Tax

Several more 2007 Toyota models have been certified by the Internal Revenue Service to qualify for the hybrid tax credit enacted by the Energy Policy Act of 2005.

Tax software publisher CCH continued making an aggressive push into the small practitioner market, announcing its second major acquisition in as many months.The Wolters Kluwer business, which produces the ProSystem fx Office line of accounting and business software products, signaled its determination to take on the marketplace leader, Intuit Inc.'s QuickBooks, by striking a pact to purchase TaxWise Corp.

Although the program has been characterized by the Internal Revenue Service itself as potentially rampant with opportunities for scamming, and has attracted growing opposition, the agency nonetheless has moved forward with its plan to hire private debt collectors to track down delinquent taxpayers.The first phase, rolled out in September, enlisted a trio of private collection agencies to receive personal information about taxpayers with outstanding liabilities, including name and Social Security number of taxpayer (and spouse, if a joint tax liability), address, amount of tax debt and the year or years to which the debt applies.

Tax advisors are likely to hear from potential clients seeking advice on how to "re-enter" our tax reporting system.The reasons for failing to file tax returns vary with the client: the stress of a divorce or bankruptcy, ignorance of U.S. tax laws, or willful negligence. Similarly, the strategies for handling these cases should vary, considering the potential criminal, as well as civil, ramifications of a client's failure to file timely returns.

The Taxpayer Advocacy Panel has sent the Internal Revenue Service recommendations for easing taxpayer burdens in five areas.In a 12-page report dated Aug. 18, the panel made the following suggestions:

To divine the true meaning of a gap, I usually need to go beyond calculating the difference between my gross pay and net pay on the 15th and 30th of each month.That my friends, is Webster’s unabridged definition of a gap.

The share of income taxes paid by the top half of taxpayers reached its highest level in decades according to a report from the Joint Economic Committee.

The threat by Sen. Max Baucus, D-Mont., to hold back the appointment of Eric Solomon as assistant secretary for tax policy at the Department of the Treasury is misplaced, according to observers.Baucus, the ranking member of the Senate Finance Committee, said that he would place a hold on President George W. Bush's nominee for the Treasury's top tax position unless the department details how it will close the tax gap.

A sampling of tax returns filed by fishermen in 2004 revealed that thousands of workers had overpaid an average of $530, after failing to take advantage of the averaging provision in calculating their income tax liability. According to the report from the Treasury Inspector General for Tax Administration, more than 4,600 taxpayers -- about 90 percent of the fishermen who could have benefited from the averaging provision -- didn't take advantage of the provision included the American Jobs Creation Act of 2004. TIGTA said that the overpaid taxes for the individual returns filed during the 2004 tax year totaled more than $2.4 million; and a startling 90 percent of the fishermen’s returns were prepared by paid tax preparers. The 2004 law allows fishermen to elect to compute their tax liabilities by averaging all, or a portion, of their taxable fishing income from the prior three years. The measure was designed to help fishermen recover from low-income years by keeping more of their income in successful years and offsetting potentially high tax burdens in isolated years. At the time of its enactment, the Joint Committee on Taxation estimated the provision could save fishermen up to $61 million in taxes over the next decade -- between $3 million and $10 million annually. During a prior audit, TIGTA noted that less than one half of taxpayers who could benefit from a similar provision for farmers, had actually taken advantage of the measure. The inspector general recommended to a variety of federal offices that a better and broader effort be made to educate both fishermen and tax preparers about the averaging provision. The full report is available at www.treas.gov/tigta/auditreports/2006reports/200630158fr.pdf.

The Internal Revenue Service has issued details on the process for military reservists called to active duty to receive payments from individual retirement accounts, 401(k) plans and 403(b) tax-sheltered annuities, without penalities.