Tax Strategies

As most every tax practitioner in town makes their pitch on year-end tax planning to clients, research organization the Tax Foundation recently released a new report making an economic case against the federal deduction for charitable gifts.

Tax protestor Larken Rose of Hollywood, Pa., was sentenced to serve 15 months in prison for failing to file tax returns for the years 1998 to 2002, the Justice Department and Internal Revenue Service announced.

A new study from the Tax Foundation says that the federal tax deduction for charitable gifts is highly regressive and subsidizes many organizations that are questionably charitable.

The final report of the President's Advisory Panel on Tax Reform attracted a heavy dose of criticism even before it was released, failing to satisfy the interest groups most concerned about tax reform.The panel offered two options. Plan A, the "Simplified Income Tax Plan," would create four tax brackets of 15, 25, 30 and 33 percent; replace the standard-deduction personal exemption and the child and earned income tax credits with family and work credits; reduce long-term capital gain rates; replace the mortgage interest deduction with a credit; end tax-free health insurance from employers; and eliminate the deduction for state and local taxes.

Electronic Data Systems Corp. will pay the U.K. government $122 million to settle a dispute over a faulty system the tech company supplied to administer tax credits.

Tax practice for CPAs is changing. Recent modifications to Circular 230, the U.S. Treasury Department regulations that govern practice before the Internal Revenue Service, have established several changes that leave CPAs with a new standard for the practice of taxation.The rationale for the revised regulations is part of an IRS effort to promote ethical tax practices and curb abusive tax avoidance programs promoted by some tax professionals. Some CPA and law firms were coming up with tax-motivated transactions for clients and then packaging those transactions to sell to other companies.

Advanced degrees are being obtained by a higher percentage of the middle- and upper-class population than ever before. Many of these students hold full-time jobs. The recent development of online universities has only served to fuel this trend. The ability of working students to take a business expense deduction for tuition expenses likewise has grown in importance.With MBAs being one of the hot degrees to have as of late, because of its apparent ticket to success in many different business settings, it's a small wonder that a recent Tax Court decision has attracted more than its share of attention. That case (Allemeier Jr., T.C. Memo. 2005-207) appears to have opened up the possibility that the expense for obtaining a larger number of MBA degrees can be written off as a trade or business expense.

A member of the President's Advisory Panel on Federal Tax Reform has been complaining loudly about the requirement that the panel always meet in public to discuss its plan, according to reports.

The recently passed Treasury appropriations bill for next year sets a budget of $10.7 billion for the Internal Revenue Service, with most of the agency's $434 million increase tabbed for enforcement efforts.

In one of the stiffest jail sentences handed down in a tax case, Dallas' Daniel A. Fisher was sentenced to serve 235 months and pay a $1 million fine.