Treasury, IRS Issue Proposed Regulations for Cash Balance and Other Hybrid Pension Plans

Treasury, IRS Issue Proposed Regulations for Cash Balance and Other Hybrid Pension Plans

IR-2007-211, Dec. 28, 2007

WASHINGTON — The Treasury Department and Internal Revenue Service (IRS) issued proposed regulations relating to cash balance plans and other hybrid pension plans.

The proposed regulations would interpret rules that were added to the tax law by the Pension Protection Act of 2006 (PPA), including an age discrimination safe harbor for hybrid pension plans, conversion protection for employees, and a 3-year minimum vesting requirement. The proposed regulations would also apply for purposes of the parallel rules that were added by PPA to the Employee Retirement Income Security Act of 1974 (ERISA).

The regulations are generally proposed to be effective for plan years beginning on and after Jan. 1, 2009. For periods before the effective date of these regulations, a plan must comply with the new PPA statutory provisions. During these periods, a plan is permitted to rely on the regulations for purposes of satisfying the new PPA statutory provisions.

Five 2008 GM Vehicles Certified As Qualified Hybrids

Five 2008 GM Vehicles Certified As Qualified Hybrids

IR-2007-210, Dec. 28, 2007

WASHINGTON — The Internal Revenue Service has acknowledged the certification by General Motors Corp. that five of its Model Year 2008 vehicles meet the requirements of the Alternative Motor Vehicle Credit as qualified hybrid motor vehicles.

The credit amount for the certified 2008 model year hybrid vehicles are:
• Chevrolet Tahoe Hybrid (2WD and 4WD) $2,200.00
• GMC Yukon Hybrid (2WD and 4WD) $2,200.00
• Saturn Vue Green Line $1,550.00

Original purchasers of these vehicles may claim the full amount of the allowable credit up to the end of the first calendar quarter after the quarter in which the manufacturer records its sale of the 60,000th vehicle. For the second and third calendar quarters after the quarter in which the 60,000th vehicle is sold, taxpayers may claim 50 percent of the credit. For the fourth and fifth calendar quarters, taxpayers may claim 25 percent of the credit. No credit is allowed after the fifth quarter.

More information on hybrid vehicles and other alternative motor vehicles can be found on the IRS Web site at IRS.gov

Treasury, IRS Implement Enhanced Standards of Conduct for Tax Return Preparers; Plan Overhaul of Tax Return Preparer Regulatory Regime

Treasury, IRS Implement Enhanced Standards of Conduct for Tax Return Preparers; Plan Overhaul of Tax Return Preparer Regulatory Regime

IR-2007-213, Dec. 31, 2007

WASHINGTON — The Treasury Department and the Internal Revenue Service today issued Notice 2008-13 that implements a May 2007 law that expanded the tax return preparer penalty and heightened the standards of conduct that must be met by tax return preparers in order to avoid that penalty.

Notice 2008-13 also solicits input from the tax return preparer community on a planned overhaul of the tax return preparer penalty regime anticipated to be completed by the end of 2008.

“The plan to take a fresh look at the preparer penalty regulations will be a top priority for us in 2008,” said IRS Chief Counsel Don Korb. “We look forward to receiving comments from all interested parties on their recommendations for the final regulations. Our goal is to complete our work on the overhaul of these rules by the end of 2008,” he said.

For undisclosed positions on a tax return, the new law replaced the realistic possibility standard with a requirement that there be a reasonable belief that the tax treatment of the position would more likely than not be sustained on its merits. In cases in which the taxpayer discloses the position on the tax return, the notice implements the new law that states there must be a reasonable basis for the tax treatment of the position taken on the tax return.

The notice provides interim rules to implement and interpret these heightened standards. The interim rules will be in effect until the overhaul of the current return preparer penalty regulations is complete. The interim rules emphasize the importance to preparers of understanding the legal basis for positions taken on tax returns, the requirement for taxpayers to disclose certain positions, and the need for preparers to advise taxpayers on the various penalties that can apply when a position is taken on a return that may not be supported by existing law.

Under the notice, preparers generally can continue to rely on taxpayer representations in preparing returns and can also generally rely on representations of third parties, unless the preparer has reason to know they are wrong.

The new law also expanded the return preparer penalty to cover all tax return preparers, not just income tax return preparers. Under the notice, preparers of many information returns, however, will not be subject to the new penalty provision unless they willfully understate tax or act in reckless or intentional disregard of the law. The notice also includes examples illustrating how the new standards would apply.

In addition to Notice 2008-13, additional guidance has been provided in Notice 2008-12 with respect to the implementation of the tax return preparer signature requirement, and in Notice 2008-11, which clarifies the transition relief provided in Notice 2007-54, issued earlier this year.

IRS, Treasury Issue Additional Proposed Regulations on Pension Protection Act Funding Rules

IRS, Treasury Issue Additional Proposed Regulations on Pension Protection Act Funding Rules

IR-2007-212, Dec. 28, 2007

WASHINGTON — The Treasury Department and the Internal Revenue Service today have issued proposed regulations that provide employers sponsoring single-employer defined benefit plans with guidance regarding the measurement of pension assets and liabilities under the new funding rules enacted as part of the Pension Protection Act of 2006.

These proposed regulations, together with proposed regulations related to mortality issued in May, proposed regulations relating to funding balances and funding-based benefit limitations issued in August, the yield curve guidance issued in October, and guidance on lump sum determinations issued in November will assist plan sponsors in determining the contribution requirements that apply to their defined benefit plans for the first year that the new funding rules apply.

Although the new funding rules are generally effective for plan years beginning on or after Jan. 1, 2008, these regulations are proposed to be effective for plan years beginning on or after Jan. 1, 2009. However, plan sponsors can rely on these proposed regulations for purposes of satisfying the requirements of section 430 for plan years beginning in 2008.

The Treasury Department and the Internal Revenue Service intend to issue guidance in the near future indicating that the proposed effective date for these regulations should also apply for the proposed regulations relating to employer-specific mortality tables issued in May and the proposed regulations related to funding balances and funding based-benefit limitations under sections 430(f) and 436 issued in August. Although final regulations will not apply to plan years beginning before January 1, 2009, plan sponsors may also rely on those proposed regulations for purposes of satisfying the statutory requirements for plan years beginning in 2008.

On Dec. 19, 2007, the Senate passed an amended version of the Pension Protection Technical Corrections Act of 2007. These proposed regulations, like the earlier proposed regulations, do not reflect any proposed technical corrections. Nor do they include any reflection of the proposed modification to the rules for determining asset values. After technical corrections are enacted, the regulations will be modified to take into account the enacted provisions.

Filing Season Opens on Time Except for Certain Taxpayers Potentially Affected by AMT Patch

Filing Season Opens on Time Except for Certain Taxpayers Potentially Affected by AMT Patch

IR-2007-209, Dec. 27, 2007

WASHINGTON — The Internal Revenue Service announced today that the upcoming tax season is expected to start on time for everyone except certain taxpayers potentially affected by late enactment of the Alternative Minimum Tax “patch.”

Following extensive work in recent weeks, the IRS expects to be able to begin processing returns for the vast majority of taxpayers in mid-January. However, as many as 13.5 million taxpayers using five forms related to the Alternative Minimum Tax (AMT) legislation will have to wait to file tax returns until the IRS completes the reprogramming of its systems for the new law.

The IRS has targeted Feb. 11, as the potential starting date for taxpayers to begin submitting the five AMT-related returns affected by the legislation. The February date allows the IRS enough time to update and test its systems to accommodate the AMT changes without major disruptions to other operations related to the tax season. As the IRS has said previously, it will take approximately seven weeks after the AMT patch was approved to update IRS processing systems completely.

Although as many as 13.5 million taxpayers will not be able to file their returns until Feb. 11, the effect of the delay may be lessened by the fact that under previous filing patterns only between 3 million to 4 million taxpayers file returns with the five affected forms during these early weeks in the filing season.

