Editor: John L. Miller, CPA Following public Senate hearings focused on IRS tactics, Congress enacted the IRS Restructuring and Reform Act of 1998, P.L. 105-206. With the adoption of the act and the public outrage created by the Senate hearings, a “gentler, kinder,” more service-oriented IRS was created. This resulted
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IRS Practice & Procedure
New Rules Govern Practice Before the IRS
Editor: Joel E. Ackerman, CPA, MST The highly publicized accounting scandals of 2002, such as Enron, WorldCom, and Global Crossing, along with revelations about tax shelter abuses, have had wide-reaching financial effects on investors and the economy. Actions of some unscrupulous tax return preparers have further exacerbated the problem. In
IRS Releases Tax Gap Report
The Service has released a report addressing the tax gap. The tax gap is the shortfall between taxes collected and the actual amount owed, which results from nonfiling, underreporting, and underpayment. For 2001, the IRS estimates that only 86% of taxes owed were collected, resulting in a tax gap of
IRS Announces Redesigned Form 8857
The Service announced that it has redesigned Form 8857, Request for Innocent Spouse Relief, in order to reduce followup questions and minimize the burden on taxpayers. Previously, Form 12510, Questionnaire for the Requesting Spouse, was separate from Form 8857. The redesigned Form 8857 combines the two forms. The IRS believes
Scope and Size of Tax Preparer Penalties Increase
Editor: Frank J. O’Connell, Jr., CPA, Esq. The Small Business and Work Opportunity Tax Act of 2007, enacted in May, increases penalties on preparers and raises the standard of nondisclosure positions from “realistic possibility of success” to “more likely than not.” The legislation also extends the reach of these penalties
IRS Releases Draft Form 1120-F and Schedule M-3 and Instructions
The IRS recently released draft versions of revised Form 1120-F, U.S. Income Tax Return of a Foreign Corporation, for 2007 and related schedules, including a new Schedule M-3, Net Income (Loss) Reconciliation for Foreign Corporations with Reportable Assets of $10 Million or More. The new Form 1120-F, Schedule M-3, will
IRS Bite Beginning to Mirror Its Bark
Editor: Anthony S. Bakale, CPA, M.Tax. Historically, compliance in the exempt organization area has not been a high priority for the IRS. Few organizations were audited, and the Service rarely used its available tools (such as the imposition of intermediate sanctions). Certainly, the IRS pledged a greater focus on perceived
Seven Suggestions for IRS Estate/Gift Tax Audits
Editor: Anthony S. Bakale, CPA, M.Tax. Many practitioners do not often have to deal with estate and gift tax audits and may need information about the process: what the auditor is looking for, what documentation is needed, how best to meet the requirements, or what to do if the taxpayer
Patenting Tax Ideas
This article explores tax-strategy patenting. It provides an overview of the issue and discusses the AICPA’s concerns and activities to keep its members informed, as well as its attempts to seek a legislative remedy that will stem the tide of these types of patents.
Check-the-Box Regs. Upheld
The check-the-box (CTB) regulations have not generated much litigation since their promulgation in 1996. Now, in a case of first impression, Littriello, 4/13/07, the Sixth Circuit has upheld the regulations, holding that they do not exceed Treasury’s authority, do not conflict with principles set forth by the Supreme Court in
Preparer Penalties
The Small Business and Work Opportunity Act of 2007 (SBWOA ’07) was enacted on May 25, 2007. (It was passed as part of the package that extended funding for the war in Iraq.) SBWOA ’07 changes the rules for imposing a return preparer penalty and increases the penalty amount. Under
The Tax Gap
Because the AICPA is the national professional organization of CPAs, comprising approximately 330,000 members, when it comments on regulatory and legislative proposals, it speaks from a broad base of experience. Members advise clients on Federal, state and international tax matters and prepare income and other tax returns for millions of
New Law Contains Small Business Tax Provisions
On May 25, 2007, President Bush signed into law the Small Business and Work Opportunity Act of 2007 (SBWOA ’07) (P.L.110-28), which included several tax provisions. Return preparer penalties: The SBWOA ’07 expands the scope of return preparer penalties and alters the standards of conduct that must be met to
Allocating Advance Payments Between Tax and Interest
Editor: Annette B. Smith, CPA Rev. Proc. 2005-18 supersedes Rev. Proc. 84-58, which for more than 20 years had specified the procedures for making remittances to suspend interest running on tax underpayments. The issuance of Rev. Proc. 2005-18 was welcome, as it provides guidance on making deposits under new Sec.
Some Schedule K-1 Recipients Get Reportable Transaction Disclosure Relief
Editor: John L. Miller, CPA Taxpayers that discover after filing their returns that they indirectly participated in a reportable transaction through a passthrough entity may be able to rely on Prop. Regs. Sec. 1.6011-4(e)(1) to avoid reportable transaction penalties. The preamble to the proposed regulations (REG-103038-05, 11/2/06) provided that this
IRS Increases Correspondence Exam Coverage
Editor: John L. Miller, CPA The federal tax gap has received much attention in the past two years. In her 2006 Annual Report to Congress, National Taxpayer Advocate Nina Olson identified it as “one of the most serious problems facing taxpayers today”; see www.irs.gov/advocate/article/0,,id=165806,00.html. In an effort to address this
Applying the Rescission Doctrine
Editor: Annette B. Smith, CPA A recent IRS Letter Ruling, 200701019, applied the rarely seen principles of the rescission doctrine. While the doctrine is most often applied to a sale of property, the ruling involved its application to a corporate merger. The Service allowed application even though the taxpayer was
IRS Launches New Industry Issue Focus Strategy
Editor: John L. Miller, CPA To keep pace with changing business environments and cope with limited government resources, the IRS has implemented a new Industry Issue Focus (IIF) strategy to concentrate on high-risk tax issues. In recent years, the Service has begun to address issues associated with the dynamic nature
Taxpayer Liable for Taxes Misappropriated by Payroll Services Firm
After the Service notified A that it had underpaid its payroll taxes, A investigated and discovered that H, a company A hired to service its payroll accounting, had misappropriated tax funds collected from A. Reliance A taxpayer’s reliance on a third party to fulfill its tax obligations does not relieve
Circular 230 Penalty
Editor: Lesli S. Laffie, J.D., LL.M. Notice 2007-39 contains guidance on the imposition of monetary penalties for prohibited conduct under Section 10.52 of Circular 230, Regulations Governing the Practice of Attorneys, Certified Public Accountants, Enrolled Agents, Enrolled Actuaries, and Appraisers Before the Internal Revenue Service. The American Jobs Creation Act
INDIVIDUALS
Current Developments in Taxation of Individuals: Part 1
This update surveys recent federal tax developments involving individuals, including court cases, rulings, and guidance issued during the six months ending October 2025.
