Tax Relief Blog

IRS pledges better collection of business taxes

August 13, 2008 | Mike Habib, EA

IRS official pledges improved collection of billions in unpaid payroll taxes from businesses

WASHINGTON (AP) — A top IRS official promised Congress Tuesday that the agency “will do better” in collecting billions in taxes that businesses supposedly withheld from employees’ paychecks but never remitted to the government.

Linda Stiff, a deputy Internal Revenue Service commissioner, agreed with senators — who criticized the agency’s enforcement efforts — that the loss of about $58 billion in payroll taxes estimated to be owed the government is unacceptable. She said the IRS has made collecting those taxes a high priority.

While too high, the $58 billion “represents a snapshot of unpaid employment taxes” as part of a long-term improvement effort, Stiff testified at a hearing of the Senate Homeland Security Committee’s investigative panel. “Our numbers show dramatic improvement in the last several years, but we know we still have a long way to go.”

IRS Targets Foreign Income

August 12, 2008 | Mike Habib, EA

IRS targets U.S. source income paid to foreign persons IRM 4.10.21, U.S. Withholding Agent Examinations – Form 1042

Mike Habib, EA

IRS has issued a new Internal Revenue Manual () section, IRM 4.10.21, U.S. Withholding Agent Examinations – Form 1042, on reporting and withholding requirements for U.S. source income that’s paid to foreign persons.

IRS Demutualization Ruling

August 12, 2008 | Mike Habib, EA

Court rebuffs IRS and allows policyholder to escape gain on demutualization

Eugene A. Fisher et al. v. U.S. (Ct Cl 8/6/2008) 102 AFTR 2d ¶ 2008-5150

The Court of Federal Claims has applied a variation of the open transaction doctrine with the result that a policyholder had no gain to report when it chose a cash option in connection with a demutualization of an insurance company. Under this option, the shares awarded to the policyholder were immediately sold by the company and the proceeds were then paid to the policyholder in cash. IRS said that the policyholder was taxable on the full amount of the gain without being able to allocate any of his basis in the contract to offset the sales proceeds. The Court allowed the policyholder to use his basis in the contract (which greatly exceeded the amount of the sales proceeds) to fully offset the proceeds and thus to report no gain.

Tax Shelter IRS Resolution

August 8, 2008 | Mike Habib, EA

New IRS settlement initiative for LILO and SILO transactions

Mike Habib, EA

IRS recently announced a settlement initiative for Lease-In/Lease-Out (LILO) and Sale-in/Lease-Out (SILO) transactions. Under this initiative, more than 45 of the nation’s largest corporations that participated in these shelters will receive a letter with an offer. Shelter participants will have 30 days to make a decision to accept the offer. Taxpayers would have to concede 80% of certain claimed tax breaks but they would not be hit with accuracy-related penalties.

Charitable Contribution

August 7, 2008 | Mike Habib, EA

Proposed regs explain strict charitable contribution substantiation & appraisal rules Preamble to Prop Reg 08/06/2008; Prop Reg § 1.170A-15, Prop Reg § 1.170A-16, Prop Reg § 1.170A-17, Prop Reg § 1.170A-18

Mike Habib, EA

IRS has issued proposed regs explaining the charitable contribution substantiation changes made by the American Jobs Creation Act of 2004 (AJCA) and the Pension Protection Act of 2006 (PPA). The proposed regs, which would be effective for contributions made after the date final regs are issued, also would provide guidance on what constitutes qualified appraisals and qualified appraisers for purposes of the substantial rules for noncash gifts.

Identity Theft Tax Problem

August 7, 2008 | Mike Habib, EA

Finance Chairman Baucus wants more action and details on IRS strategy to combat identity fraud [Press release dated Aug. 5]:

A recent IRS update on its Identity Protection Strategy has failed to satisfy the concerns of Sen. Max Baucus (D-MT), chairman of the Senate Finance Committee.

The report, submitted to Baucus on July 21 by IRS Commissioner Douglas Shulman, was provided in response to a request the senator made at a committee hearing held in April. It summarized IRS’s efforts in three areas: assistance to taxpayers in resolving tax issues associated with identity theft; outreach to increase taxpayer awareness of identity theft; and prevention of identity theft by building programs to address the problem.

CWA Central Withholding

August 5, 2008 | Mike Habib, EA

IRS issues new version of Central Withholding Agreement form

Mike Habib, EA

The IRS has issued a June 2008 version of Form 13930, Application for Central Withholding Agreement.

Passive Activity Losses

August 5, 2008 | Mike Habib, EA

IRS may require reporting of PAL activity groupings

Mike Habib, EA

Notice 2008-64, 2008-31 IRB 268

Social Security Increase

August 5, 2008 | Mike Habib, EA

Presidential candidates discuss merits of increasing the Social Security tax:

Mike Habib, EA

With less than three months until the 2008 presidential election, both candidates have expressed their views about a possible Social Security tax increase. The Federal Insurance Contributions Act (FICA) imposes two taxes on employers, employees, and self-employed workers — one for Old Age, Survivors and Disability Insurance (OASDI; commonly known as the Social Security tax), and the other for Hospital Insurance (HI; commonly known as the Medicare tax).

Innocent spouse relieved of tax

August 3, 2008 | Mike Habib, EA

Innocent spouse relieved of tax from embezzlement and forgery

Yakubik, TC Summary Opinion 2008-74

Mike Habib, EA The Tax Court recently held that the IRS abused its discretion in not granting equitable innocent spouse relief to a husband whose wife embezzled funds from her employer and forged checks taken from her stepfather.