April 27, 2005
IRS to Offer Free Tax Help to Small Businesses
In recognition of National Small Business Week, the Internal Revenue Service has announced an abundance of free resources available to assist the nation’s 45 million small business and self-employed taxpayers with their tax responsibilities. And, they are all just a mouse-click away.
The small business section of IRS.gov provides a one-stop resource for information on starting and operating a business. On this site taxpayers can:
- Learn about employment tax requirements.
- Make tax payments.
- Find out how to set up and distribute retirement plans.
- View a streaming video of a small business tax workshop.
- Order free products like a tax calendar or small business resource guide.
April 22, 2005
House Passes Energy Bill with $8 Billion in Tax Breaks
The House of Representatives passed a new bill yesterday with $8 Billion of targeted tax incentives. The Energy Policy Act of 2005 includes provisions that would shorten recovery periods for natural gas pipelines and air pollution control facilities, ease restrictions for deductible contributions to nuclear decommissioning funds, exempt from tax-exempt bond arbitrage rules some prepayments for natural gas, and increase the limitation for the oil depletion deduction for small refiners.
The Bill also would provide limited incentives for residential solar- powered water heating, photovoltaics, and fuel cells and would create a 15 percent business tax credit for the purchase of fuel cells. Both individuals and businesses would be allowed to use several new energy credits against the alternative minimum tax. The Senate is expected to begin working on an energy bill within the next two weeks.
The House vote was 249 to 183 to pass the comprehensive energy bill, but only after narrowly overcoming a Democratic objection.
April 07, 2005
No more tax breaks for Augusta National?
The NY Times is reporting that two members of Congress reintroduced a bill Wednesday that would cut off tax breaks for businesses that used clubs that discriminated and specifically named Augusta National, where the Master's golf tournament is hosted, as one such club. Congresswoman Carolyn Maloney (D-NY) and Congressman Brad Sherman (D-CA) stated that the bill was modeled after a California statute that states, "a discriminatory club must print receipts, 'Not Deductible for California Income Tax Purposes.' "
March 30, 2005
NY Court of Appeals rules that a telecommuter must pay NY state income tax
In a 4-3 decision, the NY Court of Appeals ruled yesterday that a telecommuter who lives and works in Tennessee but is employed by a New York-based company must pay New York taxes on 100 percent of his income even though he spends at most 25 percent of his working time in the Empire State.
In Matter of Huckaby, 8, the court rejected constitutional challenges to the so-called "convenience of the employer" test that enables New York to tap the income of people who live outside the state but work for an in-state firm.
Under the convenience of the employer test, if the employee works out of state due to the needs of the employer, he or she may apportion income between the days spent in and out of New York. But if the employee works out of state for his or her own convenience, New York claims the right to tax all of the earnings, no matter how much time was spent working here. The rationale for New York's convenience test was explained 31 years ago in Matter of Speno v. Gallman, 35 NY2d 256 (1974): "Since a New York resident would not be entitled to special tax benefits for work done at home, neither should a nonresident who performs services or maintains an office in New York State."
In Tuesday's opinion, the majority expressed some reservations over the fundamental fairness of taxing out-of-state residents who have only remote links to New York. But in the final analysis, Judge Susan Phillips Read, joined by Chief Judge Judith S. Kaye and Judges Albert M. Rosenblatt and Victoria A. Graffeo, concluded that the convenience of the employer test does not inherently offend either the Commerce Clause or the Due Process provision in the U.S. Constitution.
On Tuesday, the court majority said there may be some point at which the tax is so disproportionate -- for instance, if the taxpayer works only one day a year in New York -- that its application would violate due process. But it declined to draw any line and said that in the Huckaby case, spending 25 percent of one's time in New York is plenty to justify the tax and "satisfy any rough proportionality requirement called for by due process."
March 29, 2005
IRS collects $3.2 Billion in Son-Of-Boss Tax Shelter Scams
IRS Commissioner Mark Everson announced March 24, that it has collected over $3.2 Billion in from taxpayers participating in the Son of Boss tax shelter. IRS officials expect this number to grow to over $3.5 Billion once all the settlements are in. Son of Boss was an abusive transaction aggressively marketed in the late 1990s and 2000 primarily to wealthy individuals.
The settlement initiative required taxpayers to concede 100 percent of the claimed tax losses and pay a penalty of either 10 percent or 20 percent unless they previously disclosed the transactions to the IRS. So far, $3.2 billion in taxes, interest and penalties have been collected from the 1,165 taxpayers who are participating in the settlement initiative. The typical taxpayer payment was almost $1 million, with 18 taxpayers paying more than $20 million each and one paying over $100 million.
Participants not taking part in the settlement initiative have or will shortly receive a deficiency notice from the IRS disallowing all claimed tax losses and transaction costs. They will also be assessed the maximum applicable penalty –– 40 percent.
March 28, 2005
IRS to Consider Ebay Sales as Taxable Income
The Associated Press has an interesting article about whether sales on the online auction site Ebay are taxable income to the sellers. The IRS typically applies a list of nine factors that might prove whether a taxpayer's online auctions amount to a business including, evidence that the taxpayer depends on the income, acts in a businesslike manner, or puts enough time and effort into the activity to suggest a profit motive.
One key point to look at according to the article is the seller's intent. If someone is just selling their goods to create space in their house and selling it for less than they paid for it, then the taxpayer is not generating a profit. However, if the taxpayer is generating a profit from the goods sold, then the IRS might challenge it as taxable income.
The advice the article gives is when a taxpayer is not sure whether income from Ebay sales are taxable or not is to contact a tax professional for an opinion.
March 08, 2005
Budget Writers Reach Agreement on Tax Cuts
Tax analysts is reporting that Senate Budget Committee Chair Judd Gregg (R-NH) stated yesterday that congressional budget writers have reached a general agreement that would extend all tax cuts due to expire within the fiscal 2006 budget's five-year budget window.
February 24, 2005
IRS releases its redesigned Form 941
The IRS released a redesigned Form 941 yesterday which will reduce taxpayer compliance burden while decreasing common data-entry errors according to the agency. Form 941, Employer's Quarterly Federal Tax Return, is used by about 6.5 million taxpayers to report wages, tips and other compensation paid as well as Social Security, Medicare, and federal income taxes collected.
The IRS aims to provide taxpayers with simplified deposit reporting and paid preparer identification. Some of the changes include the addition of shading for easier reading, new check-off boxes, and the deletion of a horizontal grid of empty boxes intended for the IRS's use. The new forms also contains a decimal point on every box unlike its predecessor.
February 18, 2005
Presidential Tax Panel Begins Discussing Tax Code Reform
The tax reform panel created by President Bush met for the first time on Wednesday to begin exploring the complexities of the current US tax code according Tax-News. US Treasury Secretary John Snow was the first witness to speak at the hearing stating that the current Internal Revenue Code at over 1 million pages long, is more than doubled in page-length from a decade ago.
February 14, 2005
Honda Vehicles Certified for Clean-Fuel Deduction
The IRS has certified the model year 2005 Honda Insight, Civic Hybrid, and Accord Hybrid as being eligible for the clean-fuel vehicle deduction, meaning that taxpayers who purchased this car, can claim a tax deduction of up to $ 2,000 on Form 1040.