“We regret the inconvenience the delay will mean for millions of early tax filers, especially those expecting a refund,” said Linda Stiff, Acting IRS Commissioner. “We’ve taken extraordinary steps to figure out a way that we can start the filing season on time for most taxpayers, including some using AMT-related forms. Our goal has always been to make sure we can accurately process tax returns while getting refunds to taxpayers as quickly as possible.”

The February delay caused by the AMT patch will affect taxpayers using these five forms:

• Form 8863, Education Credits.
• Form 5695, Residential Energy Credits.
• Form 1040A’s Schedule 2, Child and Dependent Care Expenses for Form 1040A Filers.
• Form 8396, Mortgage Interest Credit.
• Form 8859, District of Columbia First-Time Homebuyer Credit.

While these five forms require significant additional reprogramming due to the AMT patch, the IRS has been able to reprogram its systems to begin processing seven other AMT-related forms, including Form 6251, Alternative Minimum Tax – Individuals. Taxpayers filing these seven forms should not experience delays in filing, and the IRS expects to begin processing those returns starting on Jan. 14.

Electronic returns involving those five forms will not be accepted until systems are updated in February; similarly, paper filers should wait to file as well. All other e-file and paper returns will be accepted starting in January. The IRS urges affected taxpayers to file electronically in order to reduce wait times for their refunds. E-file with direct deposit gets refunds in as little as 10 days, while paper returns take four to six weeks.

“E-file is a great option for everyone, especially if they are affected by the AMT,” said Richard Spires, IRS Deputy Commissioner for Operations Support. “Filing electronically will get people their refunds faster, and e-file greatly reduces the chances for making an error on the AMT or other tax issues.”

In addition to filing electronically, the IRS urges taxpayers to take simple steps to avoid problems:

• Taxpayers filing electronically should make sure to update their tax software in order to get the latest AMT updates.
• Taxpayers with $54,000 or less in Adjusted Gross Income can use Free File to electronically file their returns for free. Free File will only be available by visiting the official IRS web site at IRS.gov. In all, 90 million taxpayers qualify for this free service.
• Taxpayers who use tax software to print out paper copies of tax forms should make sure they update their software before printing out forms. Taxpayers using paper forms can also visit IRS.gov to get updated copies of AMT forms.

The IRS has created a special section on IRS.gov to provide taxpayers with additional information and copies of updated forms affected by the AMT. In recent days, the IRS has posted updated copies of all forms affected by the late enactment of the AMT patch by Congress.

The IRS also reminds taxpayers that printed tax packages, which will begin arriving in the mail around New Year’s, went to the printer in November before the AMT changes were enacted. The packages reflect the law in effect at the time of printing. The tax packages include cautionary language to taxpayers that late legislation was pending.

The IRS is also working closely with tax professionals and the tax preparation software community to make sure they can help taxpayers with all of the latest developments on the enactment of the AMT patch and other tax changes.

“The IRS is going to continue to do everything it can to make this a fully successful filing season for the nation’s taxpayers,” Stiff said. “We will continue to work to keep taxpayers up to date and make this situation as easy as possible for everyone.”

Link: Alternative Minimum Tax - How It Affects Filing Season 2008: http://www.irs.gov/newsroom/article/0,,id=176605,00.html

2008 Excise Taxes on Air Transportation

2008 Excise Taxes on Air Transportation

IR-2007-208, Dec. 27, 2007

WASHINGTON — Today the Internal Revenue Service announced the 2008 inflation adjustments to the excise taxes on air transportation.

Excise taxes apply to the domestic segments of taxable air transportation and to the use of international air facilities. The Consolidated Appropriations Act, 2008, signed into law on Dec. 26, 2007, extends these excise taxes to air transportation that begins or is paid for no later than Feb. 29, 2008.

These excise taxes are adjusted annually for inflation. For 2008, the excise tax on the domestic segment of taxable air transportation is $3.50. The excise tax for 2008 for international flights that begin or end in the United States is $15.40. The tax on use of international air facilities also applies at a reduced rate to departures of interstate flights that begin or end in Alaska or Hawaii. For 2008, the international air facilities tax on these flights is $7.70.

Revenue Procedure 2007-66, which contains other amounts that are adjusted annually for inflation, will be modified in the near future to include the 2008 inflation adjusted items listed above.

IR-2007-204: IRS Releases Final 2008 Form 990 for Tax-Exempt Organizations, Adjusts Filing Threshold to Provide Transition Relief

IRS Releases Final 2008 Form 990 for Tax-Exempt Organizations, Adjusts Filing Threshold to Provide Transition Relief

WASHINGTON — The Internal Revenue Service issued an updated version of Form 990, the return that charities and other tax-exempt organizations are required to file annually, and provided transition relief so that small exempt organizations will have time to adjust to the new form.

“When we released the redesigned draft form this past June, we said we needed a Form 990 that reflects the way this growing sector operates in the 21st century,” said Steven T. Miller, Commissioner of the IRS’ Tax Exempt and Government Entities division. “The public comments we received in response to our draft form helped us develop a final form consistent with our guiding principles of transparency, compliance and burden minimization.”

The final form released today retains the redesigned draft’s format of a core form and a series of schedules. In response to public comments, the new core form allows an organization to describe its exempt accomplishments and mission up-front and provides more opportunities throughout the form for the organization to explain its activities. Other major changes were made to the form’s summary page, governance section, and various schedules, including those relating to executive compensation, related organizations, foreign activities, hospitals, non-cash contributions and tax exempt bonds. A checklist of schedules was also added.

“We could not have done this without the tremendous input of the tax-exempt sector, the practitioner groups and the states,” said Lois G. Lerner, Director of Exempt Organizations. “The almost 700 public comment letters, the advice and counsel of numerous nonprofit experts and state regulators, and the input from the nonprofit sector’s leaders, were invaluable as we moved from the June discussion draft to the final form we released today.”

The new form will be used for the 2008 tax year (returns filed in 2009). The IRS plans to release the related instructions in early 2008. “We are continuing to work with the nonprofit sector to complete the new form’s instructions,” said Lerner.

The IRS also announced a graduated transition period for smaller organizations. These organizations will be allowed to file the Form 990-EZ instead of the Form 990. For the 2008 tax year (returns filed in 2009), organizations with gross receipts over $1.0 million or total assets over $2.5 million will be required to file the Form 990. For the 2009 tax year (returns filed in 2010), organizations with gross receipts over $500,000 or total assets over $1.25 million will be required to file the Form 990. The filing thresholds will be set permanently at $200,000 gross receipts and $500,000 total assets beginning with the 2010 tax year. Also, starting with the 2010 tax year, the IRS will increase the filing threshold for organizations required to file Form 990-N (the e-postcard) from $25,000 to $50,000.

“This phase-in process will allow organizations to become familiar with the new Form 990,” Lerner said.

The IRS also announced a phase-in of the form’s new hospital and tax exempt bond schedules. Certain identifying information will be required for the 2008 tax year, with completion of the entire schedules required for the 2009 tax year. In response to the nonprofit sector's safety and security concerns regarding disclosure of certain foreign workers and volunteers, the IRS revised the form to permit reporting of foreign activities by region, rather than by country, until other safeguards may be implemented to protect the privacy interests of such persons.

“We believe the transition relief we are providing is appropriate and meaningful, and will ease the concerns raised by commenters,” said Lerner.

The final Form 990 and background material explaining the changes from the current form and the June draft are available on the Exempt Organizations portion of the IRS Web site, IRS.gov/eo.

Link: Form 990 Redesign for Tax Year 2008 -- http://www.irs.gov/charities/article/0,,id=176613,00.html

IR-2007-203: Misclassified Workers to File New Social Security Tax Form

Misclassified Workers to File New Social Security Tax Form

WASHINGTON — The Internal Revenue Service has developed a new form for employees who have been misclassified as independent contractors by an employer. Form 8919, Uncollected Social Security and Medicare Tax on Wages, will now be used to figure and report the employee’s share of uncollected social security and Medicare taxes due on their compensation.

