Tax planning

The Internal Revenue Service will increase the minimum threshold for Federal Unemployment Tax Act deposits, a move that will impact more than 4 million small businesses.

Senate Finance Committee chairm Chuck Grassley and ranking member Max Baucus called for an independent investigation of the Internal Revenue Service's Offer in Compromise program by the Government Accountability Office.

Improving taxpayer service, enhancing enforcement of the tax law, and modernizing the Internal Revenue Service through its people, processes and technology should be the tax administration's top priorities for 2005, according to the American Institute of CPAs.

The City of Hartford filed a lawsuit in District Court this week to block an Internal Revenue Service test aimed at reducing erroneous earned income tax credit payments that the city alleges violates taxpayers' civil rights and discriminates against its African-American and Latino taxpayers, who make up the bulk of those who receive the credit.

The IRS has reported that current refunds for nearly 90,000 taxpayers are going unclaimed due to unknown or incorrect addresses in the IRS records. More than $73 million is at stake for taxpayers who want to file corrected addresses with the taxing agency. The most common reasons for unclaimed refunds include name changes and address changes that aren't reported to the IRS, and address errors on the tax return. The IRS has no choice but to hold on to the refund checks until they are claimed, or until the law permits the government to keep the money. Taxpayers have until three years after the due date for filing their tax return to make a claim for their refund. After that time the money become the property of the U.S. Treasury. "Where's My Refund?" is a service provided by the IRS and can be found online at https://sa.www4.irs.gov/irfof/lang/en/irfofgetstatus.jsp. Taxpayers can enter their Social Security number, tax-filing status and the exact amount of the refund that was claimed on the original tax return, and the IRS will tell them the status of the refund and provide information for submitting a change of address form.

The Internal Revenue Service has issued proposed regulations for determining when a transfer of consideration to a partnership by a partner and a transfer of consideration from that partnership to a different partner constitute a disguised sale of a partnership interest. In response to a recommendation of the Joint Committee on Taxation in its "Report of Investigation of Enron Corporation and Related Entities Regarding Federal Tax and Compensation Issues, and Policy Recommendations" (February 2003), the regulations generally would extend the existing disclosure requirement for disguised sales of property from two years to seven years. The same disclosure requirement would be incorporated for disguised sales of partnership interests. "These proposed rules benefit both the taxpaying community and the Internal Revenue Service," said IRS chief counsel Don Korb. "The rules provide taxpayers and tax practitioners with guidance on how to structure partnership contributions and distributions without getting caught up in the disguised sale rules. They also provide for a longer disclosure period that will facilitate the examination of questionable transactions involving partnerships." The proposed regulations provide, generally, that where a transfer of consideration to partner A by a partnership would not have happened "but for" the transfer of consideration to the partnership by partner B, the transfers are treated as a sale of all or a portion of partner A's interest in the partnership to partner B for all purposes under the Internal Revenue Code. Where the transfers to and from the partnership do not occur on the same date, the transfers are treated as a sale only if the later transfer is not dependent on the entrepreneurial risks of partnership operations. The proposed regulations provide that these determinations are made based on all of the facts and circumstances.

What started as a natural progression of tax preparers doing simple projections a year or two into the future has evolved into a true value-added practice for their clients, generating both client loyalty and additional income.At the same time, the ability to do these projections has evolved from a capability that is built into most tax preparation programs, into a separate tax planning module. Along the way, RIA and CCH have raised the stakes in tax planning software with their Tax Alerts and Client Relate, which do the spadework in finding tax planning engagements.

Sin taxes.

IRS INVESTIGATING OVER 60 CHARITIES ON POLITICAL ACTIVITIES; FUROR OVER NAACP PROBE: More than 60 charities, churches and other tax-exempt groups have been contacted by the Internal Revenue Service about alleged improper political activities, the agency disclosed.

The Internal Revenue Service warned consumers against bogus claims by promoters that tax debts can be settled for "pennies on the dollar" through the Offer in Compromise Program.

Despite Internal Revenue Service assertions that it had halted the decline in the government's efforts to police corporate tax non-compliance, the pace of corporate audits is running well below the record-low levels registered in 2003, according to an analysis of IRS data.

The American Institute of CPAs has named Thomas J. Purcell III to a two-year term as chairman of its Tax Executive Committee, the tax policy and standards-setting body of the AICPA.

With the dust finally settling on the American Jobs Creation Act of 2004, tax professionals are studying its voluminous sections and clauses to map out optimum strategies.

A controversial tax return inspection provision contained in a Bush administration budget bill for fiscal 2005 will be removed before the legislation is sent to the White House for the president's signature.

A controversial tax return inspection provision contained in a Bush administration budget bill for fiscal 2005 will be removed before the legislation is sent to the White House for the president's signature.

A controversial tax return inspection provision contained in a Bush administration budget bill for fiscal 2005 will be removed before the legislation is sent to the White House for the president's signature.

A controversial tax return inspection provision contained in a Bush administration budget bill for fiscal 2005 will be removed before the legislation is sent to the White House for the president's signature.

Internal Revenue Service enforcement activities brought in a record $43.1 billion in fiscal 2004, up 15 percent, or $5.5 billion, over 2003, the agency reported.

The Internal Revenue Service has raised the standard business mileage rate for automobile expenses for 2005 by three cents -- the largest one-year rise ever.

Tax reform under a second Bush Administration will most likely take the form of piecemeal tax cuts, according to panel participants at a conference of the Council for Electronic Revenue Communication Advancement, a government-private industry trade association.