House Committee Approves Health Bill

The House Committee on Ways and Means approves America’s Affordable Health Choices Act. For more click. See the Bill.

Taxpayers Held Liable for the Accuracy-Related Penalty

The Court of Appeals for the Fifth Circuit has held a couple liable for the accuracy-related penalty under Section 6662 of the Internal Revenue Code. In Prudhomme v. Commissioner, the Court found that the Prudhommes could not avoid the penalty because they did not act in “good faith” and with “reasonable cause,” as required by Section 6664(c)(1). Generally, good faith and reasonable cause may exist when relying on an accountant to prepare a tax return. The Tax Court held that the Prudhommes did not meet this standard because they provided their accountants with insufficient information to prepare their tax return accurately and did not make a reasonable effort to assess their proper tax liability. The Fifth Circuit affirmed the decision of the Tax Court.

The Tax Court found the Prudhommes’ reliance on their accountant was not reasonable, because they did not fully inform the accountant of all facets of their finances.

If a taxpayer relies on an expert, all facts and circumstances regarding whether that reliance was reasonable and in good faith, including the taxpayer’s education, sophistication and business experience, must be taken into account.

IRS Issues Highlights of 2008 Tax Changes

The IRS has issued Publication 553, Highlights of 2008 Tax Changes. This publication highlights major tax law changes that take effect in 2008 and 2009. The seven chapters cover the following: (1) Tax Changes for Individuals; (2) Tax Changes for Businesses; (3) IRAs and Other Retirement Plans; (4) Estate and Gift Taxes; (5) Excise Taxes: (6) Foreign Issues; and (7) How To Get Tax Help.

Tax Court Again Disallows Unsubstantiated Expenses

In Kyne v. Commissioner, T.C. Summ. Op. 2009-98 (June 25, 2009), the Tax Court has ruled in favor of the IRS disallowing unsubstantiated expenses. We are seeing more and more cases from audit to appeals to the courts where taxpayers are losing, if expenses taken as a deduction cannot be substantiated. It is a good time to remind clients to improve record keeping and make sure documentation exists to prove deductions.

National Taxpayer Advocate Submits Mid-Year Report to Congress

National Taxpayer Advocate Nina E. Olson today delivered a report to Congress that identifies the priority issues the Office of the Taxpayer Advocate will address in the coming fiscal year. Among the key areas of focus will be working with the IRS to improve taxpayer services, enhancing IRS oversight of federal tax return preparers, improving the accessibility of the offer in compromise program, and working with the IRS to improve its ability to administer refundable tax credits effectively. See News Release IR-2009-63.

Among the key areas of focus for the Taxpayer Advocate will be working with the IRS (1) to improve taxpayer services, (2) enhancing IRS oversight of federal tax return preparers, (3) improving the accessibility of the offer in compromise program, and (4) working with the IRS to improve its ability to administer refundable tax credits effectively.

TIGTA Issues Trends in IRS Compliance Activities

The Treasury Inspector for Tax Administration (TIGTA) has issued a report that presents statistical information and trend analyses of the data for Collection and Examination activities of the IRS. Click here to review the full report.