Generally, a worker who receives a Form 1099 for services provided as an independent contractor must report the income on Schedule C and pay self-employment tax on the net profit, using Schedule SE. However, sometimes the worker is incorrectly treated as an independent contractor when they are actually an employee. When this happens, Form 8919 will be used beginning for tax year 2007 by workers who performed services for an employer but the employer did not withhold the worker’s share of social security and Medicare taxes.

In addition, the worker must meet one of several criteria indicating they were an employee while performing the services. The criteria include:

* The worker has filed Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding, and received a determination letter from the IRS stating they are an employee of the firm.
* The worker has been designated as a section 530 employee by their employer or by the IRS prior to January 1, 1997.
* The worker has received other correspondence from the IRS that states they are an employee.
* The worker was previously treated as an employee by the firm and they are performing services in a similar capacity and under similar direction and control.
* The worker’s co-workers are performing similar services under similar direction and control and are treated as employees.
* The worker’s co-workers are performing similar services under similar direction and control and filed Form SS-8 for the firm and received a determination that they were employees.
* The worker has filed Form SS-8 with the IRS and has not yet received a reply.

By using Form 8919, the worker’s social security and Medicare taxes will be credited to their social security record. To facilitate this process, the IRS will electronically share Form 8919 data with the Social Security Administration.

In the past, misclassified workers often used Form 4137 to report their share of social security and Medicare taxes. Misclassified workers should no longer use this form. Instead, Form 4137 should now only be used by tipped employees to report social security and Medicare taxes on allocated tips and tips not reported to their employers.

IR-2007-202: IRS Works to Quickly, Accurately Implement AMT Patch

IRS Works to Quickly, Accurately Implement AMT Patch

WASHINGTON — The Internal Revenue Service announced it will immediately begin the final reprogramming steps for its income-tax processing systems to prepare for the upcoming tax season following final passage of the Alternative Minimum Tax “patch” Wednesday by the House.

“Our people will do everything they can to quickly update our systems for this major change and make this filing season as smooth as possible for everyone,” said Linda Stiff, IRS Acting Commissioner. “Our goal is to process tax returns accurately and to issue refunds to taxpayers as quickly as possible.”

The AMT and AMT-related tax calculations affect a number of core IRS processing systems that will need to be updated. The IRS is continuing to aggressively explore options for the 2008 filing season in order to minimize the impact of processing delays on taxpayers. Additional details will be available to the public as soon as plans are finalized.

To help the tax professional and software communities prepare for the upcoming filing season, revised copies of the 12 tax forms impacted by the AMT legislation will be posted to IRS.gov within 72 hours after the AMT patch is signed into law.

As more details on the AMT situation develop, the IRS encourages taxpayers to visit IRS.gov for more information.

IR-2007-201: Procedure Unveiled for Reporting Violations of the Tax Law, Making Reward Claims

Procedure Unveiled for Reporting Violations of the Tax Law, Making Reward Claims

WASHINGTON — The Internal Revenue Service today outlined ways informants can report violations of the tax law and possibly claim a reward based on the amount of additional tax, penalties and interest that is owed.

“Since Congress enacted new procedures increasing award amounts last year, informants have come forward with information on alleged tax noncompliance amounting to tens of millions of dollars, and in some cases hundreds of millions of dollars,” said Stephen Whitlock, Director of the Whistleblower Office.

Since the Whistleblower Office was created in December 2006, the IRS has received about 80 claims, half of those submitted in just the last two and a half months. To make a claim, an informant must file new Form 211, Application for Award for Original Information, which asks informants to provide an estimate of the tax owed, the pertinent facts in the case and an explanation of how the informant obtained the information.

The IRS’ Whistleblower Office will make the final determination about whether an award will be paid and the amount of the award for claims that it processes. Awards will be paid in proportion to the value of information furnished voluntarily with respect to proceeds collected.

Under the new procedures, the amount of award will be at least 15%, but no more than 30%, of the collected proceeds in cases in which the IRS determines that the information submitted by the informant substantially contributed to the collection of tax. The award percentage may be reduced in some circumstances, which are described in IRS guidance.

To be eligible for an award under the new procedures, the tax, penalties, interest, additions to tax, and additional amounts in dispute must exceed $2 million for any taxable year and, if the taxpayer is an individual, the individual’s gross income must exceed $200,000 for any taxable year in question.

All awards will be subject to normal tax reporting and withholding requirements.

Related Items:

* Notice 2008-4 -- http://www.irs.gov/pub/irs-drop/n-08-04.pdf
* Form 211 -- http://www.irs.gov/pub/irs-pdf/f211.pdf

IR-2007-200: IRS Fast Track Settlement Program Expands

IRS Fast Track Settlement Program Expands

WASHINGTON — The Internal Revenue Service today announced it is expanding the number of test areas for the Fast Track Settlement program for taxpayers under examination by the Small Business/Self-Employed Division.

The settlement program is now available for small businesses and self-employed taxpayers until Sept. 5, 2008, in five new areas, including Philadelphia, central New Jersey, San Diego, Laguna Nigel, Calif., and Riverside, Calif.

The Fast Track program is continuing in the three original test cities of Chicago, Houston and St. Paul.

The program is a jointly administered process designed to expedite case resolution. Under Fast Track, taxpayers under examination with issues in dispute work with IRS representatives from SBSE’s examination unit and the Appeals Division to resolve those issues.

Fast Track employs various techniques to facilitate case resolution. A taxpayer or IRS examination representative may initiate the Fast Track process after an issue is fully developed, and preferably before a 30-day letter is issued. The Fast Track process is designed to be completed within 60 days of acceptance of the application.

Taxpayers retain the right to request their issue be addressed through the traditional appeals process if Fast Track fails to yield a resolution.

Examination and Appeals officials will re-evaluate the Fast Track program after this test phase is completed on Sept. 5, 2008. This phase will help determine whether Fast Track is adjusted, expanded to more areas or made available nationwide.

The Small Business/Self-Employed Division Fast Track Settlement program was originally launched in September 2006. Additional background is available in IRS Announcement 2006-61.

IR-2007-198: Certain Payments to Disabled Veterans Ruled Tax-Free; Some May Be Due Refunds

Certain Payments to Disabled Veterans Ruled Tax-Free; Some May Be Due Refunds

WASHINGTON — Payments under the Department of Veterans Affairs (VA) Compensated Work Therapy (CWT) program are no longer taxable and disabled veterans who paid tax on these benefits in the past three years can now claim refunds, the Internal Revenue Service said today.

Recipients of CWT payments will no longer receive a Form 1099 from the Department of Veterans Affairs. Disabled veterans who paid tax on these benefits in tax-years 2004, 2005 or 2006 can claim a refund by filing an amended return using IRS Form 1040X. According to the VA, more than 19,000 veterans received CWT in Fiscal Year 2007.

The IRS agreed with a U.S. Tax Court decision issued earlier this year, which held that CWT payments are tax-free veterans’ benefits. In so doing, the agency reversed a 1965 ruling which held that these payments were taxable and required the VA to issue 1099 forms to payment recipients.

According to the VA, the CWT program provides assistance to veterans unable to work and support themselves. Under the program, the VA contracts with private industry and the public sector for work by veterans, who learn new job skills, re-learn successful work habits and regain a sense of self-esteem and self-worth.

Related Item: Revenue Ruling 2007-69 -- http://www.irs.gov/pub/irs-drop/rr-07-69.pdf

IR-2007-199: Electronic Tax Advisory Committee Gets New Chairman and Members

Electronic Tax Advisory Committee Gets New Chairman and Members

WASHINGTON — The Internal Revenue Service today announced the selection of six new members of the Electronic Tax Administration Advisory Committee (ETAAC). The Treasury Department and the IRS Commissioner have approved the new members to serve a three-year term beginning November 2007 and ending in November 2010.

