News and miscellaneous legal topics – 2003
and provides a detailed look at 130.3 million individual returns for Tax Year 2001
Taxpayer advocate report to Congress 12/4/03
Report to Congress by the National Taxpayer Advocate, the top official within the IRS representing taxpayers identifies the Alternative Minimum Tax and sole proprietor tax noncompliance as the top two problems facing taxpayers.
Revenue Ruling-2004-1 describes the income and employment tax treatment of a mileage allowance paid by a courier company to its employee drivers 12/4/03
Revenue Ruling 2004-9, provides the Applicable Federal Rates (AFRs) for February 2004 12/4/03
Child Credit Deadline ReminderTaxpayers have until December 5, 2003 to claim undelivered checks from this summer's advance child tax credit 12/4/03
After the December cut-off date, taxpayers will not be able to claim the credit until they file their tax returns next year. IR-2003-133 Commissioner Mark W. Everson noted that the IRS web site at http://www.irs.gov "makes it easy for taxpayers to track undelivered checks." Taxpayers wishing to track their advance child tax credit may use "Where's My Advance Child Tax Credit?" also available through the IRS web site.
Purchaser of transferable state tax credits allowed federal deduction for "taxes paid" PLR 200348002 12/3/03
In a private letter ruling, the IRS determined a taxpayer/purchaser of transferable state historic rehabilitation tax credits was allowed an IRC § 164 deduction for state income taxes paid with the purchased credits. The IRS noted that payment for the credit is not a payment of tax, nor a payment in lieu of tax, but reasoned that when purchased for value, use of the credit to offset the taxpayer's state income tax was analogous to the transfer of property (like cash) to the state in satisfaction of the purchaser's tax liability, rather than a factor in the calculation of the purchaser's tax due.
IRS puts new Abusive Schemes Counter-Marketing Toolkits on its web siteTalking points and other information on abusive tax avoidance transactions are available 12/3/03
IRS Construction Center of Excellence (COE) through the Small Business Community Unveiled a New Site in October 2003 112/3/03
The site provides information on federal tax topics common to the construction industry in easy to understand language, also useful to those working in the construction, relevant IRS publications and other products, income and employment tax tips relevant to the construction industry including tax preparation information and filing obligations, the Construction Audit Technique Guide, and coordinated issue papers,and non-tax information on how to obtain financing, starting a business, and recent trends and statistics in the construction industry.
Taxpayers were misinformed that if they timely made all 36 $225 installment payments to pay delinquent trust fund recovery and income tax liabilities, and did not become delinquent with any other tax liabilities, the remaining balance would be removed at the end of the 36 months. The Tax Court held there was no offer in compromise, but the IRS collection employee's failure to clarify that unassessed interest would continue to accrue during the installment period, and instead confirming Taxpayers' flawed understanding, was a ministerial act and did not require any judgment or discretion, so interest should be abated until Taxpayers were put on notice that their understanding was incorrect by their receipt of an IRS statement showing some additional amounts were still due. Taxpayers' failure to make any payments after that date was a result of their decision to challenge the IRS's position, and there was no erroneous or dilatory performance of a ministerial act on the IRS's part.
The Fifth Circuit holds interest on income tax deficiency from unincorporated business was nondeductible 11/26/03
affirming the Tax Court's determination that Taxpayer could not deduct interest on an income tax deficiency arising solely from income from his unincorporated law practice.
IRS concurs in full beduction of S Corp aircraft expenses even with significant personal use 11/26/03
The IRS has determined that the costs of personal flights on company aircraft may be deducted in full by the S Corporation, and that shareholders' pass-through deduction is not limited to the aircraft expense reported as compensation to the shareholders for personal use.
The IRS has released its official computation of next year's tax rates, standard deductions, and other inflation-based tax figures. Rev. Proc. 2003-85.
IRS implements application fee for offers in compromise 11/25/03
Starting November 1, 2003, the IRS began charging a $150 application fee to process offers in compromise (OIC), which allows taxpayers to settle their tax liabilities for less than the full amount. Individual taxpayers (not businesses) will be exempt from the fee if their monthly income falls at or below Department of Health and Human Services poverty guidelines, or if they file offers based solely on doubt as to liability.
The IRS announced new facsimile guidelines effective October 1, 2003 that expand the list of documents and information the IRS will accept via fax, and are aimed at reducing the burden on taxpayers and practitioners and shortening the time it takes to resolve tax inquiries and cases.
Recently, the IRS issued Rev. Proc. 2003-71 (making Rev. Proc. 96-38 obsolete) to give additional clarification regarding the application of the regulations and the acceptance of an OIC.