Tax Strategies

Just in time for consideration by President Bush's new bipartisan panel on tax reform, National Taxpayer Advocate Nina Olson told Congress that the complexity of the Internal Revenue Code is the most serious problem facing both taxpayers and the Internal Revenue Service.

President George W. Bush has named two former senators to lead a new nine-member bipartisan panel charged with arriving at options to reform the tax code.

In his State of the Union address this week, President Bush pushed his plan to overhaul Social Security and add optional private accounts for younger workers, as the White House unveiled some new details of how that plan would work.

The Internal Revenue Service has revised the form used by municipalities and other issuers of tax-exempt bonds to make arbitrage-related payments.

The Internal Revenue Service can use the efforts of CPAs and other tax practitioners as a springboard to leverage IRS initiatives to improve taxpayer compliance, Tom Purcell, chair of the American Institute of CPAs' Tax Executive Committee, told the IRS Oversight Board.

Thomas Wilson, former Large and Mid-Size Business Division industry director for the telecommunications, media, high technology, publishing, entertainment, sports and gaming industries at the Internal Revenue Service, has joined PricewaterhouseCoopers as a managing director in the Washington National Tax Service's IRS Service Team, the Big Four firm said.

Tax prep giant H&R Block has launched a new business employing CPAs to serve the needs of small business owners.

Members of the Association of Community Organizations for Reform Now, or Acorn, announced plans to protest at Liberty Tax offices in more than 60 cities throughout the U.S. and Canada from Feb. 1 to Feb. 4 to demand that the tax preparer change its refund anticipation loans practices.

The National Association for the Advancement of Colored People said that it is refusing to comply with an Internal Revenue Service request for documents that came as part of the agency's investigation into alleged improper political bias by the civil rights group.

The Joint Committee on Taxation has suggested over 60 options to close the $311 billion gap between taxes owed and collected. The report, requested by Sen. Chuck Grassley, R-Iowa, chairman of the Committee on Finance, and ranking member Sen. Max Baucus, D-Mont., consists of numerous revenue raisers, in addition to compliance provisions. The largest revenue raiser, to the tune of $164 billion, is a proposal to include in FICA wages salary reduction amounts used to provide benefits under a cafeteria plan or to provide qualified transportation fringe benefits. Proposals affecting individual income tax include a repeal of the exclusion for employer-provided care, making the dependent care credit the exclusive means for receiving tax benefits for dependent care expenses; a modification of the "kiddie tax" by increasing the age of children to which the kiddie tax provisions apply from under 14 to under 18; and a repeal of the deduction for interest on home equity indebtedness. "High-priced lobbyists won't be able to eat their eggs Benedict when they see this report," Grassley said. Grassley said that he was especially pleased to see the report's extensive discussion about possible changes in the law governing nonprofits and charitable donations. "These recommendations should help to remove the rose-colored glasses that a lot of people use to view tax-exempt organizations," he said.