ETAAC serves as a public forum for discussion of electronic tax administration issues and supports the goal of increasing electronic interactions between tax professionals and the IRS.

“The IRS is pleased with the continued support of the ETAAC group,” said David R. Williams, director, IRS Electronic Tax Administration and Refundable Credits. “ETAAC supports the goal of electronic tax administration by encouraging taxpayers to transact and communicate electronically with the IRS.”

The new members are:

* Grant DeMeritte, Silver Spring, Md. DeMeritte is a certified public accountant and the tax compliance manager for the Howard Hughes Medical Institute. DeMeritte e-files state employment tax returns, exempt organization returns and transmits information returns using the IRS Filing Information Returns Electronically (FIRE) System.
* Brian Digman, Albany, N.Y. Digman is the chief information officer at the New York State Department of Taxation and Finance. Digman is responsible for operating technology systems, overseeing applications development, establishing technology policies and leading strategic planning.
* Susan Gaston, Kansas City, Mo. Gaston is a CPA and is currently the Director of Industry Operations for H&R Block. Gaston is the liaison between H&R Block and the IRS/states electronic tax administration departments. She is also engaged in operational and compliance issues with regard to the IRS, e-file and tax preparation.
* Roberto Jimenez-Ortiz, Woodbridge, Va. Jimenez-Ortiz is an advisor to the World Bank in Washington, D.C., and a seasonal tax professional with H&R Block. Jimenez-Ortiz has more than 20 years of professional experience with international financial issues and has designed strategic plans for the Hispanic community.
* William B. Marshall, III, Shreveport, La. Marshall is an enrolled agent and a member manager of Marshall and Associates, LLC. Marshall has more than 10 years of experience in electronic filing. He is responsible for preparing more than 600 individual and business returns yearly.
* Ryan Snow, Roosevelt, Utah. Snow is a certified public accountant and the chief financial officer for Burdick Paving. Snow has a Masters of Business Administration. He is responsible for e-filing corporate tax returns and managing all financial aspects of the company.
* Tim Hubbs, Franklin, N.C. Hubbs has agreed to serve as the chairman of ETAAC for 2007. Hubbs is president and CEO of Drake Software, a software provider to tax firms for preparing and e-filing tax returns. In 2007, Drake customers transmitted more than 7.2 million federally accepted income tax returns and more than 6.2 million state returns.

The ETAAC group provides input into the development and implementation of IRS strategy for electronic tax administration. Each June, the ETAAC submits an annual report to Congress reporting on the progress of IRS electronic tax initiatives.

ETAAC was created in 1998 by the IRS Electronic Tax Administration as required by the IRS Restructuring and Reform Act of 1998.

IR-2007-197: IRS Announces Groundbreaking OPR Settlement with Attorneys

IRS Announces Groundbreaking OPR Settlement with Attorneys

WASHINGTON — The Internal Revenue Service's Office of Professional Responsibility (OPR) announced today a settlement agreement with Michael C. Ormsby and David O. Thompson, in connection with a $31 million municipal bond issuance involving River Park Square in Spokane, Washington in 1998 handled by the former firm of Preston, Gates & Ellis LLP.

OPR raised allegations, including the scope of due diligence, under Treasury Department Circular 230 sections 10.22, 10.29, 10.34, and 10.51(j), with respect to the tax aspects of the bond opinion rendered in the matter. The Respondents filed answers denying the allegations. In the settlement, the attorneys agreed to comply fully with practices and procedures implemented by their current firm in its public finance group, including but not limited to (i) submitting new matters to a review and approval process, (ii) completing questionnaires and checklists to document the due diligence activities undertaken in the matter, and (iii) following practices and procedures established by the firm's opinion committee for municipal bond opinions. The attorneys also agreed that, for a period of 18 months from the date of settlement, any opinion proposed to be delivered by the attorneys in connection with certain specified financings will be reviewed and approved by the leader of the public finance group, who is also a member of the firm's opinion committee. OPR believes the settlement will result in enhanced oversight of the state and local bond practice of these attorneys and will help assure their compliance with the applicable requirements of Circular 230. OPR agreed that implementation of such practices and procedures is appropriate for municipal bond attorney practice.

OPR and the attorneys agreed that the settlement does not constitute any admission of wrongdoing by, or a sanction of, the attorneys.

The Office of Professional Responsibility is pleased to have reached an agreement that demonstrates its commitment to ensuring bond lawyers comply with Circular 230 when involved in tax-exempt municipal bond issuances. Such efforts are an outgrowth of OPR's enhanced oversight of Circular 230 practitioners.

The settlement agreement included a disclosure authorization that allowed the Office of Professional Responsibility to issue this release.

Related Items:

* Frequently Asked Questions about OPR -- http://www.irs.gov/taxpros/agents/article/0,,id=123370,00.html
* Latest News from OPR -- http://www.irs.gov/taxpros/agents/article/0,,id=100709,00.html

IR-2007-196: IRS Issues List of Vehicles that Qualify for the Alternative Motor Vehicle Credit

IRS Issues List of Vehicles that Qualify for the Alternative Motor Vehicle Credit

WASHINGTON — Purchasers of certain large trucks, buses or other heavy vehicles running on alternative fuel can claim a credit of up $32,000, and purchasers of certain large hybrid trucks and other heavy hybrid vehicles can claim a credit of up to $12,000 if they qualify for the Alternative Motor Vehicle Credit.

Qualified Alternative Fuel Motor Vehicles (QAFMV) are powered solely by alternative fuels, such as compressed natural gas, liquefied natural gas, liquefied petroleum gas, hydrogen and any liquid at least 85 percent of the volume of which consists of methanol. Vehicles powered by a combination of an alternative fuel and a petroleum-based fuel may qualify for a reduced credit. Purchases of new vehicles with special equipment, as well as ones converted for alternative power, may qualify.

A credit also is available for certain new qualified heavy hybrid vehicles with a gross vehicle weight rating in excess of 8,500 pounds. A qualifying heavy hybrid motor vehicle draws propulsion energy from onboard sources of stored energy which are both an internal combustion or heat engine using consumable fuel, and a rechargeable energy storage system. This credit should be not confused with the alternative motor vehicle credit for qualified hybrid passenger automobiles and light trucks.

The list of vehicles is updated periodically -- http://www.irs.gov/businesses/article/0,,id=175456,00.html

IR-2007-195: IRS Issues Fall 2007 Statistics of Income Bulletin

IRS Issues Fall 2007 Statistics of Income Bulletin

WASHINGTON — The Internal Revenue Service today released the fall 2007 issue of the Statistics of Income Bulletin, featuring data from 134.4 million individual income tax returns filed for tax year 2005.

U.S. taxpayers reported $7.4 trillion of adjusted gross income less deficit in tax year 2005, up 9.3 percent from tax year 2004 when 132.2 million returns were filed.

Certain types of income posted strong gains between 2004 and 2005. Net capital gains climbed 41 percent and taxable interest rose 29.5 percent, while net partnership and S corporation income gained 27.3 percent.

Taxable income totaled $5.1 trillion in tax year 2005, up 10 percent from the prior year. Total income tax increased for a second straight year, rising 12.4 percent to $934.8 billion. Between tax years 2003 and 2004, total income tax rose 11.2 percent, the first increase in 4 years.

The alternative minimum tax (AMT) grew 33.7 percent between 2004 and 2005 to $17.4 billion. Four million taxpayers paid the AMT in 2005, compared to almost 3.1 million in tax year 2004.

