Tax practice

The National Association for the Advancement of Colored People is reportedly under investigation by the Internal Revenue Service for violating the terms of its tax-exempt status in a probe that the group's chairman says stems from comments he made that were critical of President Bush.

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.

Liberty Tax Service marked a milestone this week as the company officially welcomed its thousandth Liberty franchise entity. In the last two tax seasons, Liberty Tax Service has doubled the number of tax returns prepared in outlets throughout the U.S. and Canada. Less than 50 franchise companies have more than 1,000 franchisees on Entrepreneur magazine's list of top 500 franchise organizations in the world. "This year has been an exhilarating time of record growth in many areas for Liberty Tax. As we hit the mark of 1,000 franchisees in our operating system, we continue our quest and drive to be the No. 1 tax company in the industry," said John Hewitt, chief executive and founder of Liberty Tax Service. For the fourth consecutive year, Accounting Today named Hewitt one of the Top 100 Most Influential People in the tax industry. This year, Entrepreneur magazine ranked Liberty Tax Service as the ninth fastest growing franchise opportunity, one of the top 20 low-investment opportunities, and No. 28 on its overall list of best franchises. In March, Accounting Today magazine ranked Liberty among the fastest growing on its list of the Top 100 Tax & Accounting Firms.

The Internal Revenue Service has issued Notice 2004-71, providing procedures for persons required to prepare Form 1099-DIV and other information reporting with respect to dividends from foreign corporations and for individuals receiving such forms.

CHANGE BOOSTS SMALL BUSINESSES ELIGIBLE FOR SCHEDULE C-EZ: In a move aimed at reducing the paperwork burden for small businesses, the Internal Revenue Service said that it would boost the number of small businesses eligible to file a simplified expense form. The IRS will double the business expense threshold to $5,000 from $2,500 for filing the Form 1040, Schedule C-EZ.

Tax practitioners should be pleased that recent improvements have enabled the Internal Revenue Service to handle appeals more efficiently and in a more timely fashion than in the past.

Year-end tax planning generally never turns out to be the same routine each year. Either the client's circumstances change, or the tax law changes. For 2004, one of the major unexpected developments is the eleventh-hour passage of the Working Families Tax Relief Act of 2004.

A week after the release of a scathing report by its federal regulator, mortgage giant Fannie Mae agreed to major changes in its accounting, internal controls and management practices.

President Bush on Friday quietly signed the American Jobs Creation Act of 2004 into law, while flying on Air Force One to a campaign appearance in Pennsylvania.

The Internal Revenue Service Appeals Division has tightened the guidelines under which it will settle cases with taxpayers that participated in certain abusive transactions, the agency advised this week.

Singer and songwriter Ronald Isley has been indicted on tax evasion charges for failing to report income that he received from performances and royalties as a member of the renowned Isley Brothers.

The Internal Revenue Service and the Virgin Islands Bureau of Internal Revenue said that they've established a new partnership to work together on common tax enforcement issues.

The Internal Revenue Service is reminding tax-exempt political organizations that filing deadlines are approaching for disclosure statements prior to the Nov. 2 election date. Information on 2004 political contributions and expenditures will be available for public inspection on the IRS Web site.Certain political organizations that are tax exempt under Section 527 of the Internal Revenue Code are required to file Form 8872, Report of Contributions and Expenditures. Organizations have the option of filing either monthly or quarterly.For quarterly filers, the third quarter report were due Oct. 15. Organizations filing monthly reports must submit their September information by Oct. 20. A pre-election report for both quarterly and monthly filers is due Oct. 21, or Oct. 18 if the report is sent by registered or certified mail.The October filings are the last reports that will be available to the public prior to the Nov. 2 election. A post-election report will be due on Dec. 2.

When President Bush signs the FSC/ETI bill, the days of small business owners and professionals such as doctors and lawyers expensing luxury SUVs are over.Writers of the 600-page measure closed a tax break that allowed business owners to save as much as $33,000 on the purchase of a $1000,000 vehicle, according to Tax Analysts.The Jobs and Growth Tax Relief Reconciliation Act of 2003 created the break by increasing from $25,000 to $100,000 the amount that small businesses can expense in the first year for buying a vehicle weighing 6,000 pounds or more.The incentive was originally written to assist farmers and contractors to invest in larger equipment, but the floodgates opened when it was discovered that luxury SUVs also qualified.The amendment reduces the SUV deduction to $25,000, while still allowing the farmers and contractors the break.

New data suggesting that income tax noncompliance is on the rise among the Internal Revenue Service's own employees is causing some hand-wringing among members of an IRS task force formed to address the problem.

NEW BILL WOULD PREVENT DOUBLE TAXATION OF TELECOMMUTERS: Democratic Senators Christopher Dodd and Joseph Lieberman, both of Connecticut, have introduced a bill to prevent double taxation of taxpayers who work from home. The Telecommuter Tax Fairness Act of 2004 would prohibit states from imposing personal income tax on nonresidents for any period that the individual is not physically present in the state.

Although Tropical Storm Bonnie and Hurricanes Charley, Frances and Ivan have taken their toll on Florida this season, disaster tax relief affects most preparers at some time during their career.

As the Internal Revenue Service continues to labor to finalize Circular 230 on the requirements for tax shelter opinions and when they may be relied on, a recent court decision may have already done a significant portion of its work.

House and Senate negotiators agreed to a corporate tax bill that repeals the Foreign Sales Corporation-Extra Territorial Income Tax regime, and cuts taxes across a broad swath of businesses.

The Internal Revenue Service has unveiled a new tool to help tax professionals determine whether their clients are eligible for the earned income tax credit.