Tax

Tax Freedom Day will fall on April 30 this year, two days later than 2006, according to the Tax Foundation's annual calculation using the latest government data on income and taxes.Tax Freedom Day marks the calendar date by which Americans have worked enough days to pay off the federal and state taxes they will pay. The foundation calculates the date by dividing the total tax collections by the nation's income and then converting that percentage into days worked. This year, the percentage fell at 32.7 percent -- meaning that counting from January 1, it would take until April 30 before a worker begins to "take home" their earnings.

The Internal Revenue Service has alerted taxpayers about Internet scams in which fraudulent e-mails are sent that appear to be from the IRS.The e-mails direct the consumer to a Web link that requests personal and financial information, such as Social Security, bank account or credit card numbers. The practice of tricking victims into revealing private personal and financial information over the Internet is known as “phishing” for information.

Although there were delays on issuing 1099s, and some problems have surrounded the telephone tax refund, the 2007 filing season has been relatively uneventful, observers said. The traditionally frenetic period had, at press time, passed its midpoint without any real snags."So far, the season has been remarkably quiet and very smooth," said Teresa Mackintosh, CPA, CITP and vice president of strategic marketing at Thomson Tax and Accounting Professional Software and Services.

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.