This edition of the quarterly Bulletin also includes articles about:

* Growth trends in partnerships: Between tax years 2004 and 2005, the number of partnerships rose 8.5 percent to about 2.76 million. The number of partners increased just 4.2 percent to about 16.21 million in tax year 2005. Meanwhile, income rose at a much faster rate. Total partnership net income climbed 42 percent to $546.2 billion in tax year 2005.
* Municipal bond issuance: State and local governmental entities issued about $475 billion of tax-exempt bonds in calendar year 2005, up 11.9 percent from the prior year. Governmental bonds accounted for about three-quarters of the total, while private-activity bonds represented the remainder.
* A look at private foundations: The number of private foundations that filed Form 990-PF remained nearly the same between tax years 2003 and 2004, while the number of nonexempt charitable trusts treated as private foundations that filed the return increased by 12 percent. In tax year 2004, private foundations distributed $27.6 billion in contributions, gifts, and grants and other outlays for charitable purposes, while nonexempt charitable trusts distributed $314 million.
* Recent data on charities: For tax year 2004, nonprofit charitable organizations exempt from income tax under Internal Revenue Code Section 501(c)(3) filed more than 276,000 information returns, an increase of 5 percent from 2003. These organizations held more than $2.0 trillion in assets, a real increase of 5 percent from the previous year and 52 percent over the past decade.
* Corporate foreign tax credits: For tax year 2003, U.S. corporations claimed $50 billion in foreign tax credits. Corporations that claimed a foreign tax credit paid $140.5 billion in worldwide income taxes on $424.5 billion in worldwide taxable income.
* Historical data: The final article in the issue describes the availability and expansion of SOI's published corporate data between 1917 and today and presents some corporate data highlights within a historical context.

The Bulletin also includes historical data on income, deductions and tax reported on returns filed by individuals, corporations and unincorporated businesses, with selected data.

From the Tax Stats page, select "SOI Bulletins" under "Products, Publications, & Papers" and click on "Historical Tables and Appendix." Also on these pages are statistics presented on tax collections, including excise taxes by type, and refunds for recent years.

The Statistics of Income Bulletin is available from the Superintendent of Documents, U.S. Government Printing Office, P.O. Box 371954, Pittsburgh, PA 15250-7954. The annual subscription rate is $53 ($74.20 foreign), single issues cost $39 ($48.75 foreign).

For more information about these data, write the Director, Statistics of Income (SOI) Division, RAS:S, Internal Revenue Service, P.O. Box 2608, Washington, DC 20013-2608; call SOI's Statistical Information Services at (202) 874-0410; or fax, (202) 874-0964.

IR-2007-194: December’s Tax Talk Today Will Focus on Filing Season

December’s Tax Talk Today Will Focus on Filing Season

WASHINGTON — The 2008 filing season is right around the corner. December’s Tax Talk Today program, “Getting Ready for the Filing Season 2008: Part 1 (Individuals)”, on Tuesday, Dec. 11, 2007 at 2 p.m. will give tax professionals a head start and get preparers off on the right foot.

This annual filing season program focuses on individual tax return issues, such as changes to forms, the latest tax law changes and IRS processing issues that affect individual taxpayers. Tax preparers also will get tips on how to avoid common errors that can cost them and their clients time and money.

Panelists will be Kathleen Collins, principal of her own Savannah, Georgia-based tax practice, and president of the Georgia Association of Enrolled Agents; William Stevenson, president of National Tax Consultants, Inc., a tax preparation and taxpayer representation firm for individuals and businesses; Pamela J. Walker, IRS deputy director for Submission Processing at Cincinnati and Carole Barnette, IRS acting chief for Individual Tax Forms and Publications.

Tax Talk Today is a Webcast aimed at educating tax and payroll professionals on the most current and complex tax issues. Tax professionals are encouraged to watch and submit questions.

To access the Webcast at no charge, viewers can register online at www.TaxTalkToday.tv. Tax professionals in need of continuing education credits (CECs) are eligible to receive one CEC by viewing the Dec. 11 Webcast.

Archived shows are available on the site also, including the November broadcast “What’s Hot in Employment Taxes: Independent Contractor or Employee?”

NOTE: The next show will air on Tuesday, Jan. 8, 2008: “Getting Ready for Filing Season 2008 - Part 2 (Business)”, 2 p.m. - 3 p.m.

IR-2007-193: Interest Rates Drop for the First Quarter of 2008

Interest Rates Drop for the First Quarter of 2008

WASHINGTON – The Internal Revenue Service today announced that interest rates for the calendar quarter beginning January 1, 2008, will drop by one percentage point. The new rates will be:

* seven (7) percent for overpayments [six (6) percent in the case of a corporation];
* seven (7) percent for underpayments;
* nine (9) percent for large corporate underpayments; and
* four and one-half (4.5) percent for the portion of a corporate overpayment exceeding $10,000.

Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points. Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.

The interest rates announced today are computed from the federal short-term rate based on daily compounding determined during October 2007.

Related Item: Revenue Ruling 2007-68 -- http://www.irs.gov/pub/irs-drop/a-07-114.pdf

IR-2007-192: IRS Announces 2008 Standard Mileage Rates; Rate for Business Miles Set at 50.5 Cents per Mile

IRS Announces 2008 Standard Mileage Rates; Rate for Business Miles Set at 50.5 Cents per Mile

WASHINGTON — The Internal Revenue Service today issued the 2008 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning Jan. 1, 2008, the standard mileage rates for the use of a car (including vans, pickups or panel trucks) will be:

* 50.5 cents per mile for business miles driven;
* 19 cents per mile driven for medical or moving purposes; and
* 14 cents per mile driven in service of charitable organizations.

The new rate for business miles compares to a rate of 48.5 cents per mile for 2007. The new rate for medical and moving purposes compares to 20 cents in 2007. The rate for miles driven in service of charitable organizations has remained the same.

The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile; the standard rate for medical and moving purposes is based on the variable costs as determined by the same study. Runzheimer International, an independent contractor, conducted the study for the IRS.

The mileage rate for charitable miles is set by law.

A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS), after claiming a Section 179 deduction for that vehicle, for any vehicle used for hire or for more than four vehicles used simultaneously. Revenue Procedure 2007-70 contains additional information on these standard mileage rates.

Related link:

* RP-2007-70 -- http://www.irs.gov/pub/irs-drop/rp-07-70.pdf

IR-2007-191: Honda Hybrid Begins Phase-Out on January 1

Honda Hybrid Begins Phase-Out on January 1

WASHINGTON — The Internal Revenue Service announced today that American Honda Motor Company, Inc, has submitted quarterly reports indicating that its cumulative sales of qualified vehicles to retail dealers reached the 60,000-vehicle limit during the calendar quarter ending Sept. 30, 2007.

Under the current tax law, the credit for buying a hybrid vehicle begins to phase out in the second calendar quarter after the quarter in which the manufacturer sells its 60,000th hybrid or lean burn technology vehicle.

The credit for all new qualified hybrid passenger automobiles or light trucks manufactured by Honda will begin to phase out on Jan. 1, 2008.

Vehicles purchased before Jan. 1, 2008 qualify for the full credit. For Honda hybrid vehicles bought on or after Jan. 1, 2008, and on or before June 30, 2007, the credit is 50 percent of the otherwise allowable credit amount. Taxpayers buying vehicles on or after July 1, 2008, and on or before Dec. 31, 2008, can only get 25 percent of the credit.

Here are the credit amounts for Jan. 1, 2008, through June 30, 2008:

Honda Accord Hybrid AT, Model Year 2007 — $650
Honda Accord Hybrid Navi AT, Model Year 2007 — $650
Honda Civic Hybrid CVT, Model Year 2007 — $1,050
Honda Civic Hybrid CVT, Model Year 2008 — $1,050

Here are the credit amounts for July 1, 2008 – Dec. 31, 2008:

Honda Accord Hybrid AT, Model Year 2007 — $325
Honda Accord Hybrid Navi AT, Model Year 2007 — $325
Honda Civic Hybrid CVT, Model Year 2007 — $525
Honda Civic Hybrid CVT, Model Year 2008 — $525

Beginning Jan 1, 2009, taxpayers who buy a Honda hybrid cannot claim the related tax credit.

