Tax

Good news came to KPMG on two fronts this week, as a federal judge in New York dismissed a criminal conspiracy charge against the U.S. arm of the Big Four firm. Meanwhile, a court in Oslo ruled that the Norwegian group could not be held responsible for the negligence of an auditor in its employ.

Tax preparation service Jackson Hewitt Inc. will pay $5 million to settle allegations that it violated state and federal laws when marketing its refund anticipation loans to California customers.California Attorney General Bill Lockyer said that the tax preparer will pay $4 million in restitution to customers who purchased same-day "Money Now!" loans and other loan products. The company will also pay $500,000 in civil penalties and $500,000 to reimburse investigative costs.

The Internal Revenue Service officially began its 2007 filing season on Thursday, making note of new developments, including telephone excise tax refunds, a new refund deposit feature and recently enacted tax breaks that may require extra attention.

Senators Max Baucus, D-Mont., and Chuck Grassley, R-Iowa, introduced legislation on the first day of the 110th Congress to repeal the individual alternative minimum tax beginning in the 2007 tax year.It’s just the most recent attempt the men have made to get the legislation passed. Congress has taken to patching the AMT one year at a time -- six years in a row -- usually by increasing the exemption amount. According to the Joint Committee on Taxation, in 2007 the patch will cost about $50 billion and hold the number of affected taxpayers at close to the 4 million taxpayers affected this year. Without a patch, about 23 million households would have been affected by the AMT.

Two unmarried taxpayers can exclude gain from the sale of their home -- even though they fail the two-year ownership and use tests of the tax code -- because the primary reason for the sale was an unexpected pregnancy.In a Dec. 29 letter responding to a ruling request, the Internal Revenue Service said that a pregnancy meets the “unforeseen circumstances” exclusion outlined in Section 121(a)(c)(2) of the code.

The Internal Revenue Service recently issued a notice outlining how individuals and businesses can obtain refunds and credits on their 2006 returns of the long-distance telephone excise tax.

The Justice Department has asked a federal court to bar a flea market-based tax preparer from readying returns for clients.According to a complaint filed in Miami’s U.S. District Court, Tashanna McFarland of Miramar, Fla., regularly prepared federal tax returns claiming fraudulent fuel tax credits, a scam that the Internal Revenue Service has said is a serious enforcement problem. McFarland operates her tax preparation business out of a booth in a Miami flea market.

The Wisconsin Department of Revenue has inadvertently distributed 170,000 tax forms bearing the Social Security number of the intended recipient on the mailing label.

With the Tax Relief and Health Care Act of 2006 now signed into law, the Internal Revenue Service has rolled out guidance to help taxpayers filing in 2007 claim the extended deductions and other tax advantages contained in the act.

Just before the holiday break, a federal appeals court said it will reconsider a case involving the taxability of damages received for emotional distress.