada from Feb. 1 to Feb. 4 to demand that the tax preparer change its refund anticipation loans practices.

The National Association for the Advancement of Colored People said that it is refusing to comply with an Internal Revenue Service request for documents that came as part of the agency's investigation into alleged improper political bias by the civil rights group.

The Joint Committee on Taxation has suggested over 60 options to close the $311 billion gap between taxes owed and collected. The report, requested by Sen. Chuck Grassley, R-Iowa, chairman of the Committee on Finance, and ranking member Sen. Max Baucus, D-Mont., consists of numerous revenue raisers, in addition to compliance provisions. The largest revenue raiser, to the tune of $164 billion, is a proposal to include in FICA wages salary reduction amounts used to provide benefits under a cafeteria plan or to provide qualified transportation fringe benefits. Proposals affecting individual income tax include a repeal of the exclusion for employer-provided care, making the dependent care credit the exclusive means for receiving tax benefits for dependent care expenses; a modification of the "kiddie tax" by increasing the age of children to which the kiddie tax provisions apply from under 14 to under 18; and a repeal of the deduction for interest on home equity indebtedness. "High-priced lobbyists won't be able to eat their eggs Benedict when they see this report," Grassley said. Grassley said that he was especially pleased to see the report's extensive discussion about possible changes in the law governing nonprofits and charitable donations. "These recommendations should help to remove the rose-colored glasses that a lot of people use to view tax-exempt organizations," he said.

The 2006 budget reportedly will not address the hot-burner issue of revamping or eliminating the controversial alternative minimum tax or other tax reforms, but will allow President Bush's recently appointed tax reform panel to tackle them. According to Tax Analysts, the bipartisan tax reform panel is expected instead to examine tax reform options that will make the code simpler and fairer. The panel is supposed to make recommendations to Treasury Secretary John Snow by July 31. In her recent report to Congress, National Taxpayer Advocate Nina Olson recommended the repeal of the AMT, which she described as the biggest problem of the Internal Revenue Code. However, costs to fix the AMT are estimated to be roughly $700 billion.

California is preparing to kick off its first tax amnesty program in two decades, in hopes of narrowing its whopping budget deficit.

The Treasury Department and the Internal Revenue Service have published a new revenue procedure that offers guidance on the like-kind exchange of a home.

CCH Tax and Accounting has unveiled a Web site for sales and use tax professionals.

The U.S. Supreme Court has ruled unanimously that the portion of a money judgment or settlement paid to a plaintiff's attorney under a contingent-fee agreement is income to the plaintiff.

A federal judge here has reportedly denied a request by BDO Seidman LLP to force a group of its former tax shelter clients to arbitrate their complaints out of court, according to a published report.

Turnaround specialist firm Alvarez & Marsal has expanded its tax advisory unit, adding eight managing directors in several of its regional locations, as well as unveiling an office here.

Tax law changes, expanded electronic services from the Internal Revenue Service, simplified tax filing rules for certain forms and an expected increase in total returns mark the start of the 2005 tax filing season.

New regulations to Circular 230 calling for "highest quality representation" may encourage malpractice litigation involving tax advisors, according to some observers.

The American Jobs Creation Act of 2004 permits taxpayers to deduct either their state and local income taxes or their state and local sales taxes as an itemized deduction for 2004 and 2005.

BLOCK FINANCIAL ADVISORS SETTLES WITH NASD: H&R Block Financial Advisors, the investment arm of the tax prep giant, agreed to pay a $500,000 fine and to return $325,000 in clients' mutual fund trading profits to settle charges brought against it by the National Association of Securities Dealers related to the market-timing of mutual fund shares by two of its former financial advisors. The company, which did not admit or deny the NASD's allegations, said that the settlement won't have a material effect on its operations.