IR-2007-190: IRS Reminds Charities and Churches of Political Activity Ban

IRS Reminds Charities and Churches of Political Activity Ban

WASHINGTON — The Internal Revenue Service today reminded section 501(c)(3) organizations, including charities and churches that federal law prohibits them from becoming directly or indirectly involved in campaigns of political candidates.

The prohibition against political campaign activity has been in effect for more than half a century and bars certain tax-exempt organizations from engaging on behalf of or in opposition to political candidates. However, these organizations can engage in advocating for or against issues and, to a limited extent, ballot initiatives or other legislative activities.

“The political contests, especially for president, are starting earlier than usual. The IRS, as it has in the past, wants to remind charities and churches of the ban on political campaign activity. We also want to urge nonprofit and religious organizations to review the guidance we have issued to help them avoid any problems,” said Steven T. Miller, Commissioner of IRS’ Tax Exempt and Government Entities Division.

The IRS’ goal is to educate the leadership of these organizations to help them stay within the legal boundaries. In this regard, IRS Revenue Ruling 2007-41 outlines a number of scenarios to help charities and churches understand the ban on political campaign activity and actions that may arise.

In addition to the revenue ruling, the IRS has other helpful information for churches and charities on its website at www.irs.gov/eo. For example, IRS Publication 1828, Tax Guide for Churches and Religious Organizations, contains a discussion of the law affecting political campaign activity by churches and religious institutions.

Violation of the law can result in imposition of an excise tax or, in extreme cases, a loss of tax exempt status.

In June 2007, the IRS released its Report on the Political Activity Compliance Initiative for the 2006 election cycle. This report, PACI 2006, follows the report on prohibited political campaign intervention in the 2004 election cycle, which was issued in February 2006.

Related Items:

* Revenue Ruling 2007-41 -- http://www.irs.gov/pub/irs-drop/rr-07-41.pdf
* Publication 1828 -- http://www.irs.gov/pub/irs-pdf/p1828.pdf
* Past PACI Reports -- http://www.irs.gov/charities/article/0,,id=154622,00.html
* Charities, Churches and Educational Organizations - Political Campaign Initiative -- http://www.irs.gov/charities/charitable/article/0,,id=155030,00.html

IR-2007-189: IRS Has $110 Million in Refund Checks Looking for a Home

IRS Has $110 Million in Refund Checks Looking for a Home

WASHINGTON — The Internal Revenue Service is looking for 115,478 taxpayers who are due refund checks worth about $110 million after the checks were returned as undeliverable.

The refund checks, averaging about $953, can be claimed as soon as taxpayers update their addresses with the IRS. Some taxpayers have more than one check waiting.

“Taxpayers should not miss out on getting their money back,” said Richard Morgante, commissioner of the IRS Wage and Investment Division. ”The IRS makes it as easy as possible for taxpayers to update their addresses and claim their refunds.”

The “Where’s My Refund?” tool on IRS.gov enables taxpayers to check the status of their refunds. A taxpayer must submit his or her social security number, filing status and amount of refund shown on their 2006 return. The tool will provide the status of their refund and in some cases provide instructions on how to resolve delivery problems.

Taxpayers can access a telephone version of “Where’s My Refund?” by calling 1-800-829-1954.

Most Refunds

The number of undeliverable refunds each year is a relatively small portion of all refunds returned to taxpayers. So far in 2007, the IRS has processed nearly 105 million refunds, totaling about $240 billion, either by mail or direct deposit.

In fact, undeliverable refunds account for less than one-tenth of one percent of all refunds, or about one in a thousand.

A refund check is normally returned as undeliverable when a taxpayer moves without updating his or her address with either the U.S. Postal Service or the IRS.

Telephone Tax Refund

The list of taxpayers due undeliverable refunds this year rose about 21 percent from 95,746 last year. The sharp increase is due in part to the Telephone Excise Tax Refund. The refund is a one-time payment available on 2006 federal income tax returns. It was designed to return to taxpayers previously collected long-distance telephone taxes. Individuals, businesses and tax-exempt organizations are eligible to request it.

Updating Your Address

Refund checks are mailed to a taxpayer’s last known address. Checks are returned to the IRS if a taxpayer moves without notifying the IRS or the U.S. Postal Service.

Taxpayers can update their addresses with the IRS on the “Where’s My Refund?” feature. Also, taxpayers checking on a refund will be prompted to provide an updated address if there is an undelivered check outstanding within the last 12 months. Taxpayers checking on a refund over the phone will be given instructions on how to update their addresses.

A taxpayer can also ensure the IRS has his or her correct address by filing Form 8822, Change of Address. Download the form from IRS.gov or request it by calling 1-800-TAX-FORM (1-800-829-3676).

Those who do not have access to the Internet and think they may be missing a refund should first check their records or contact their tax preparer, then call the IRS toll-free assistance line at 1-800-829-1040 to update their address.

Direct Deposit Can Stop Lost Refunds

Signing up for Direct Deposit can put an end to undelivered refunds, as well lost or stolen refund checks. Taxpayers can receive refunds directly into personal checking or savings accounts. Direct Deposit is available for filers of both paper and electronic returns. Taxpayers can sign up for direct deposit on their tax form.

Links:

* Want to hear more? Listen to an IRS interview on Undelivered Refunds(Editors: Download the .mp3 file to podcast from your Web site)
* Where's My Refund? -- http://www.irs.gov/individuals/article/0,,id=96596,00.html
* IRS Change of Address, Form 8822 -- http://www.irs.gov/pub/irs-pdf/f8822.pdf

IR-2007-188: 2008 Nissan Altima Certified as Qualified Hybrid Vehicle

2008 Nissan Altima Certified as Qualified Hybrid Vehicle

WASHINGTON — The Internal Revenue Service has acknowledged the certification by Nissan North America, Inc., that its 2008 Nissan Altima Hybrid vehicle meets the requirements of the Alternative Motor Vehicle Credit as a qualified hybrid motor vehicle.

The credit amount for the hybrid vehicle certification of the 2008 Nissan Altima Hybrid is $2,350.

The announcement comes after the IRS concluded its quarterly review of the number of hybrid vehicles sold. Nissan sold 2,627 qualifying vehicles to retail dealers in the quarter ending Sept. 30, 2007. This brings the total number of qualified hybrid vehicles sold to 7,849.

Original owners may claim the full amount of the allowable credit up to the end of the first calendar quarter after the quarter in which the manufacturer records its sale of the 60,000th vehicle. For the second and third calendar quarters after the quarter in which the 60,000th vehicle is sold, taxpayers may claim 50 percent of the credit. For the fourth and fifth calendar quarters, taxpayers may claim 25 percent of the credit. No credit is allowed after the fifth quarter.

IR-2007-187: Plan Now to Get Full Benefit of Saver’s Credit; Tax Break Helps Low- and Moderate-Income Workers Save for Retirement

Plan Now to Get Full Benefit of Saver’s Credit; Tax Break Helps Low- and Moderate-Income Workers Save for Retirement

WASHINGTON — Low- and moderate-income workers can take steps now to save for retirement and earn a special tax credit in 2007 and the years ahead, according to the Internal Revenue Service.

The saver’s credit helps offset part of the first $2,000 workers voluntarily contribute to IRAs and to 401(k) plans and similar workplace retirement programs. Formally known as the retirement savings contributions credit, the saver’s credit is available in addition to any other tax savings that apply.

“We want low- and moderate-income workers to know about this valuable credit so they can effectively plan ahead and take full advantage of it,” said Richard J. Morgante, commissioner of the Wage and Investment Division of the IRS. “Now that a growing number of employers are automatically enrolling their employees in 401(k) plans, the saver’s credit offers many workers who save for retirement an added bonus.”

