August 2012

August 31, 2012

Statutory Definition of Notional Principal Contract Further Extended Through 2013

The IRS announced that it was further extending the effective date until 2014 for proposed regulations issued under Sec. 871(m).

August 29, 2012

IRS Launches Redesigned Website; Temporarily Takes Down Some Services

A redesigned IRS.gov website went live on Aug. 30; however, the IRS also announced that it is taking down several of its online services during the Labor Day weekend.

August 28, 2012

IRS Changes Stance on Application of Sec. 6662 Penalty to Frozen Refundable Credits

The IRS announced that it would no longer impose a penalty under Sec. 6662 for a substantial understatement of tax when a taxpayer claims a refundable tax credit he or she is not entitled to, but the IRS does not pay the refund or approve the credit.

August 24, 2012

AICPA Provides Guidance on FSA Certification Letters

Tthe AICPA has worked with the FSA to create a certification letter CPAs can use when their clients are asked to certify income and is providing its members with sample engagement and disclosure letters to be used in connection with providing a certification letter for clients.

August 22, 2012

Federal Law Preempts Alabama Statute Denying Tax Deduction for Illegal Alien Employees

The Eleventh Circuit held that an Alabama law that disallowed an employer a state tax deduction for wages and compensation paid to an alien unauthorized to work in the United States was preempted by federal immigration law.

August 21, 2012

IRS Chief Counsel’s Office Issues Advice on Identity Theft Returns

The IRS Office of Chief Counsel explained what the IRS can do when a return is filed by an identity thief in order to generate a fraudulent refund and the IRS has issued a statutory notice of deficiency based on that fraudulent return.

August 17, 2012

IRS Announces the End of Tiered Issues

Effective Aug. 17, 2012, the IRS will no longer use the tiered management process to set examination priorities and address important issues in the Large Business & International division.

August 17, 2012

Draft Form 706 Provides Check Box to Not Elect Portability

Draft Form 706 addresses portability of a deceased spouse’s unused estate and gift tax exclusion amount and provides a check box for the executor to opt out of electing portability of the unused portion.

August 15, 2012

Corporation Cannot Deduct California Business Privilege Tax in Year Paid

An accrual-basis taxpayer could not deduct the California business privilege tax in the year it was paid, even though California treated the tax as being incurred in that year.

August 14, 2012

Removal of Two-Year Limit on Innocent Spouse Claims Does Not Revive Taxpayer’s Case

A federal court dismissed a taxpayer’s claim that she was entitled to innocent spouse relief under Notice 2011-70, which announced the removal of the two-year limitation period for claims for equitable innocent spouse relief under Sec. 6015(f).

August 9, 2012

TIGTA: IRS Encourages Employees to Ignore ITIN Fraud

TIGTA confirmed allegations from IRS employees that their supervisors were urging them to ignore potential fraud in a program that reviews and verifies applications for ITINs.

August 8, 2012

Fraud Convicts Cannot Argue in Tax Court That Payments Did Not Result From Fraud

Taxpayers who were convicted of fraud are precluded from later arguing that payments they received were not the result of fraud, the Tax Court held in two related cases

August 6, 2012

Notice Permits Charitable Contributions to Single-Member LLCs

The IRS explained that contributions to disregarded SMLLCs wholly owned and controlled by a U.S. charity will be treated as if made directly to the U.S charity.

August 2, 2012

TIGTA Recommends Steps for IRS to Reduce Fraudulent Refunds From Identity Theft

TIGTA reported that the IRS had missed 1.5 million tax returns with potentially identity-theft-related fraudulent tax refunds in excess of $5.2 billion for the 2011 filing season.