Tax

IRS SAVES PAULSON FROM TAX HIT: The Internal Revenue Service will issue guidance clarifying the 20 percent penalty for executives who divest a deferred-compensation arrangement. The new regulations will translate into significant savings for incoming Treasury Secretary Henry Paulson. Paulson will sell off the more than $470 million that he owns in Goldman Sachs stock to comply with conflict-of-interest provisions for his new position. The guidance says that any executive divesting a deferred-compensation arrangement specifically to comply with government rules on conflicts of interest doesn't have to pay the penalty. Paulson will still have to pay regular income taxes on the deferred compensation.A spokesperson for the Treasury said that the IRS had been working on the guidance for some time, but accelerated its work in time for Paulson to be covered. The writing of the new rule hadn't been a priority because so few people are affected under the provision.

An estimated 15 million immigrants in the United States are not eligible to obtain a Social Security number. However, many of these same individuals pay taxes on income and are obligated to file tax returns.If this sounds confusing to you, then you're not alone.

Individuals who participate in online sales at auction sites such as eBay face a plethora of bookkeeping and tax issues regarding their entrepreneurial ventures. Some people choose to ignore the issues and simply not report their financial activity.Earlier this spring, the IRS completed a National Research Program study in which it was determined that an annual tax gap of more than $300 billion exists. The tax gap represents the difference between the amount of tax that should be paid and the amount actually paid in any given year.

The American Institute of CPAs praised a new law that will prevent states from taxing the retirement income of non-resident partners last week.

One of the provisions inserted by the Conference Committee into the Tax Increase Prevention and Reconciliation Act of 2005, signed by President Bush on May 17, 2006, was a tax increase on citizens working abroad. The provision was not in either the House or Senate versions of the legislation, although Congress has considered a number of proposals related to the taxation of citizens working abroad over the years, including some Senate bills in the current Congress.It is estimated that over 4 million citizens work abroad. The U.S. Census does not count them, so we have no accurate numbers. The Treasury does try to tax them, but with questionable effectiveness. For the 1999 tax year, out of 127,667,890 returns filed, 1,350,890 had foreign addresses, but this included the APO and FPO addresses of members of the armed forces, as well as some Puerto Rico residents with offshore income. A 2004 Internal Revenue Service study reported that in 2001, fewer than 300,000 tax returns reported foreign-source-earned income.

Maintaining that there's near-universal agreement that the nation's tax code is too complex, Sen. Chuck Grassley, R-Iowa, chairman of the Senate Finance Committee, officially opened the committee's hearings titled "Kick-off for Tax Reform: Tackling the Tax Code."

Internal Revenue Service Commissioner Mark W. Everson has been elected chairman of the Forum on Tax Administration, a panel of national tax administrators that is part of the Paris-based Organization for Economic Cooperation and Development.

A Senate report estimates that tax cheating now equals about 7 cents out of each dollar paid by honest taxpayers, or as much as $70 billion annually.

The American Institute of CPAs has been working to mend fences with local officials in Durham, N.C., after the county manager threatened to pull a $400,000 subsidy package for the institute's relocation of its New Jersey headquarters.

Before adjourning for a five-week summer recess, the House pushed through a bill pairing a minimum wage increase with a GOP-led effort to extend cuts on estate taxes.