Eligible workers still have time to make qualifying retirement contributions and get the saver’s credit on their 2007 tax return. People have until April 15, 2008, to set up a new individual retirement arrangement or add money to an existing IRA and still get credit for 2007. However, elective deferrals must be made by the end of the year to a 401(k) plan or similar workplace program, such as a 403(b) plan for employees of public schools and certain tax-exempt organizations, a governmental 457 plan for state or local government employees, and the Thrift Savings Plan for federal employees. Employees who are unable to set aside money for this year may want to schedule their 2008 contributions soon so their employer can begin withholding them in January.

The saver’s credit can be claimed by:

* Married couples filing jointly with incomes up to $52,000 in 2007 or $53,000 in 2008;
* Heads of Household with incomes up to $39,000 in 2007 or $39,750 in 2008; and
* Married individuals filing separately and singles with incomes up to $26,000 in 2007 or $26,500 in 2008.

Like other tax credits, the saver’s credit can increase a taxpayer’s refund or reduce the tax owed. Though the maximum saver’s credit is $1,000, $2,000 for married couples, the IRS cautioned that it is often much less and, due in part to the impact of other deductions and credits, may, in fact, be zero for some taxpayers.

A taxpayer’s credit amount is based on his or her filing status, adjusted gross income, tax liability and amount contributed to qualifying retirement programs. Form 8880 is used to claim the saver’s credit, and its instructions have details on figuring the credit correctly.

In 2005, the most recent year for which complete figures are available, saver’s credits totaling more than $900 million were claimed on nearly 5.3 million individual income tax returns. Saver’s credits claimed on these returns averaged $216 for joint filers, $149 for heads of household and $140 for single filers.

The saver’s credit supplements other tax benefits available to people who set money aside for retirement. For example, most workers may deduct their contributions to a traditional IRA. Though Roth IRA contributions are not deductible, qualifying withdrawals, usually after retirement, are tax-free. Normally, contributions to 401(k) and similar workplace plans are not taxed until withdrawn.

Other special rules that apply to the saver’s credit include the following:

* Eligible taxpayers must be at least 18 years of age.
* Anyone claimed as a dependent on someone else’s return cannot take the credit.
* A student cannot take the credit. A person enrolled as a full-time student during any part of 5 calendar months during the year is considered a student.
* Certain retirement plan distributions reduce the contribution amount used to figure the credit. For 2007, this rule applies to distributions received after 2004 and before the due date (including extensions) of the 2007 return. Form 8880 and its instructions have details on making this computation.

Begun in 2002 as a temporary provision, the saver’s credit was made a permanent part of the tax code in legislation enacted last year. To help preserve the value of the credit, income limits are now adjusted annually to keep pace with inflation. More information about the credit is on this Web site.

Related Item: Publication 590, Individual Retirement Arrangements (IRAs) -- http://www.irs.gov/pub/irs-pdf/p590.pdf

IR-2007-186: 2008 Hybrids Certified As Tax Credit For Toyota and Lexus Comes to an End

2008 Hybrids Certified As Tax Credit For Toyota and Lexus Comes to an End

WASHINGTON — The Internal Revenue Service acknowledged the certification by Toyota Motor Sales U.S.A., Inc., that several of its Model Year 2008 vehicles qualify for the hybrid vehicle tax credit. Only vehicles purchased prior to Oct. 1, 2007, qualify for a credit.

For purchases made April 1, 2007, through Sept. 30, 2007, the hybrid vehicle certifications recently acknowledged by the IRS and their credit amounts are:

* 2008 Toyota Prius Hybrid — $787.50
* 2008 Toyota Camry Hybrid — $650
* 2008 Toyota Highlander Hybrid 4WD — $650
* 2008 Lexus LS 600h L Hybrid — $450
* 2008 Lexus RX 400h 2WD and 4WD — $550

No credit is allowed for purchase of these vehicles after September 30, 2007.

The credit amounts reflect a decrease in the credit beginning on Oct. 1, 2006, as a result of the manufacturer’s having sold 60,000 qualified hybrid motor vehicles.

IR-2007-185: Another Record-Breaking Number of Taxpayers Choose to Electronically File in 2007

Another Record-Breaking Number of Taxpayers Choose to Electronically File in 2007

WASHINGTON — The Internal Revenue Service this year received nearly 80 million tax returns through e-file, breaking the record set last year.

The 2007 level is up about 9 percent from the 73 million returns filed for the same period last year. Of the 139.3 million returns filed in 2007, 79.98 million or about 57.4 percent were filed electronically.

“It was another record-breaking year for e-file,” said IRS Acting Commissioner Linda E. Stiff. “Paper returns continue to drop year after year. E-file is the safe, accurate way for more and more taxpayers to quickly complete their taxes and get a refund faster.”

Since 2001, the number of e-filed returns has almost doubled and over the past decade the number of e-filers has increased four-fold.

Year
Returns
Total E-file
Percent E-file

1997
121.5 million
19.2 million
15.8%

1998
123.8 million
24.6 million
19.9%

1999
125.9 million
29.3 million
23.3%

2000
128.4 million
35.4 million
27.6%

2001
131.0 million
40.2 million
30.7%

2002
131.7 million
46.9 million
35.6%

2003
131.6 million
52.9 million
40.2%

2004
132.2 million
61.5 million
46.5%

2005
134.0 million
68.5 million
51.1%

2006
136.1 million
73.3 million
53.8%



More than 22.6 million returns have been e-filed by taxpayers doing their own returns, up from 20.3 million from the same period last year. More than 57.4 million returns were e-filed by tax professionals, up from nearly 52.9 million last year.

Direct Deposit, IRS.gov also Set Records

Meanwhile, more people this year chose to have their tax refunds directly deposited than ever before. For the year to date, the IRS has directly deposited 61.4 million refunds, up 8 percent from last year.

The IRS Web site – IRS.gov – also experienced a record year. The IRS recorded 196.2 million visits to IRS.gov this year, a more than 10 percent increase from the 177.5 million visits for the same period last year.

IR-2007-184: IRS and States to Share Employment Tax Examination Results

IRS and States to Share Employment Tax Examination Results

WASHINGTON — Officials from the Internal Revenue Service and more than two dozen state workforce agencies today announced they have entered into agreements to share the results of employment tax examinations.

The agreements, part of the Questionable Employment Tax Practice (QETP) initiative, provide a centralized, uniform means for the IRS and state employment officials to exchange data, thereby leveraging resources and encouraging businesses to comply with federal and state employment tax requirements.

So far, 29 states have entered into individual information-sharing agreements with the IRS.

“These agreements present a united front for the IRS and its state partners to improve compliance in the employment tax arena,” said Kathy Petronchak, Commissioner of the IRS Small Business/Self-Employed Division. “Combining resources will help IRS and the states reduce fraudulent filings, uncover employment tax avoidance schemes and ensure proper worker classification.”

“As the first state to sign a memorandum of understanding, Michigan has already begun to forge a much closer working relationship with the IRS, which has significantly increased the sharing of tax and audit information between the IRS and our unemployment insurance program,” said Keith W. Cooley, Director, Michigan Dept. of Labor & Economic Growth. “The exchange of data is helping to strengthen employer compliance with our unemployment insurance tax law by reducing the ability for some to manipulate the system, which burdens honest taxpaying employers with extra costs. Our objective is an unemployment tax system that is fair for all employers.”

"New York State is pleased to work with the IRS and other pilot states on the QETP initiative,” New York State Labor Commissioner M. Patricia Smith said. “We are committed to the development of federal-state partnerships that are crucial to effective tax enforcement.”

California, Michigan, New Jersey, New York and North Carolina all are part of the team that developed the strategy, and they were instrumental in helping make sure the agreements meet the needs of the participating states as well as the needs of the IRS.

