On February 13, 2008, President Bush signed into law the Economic Stimulus Act of 2008, which included several tax items among its provisions.
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Tax Accounting
Accelerating FICA and FUTA Tax Deductions for Vacation and Bonus Pay
Rev. Rul. 2007-12 holds that if the all-events test and recurring-item exception of Sec. 461 are otherwise met, an accrual-method taxpayer may deduct FICA and FUTA tax expenses (payroll taxes) in the year that the deferred compensation to which they relate is earned, regardless of whether that deferred compensation is deductible in a later year under Sec. 404.
Accounting for Bonus Compensation Under the Final Corporate Estimated Tax Regs.
Treasury issued final corporate estimated tax regulations under Sec. 6655 that establish a comprehensive set of rules for corporations using the annualized income installment method.
Mere Execution of Service or Insurance Contract Does Not Satisfy All-Events Test
Rev. Rul. 2007-3 holds that the mere execution of a service or insurance contract by an accrual method taxpayer/payor (TP) does not satisfy the all-events test for incurring a liability.
Accounting Method Change Procedures: One Possible Solution
While there is no official guidance binding the IRS to review a Form 3115 within a particular time period, taxpayers generally expect the Service to review and respond to Forms 3115 before the extended due date for filing the taxpayer’s income tax return. Unfortunately, given the backlog of method change requests, the IRS is not always able to respond to a taxpayer’s requests by that date.
Change in Accounting Method Request Does Not Qualify for Audit Protection
The IRS has ruled that a service provider’s request for a change in accounting method for mixed service costs does not qualify for audit protection because the service provider received written notification, citing the treatment of mixed service costs as an issue under consideration.
FIN 48 Compliance: Disclosing Tax Positions in an Age of Uncertainty
FIN 48 presents new challenges for taxpayers, auditors, and tax advisers. The disclosures required by the interaction of FAS 109 and FIN 48 will result in greater public disclosure of tax planning techniques, including the strengths and weaknesses of those techniques.
Accounting Period Changes Affecting CFCs and Corporations Exiting a Consolidated Group
The IRS has modified the scope provision for corporations that exit a consolidated group and request consent to change their annual accounting periods.
Catch-Up Opportunities for Depreciation
Selecting the proper class life for assets placed in service may allow a business to increase its cashflow by accelerating depreciation and thus deferring federal and state income taxes.
Practical Considerations for the New Paid Preparer Penalty Rules and FIN 48
Editor: Michael D. Koppel, CPA, PFS Return preparers have recently become subject to new, higher standards from two sources: Congress and the Financial Accounting Standards Board (FASB). This item compares the new “more likely than not” standard and explores the pitfalls that CPAs may encounter under FIN 48 and the
FAS 109 Valuation Allowance and Cumulative Losses Guidance
In the new Sarbanes-Oxley environment, tax departments’ calculations of valuation allowances for deferred tax assets have come under intense scrutiny by external auditors.
Placed-in-Service Decision Requires Careful Planning
Editor: Kevin F. Reilly, J.D., CPA Sec. 167(a) allows a depreciation deduction for assets used in the taxpayer’s trade or business or held for the production of in-come (e.g., rental income). Regs. Sec. 1.167(a)-10(b) provides that the period for depreciation of such an asset begins when it is placed in
Lease Termination Payments
Editor: Kevin F. Reilly, J.D., CPA A client owns a commercial building and leases it to various tenants. For business purposes, the client decides that he needs space currently occupied by tenants. To induce the current tenants to cancel their leases, the client will have to pay them a lease
Guidance on FIN 48 and Independence
The AICPA’s Professional Ethics Executive Committee (PEEC) recently issued nonauthoritative guidance on whether under AICPA Interpretation 101-3, Performance of Nonattest Services, members could assist an attest client in applying FASB Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes, without impairing independence, given the potential complexity of the
Tax Savings Opportunities for Taxable Contract Acquisitions
Editor: Frank J. O’Connell, Jr., CPA, Esq. Taxpayers using percentage-of-completion accounting have an opportunity for gross profit deferral following a mid-contract change in ownership. Taxpayers that acquire contracts in taxable transactions may wish to consider opportunities to defer gross profit resulting from the deemed constructive-completion rules that apply to taxable
Fin 48 and State and Local Income Taxes
Scott Salmon, CPA, M.Acc. The required adoption of Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48), for enterprises with fiscal years beginning after December 15, 2006, has placed increased scrutiny on state and local income taxes. Given that in the past, state and
Prepaid services must be fully completed to use 3½-month rule: AM 2007-009
At the end of year 1, T enters into a 12-month service contract with X. Under the contract, X will provide services to T until the end of year 2. At the end of year 1, when the contract is executed, T makes a prepayment to X for a portion
Is a Change in Characterization an Accounting-Method Change?
Editor: Annette B. Smith, CPA Taxpayers periodically assess the validity of their tax positions. Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes, has made this assessment even more detailed, and the questions have become more probing. This increased awareness has many companies in a quandary
Allocating Partnership Depreciation Between Trusts and Beneficiaries
This article reviews how depreciation from a partnership is allocated between a trust and its beneficiaries and highlights the potential trap the allocation can cause when the depreciation deduction flows through a partnership.
GO Zone Depreciation
Notice 2007-36 contains guidance on the extended placed-in-service dates for the 50% additional first-year depreciation available for certain Gulf Opportunity (GO) Zone property and provides additional rules on the “original use” requirement. (GO Zone property is depreciable property that meets the definitions in Sec. 1400N(d)(2) and Notice 2006-77, Section 2.02.)
TAX PRACTICE MANAGEMENT
2025 tax software survey
AICPA members in tax practice assess how their return preparation software performed during tax season and offer insights into their procedures.