The states that have signed partnership agreements with the IRS thus far are:

Arizona, Arkansas, California, Colorado, Connecticut, Hawaii, Idaho, Kentucky, Louisiana, Maine, Massachusetts, Michigan, Minnesota, Nebraska, New Hampshire, New Jersey, New York, North Dakota, Ohio, Oklahoma, Rhode Island, South Carolina, South Dakota, Texas, Utah, Vermont, Virginia, Washington and Wisconsin.

In addition to coordinating compliance activities, the agreements call for collaborative outreach and education activities designed to help businesses understand their employment and unemployment tax responsibilities.

The state agencies, the U.S. Department of Labor, the National Association of State Workforce Agencies, the Federation of Tax Administrators and the IRS worked together on various facets of the exchange agreements.

The exchange agreements are the first result of the QETP initiative. The QETP team will use the results of the project to find new opportunities for collaboration and to work toward improved employment tax compliance.

Related Fact Sheet: FS-2007-25 --

IR-2007-183: IRS Warns of E-mail Scam Soliciting Donations to California Wildfire Victims

IRS Warns of E-mail Scam Soliciting Donations to California Wildfire Victims

WASHINGTON — The Internal Revenue Service today warned taxpayers to be on the lookout for a new e-mail scam that appears to be a solicitation from the IRS and the U.S. government for charitable contributions to victims of the recent Southern California wildfires.

In an effort to appear legitimate, the bogus e-mails include text from an actual speech about the wildfires by a member of the California Assembly.

The scam e-mail urges recipients to click on a link, which then opens what appears to be the IRS Web site but which is, in fact, a fake. An item on the phony Web site urges donations and includes a link that opens a donation form which requests the recipient’s personal and financial information.

“People should exercise caution when they receive unsolicited e-mail or e-mail from senders they don’t know,” said Richard Spires, IRS Deputy Commissioner for Operations Support. “They should avoid opening any attachments or clicking on any links until they can verify the e-mail’s legitimacy.”

The bogus e-mails appear to be a “phishing” scheme, in which recipients are tricked into providing personal and financial information that can be used to gain access to and steal the e-mail recipient’s assets.

The IRS also believes that clicking on the link downloads malware, or malicious software, onto the recipient’s computer. The malware will steal passwords and other account information it finds on the victim's computer system and send them to the scamster.

Generally, scamsters use the data they fraudulently obtain to empty the recipient’s bank accounts, run up charges on the victim’s existing credit cards, apply for new loans, credit cards, services or benefits in the victim’s name or even file fraudulent tax returns to obtain refunds rightfully belonging to the victim.

The IRS does not send e-mails soliciting charitable donations. As a rule, the IRS does not send unsolicited e-mails or ask for personal and financial information via e-mail. The IRS never asks people for the PIN numbers, passwords or similar secret access information for their credit card, bank or other financial accounts.

Recipients of the scam e-mail who clicked on any of the links should have their computers checked for malicious software and should monitor their financial accounts for suspicious activity, taking measures to prevent unauthorized access as necessary. Any unauthorized activity should be reported to law enforcement authorities and to the three major credit companies. More information on how to handle actual or potential identity theft may be found in IRS Publication 4535, Identity Theft Protection and Victim Assistance, available on the IRS Web site. Information is also available on the Federal Trade Commission’s identity theft Web site.

Recipients of the scam e-mail can help the IRS shut down this scheme by forwarding the e-mail to an electronic mail box, phishing@irs.gov, using instructions found in “How to Protect Yourself from Suspicious E-Mails or Phishing Schemes” on this site. This mail box was established to receive copies of possibly fraudulent e-mails involving misuse of the IRS name, logo or Web site for investigation.

The IRS and the Treasury Inspector General for Tax Administration (TIGTA) work with the U.S. Computer Emergency Readiness Team (US-CERT) and various Internet service providers and international CERT teams to have the phishing sites taken offline as soon as they are reported.

Since the establishment of the mail box last year, the IRS has received more than 30,000 e-mails from taxpayers reporting almost 600 separate phishing incidents. To date, investigations by TIGTA have identified almost 900 host sites in at least 55 different countries, as well as in the United States.

Recipients of questionable e-mails claiming to come from the IRS may also call TIGTA’s toll-free hotline at 1-800-366-4484.

The IRS has come across numerous schemes in which e-mails claim to come from the IRS. More information on these schemes may be found on the genuine IRS Web site, IRS.gov, by entering the term phishing in the search box.

IR-2007-182: IRS Announces New Chinese, Korean, Russian and Vietnamese Tax Glossaries To Assist Taxpayers

IRS Announces New Chinese, Korean, Russian and Vietnamese Tax Glossaries To Assist Taxpayers

WASHINGTON — The Internal Revenue Service today announced five new publications to help foreign-language communities understand federal tax forms and publications that are written in English. These new glossaries of tax terminology will help meet increased demand for tax-related resources in languages other than English.

The five new publications are new versions of Publication 850 (names listed below) and are for Chinese (simplified), Chinese (traditional), Korean, Russian and Vietnamese. A Spanish version was already available.

The Virtual Translation Office of the IRS helped create these glossaries of tax terminology to help taxpayers and the professionals who assist them. The publications were developed in cooperation with numerous professional translators and editors to establish uniformity in language usage in IRS tax products and to function as reference materials for these products.

Although the publications are not legal documents, the IRS hopes that these glossaries will be useful to members of the Chinese, Korean, Russian and Vietnamese communities in the United States in understanding IRS documents and clarifying tax-related issues.

The new publications are:

* Publication 850 (EN/CN-S), English-Chinese (Simplified) Glossary of Words and Phrases -- http://www.irs.gov/pub/irs-pdf/p850encs.pdf
* Publication 850 (EN/CN-T), English-Chinese (Traditional) Glossary of Words and Phrases -- http://www.irs.gov/pub/irs-pdf/p850enct.pdf
* Publication 850 (EN/KR), English-Korean Glossary of Words and Phrases -- http://www.irs.gov/pub/irs-pdf/p850enkr.pdf
* Publication 850 (EN/RU), English-Russian Glossary of Words and Phrases -- http://www.irs.gov/pub/irs-pdf/p850enru.pdf
* Publication 850 (EN/VN), English-Vietnamese Glossary of Words and Phrases -- http://www.irs.gov/pub/irs-pdf/p850envn.pdf

IR-2007-181: Honda Compressed Natural Gas Vehicle is Certified for the Qualified Alternative Fuel Motor Vehicle Tax Credit

Honda Compressed Natural Gas Vehicle is Certified for the Qualified Alternative Fuel Motor Vehicle Tax Credit

WASHINGTON — The Internal Revenue Service has acknowledged the certification by American Honda Motor Company, Inc., that its Honda Civic GX Model Year 2008 vehicle meets the requirements of the Qualified Alternative Fuel Motor Vehicle Credit.

The Qualified Alternative Fuel Motor Vehicle Credit was enacted by the Energy Policy Act of 2005. To qualify these vehicles can operate only on alternative fuels or mixed fuels (a combination of alternative fuel and petroleum based fuel). The 2008 Honda Civic GX is an alternative fueled vehicle that operates on compressed natural gas. This vehicle should not be confused with hybrid vehicles.

The Qualified Alternative Fuel Motor Vehicle Credit amount for the Honda Civic GX Model Year 2008 is $4,000.

IR-2007-180: IRS Seeks Applications for TE/GE Advisory Committee

IRS Seeks Applications for TE/GE Advisory Committee

WASHINGTON – The Internal Revenue Service is seeking applications for vacancies on the Advisory Committee on Tax Exempt and Government Entities (ACT). The committee provides a venue for public input into critical tax administration areas.

Vacancies exist in the following customer segments:

* Employee Plans – two vacancies
* Exempt Organizations – two vacancies
* Tax Exempt Bonds – one vacancy
* Indian Tribal Governments – one vacancy
* Federal, State and Local Governments – two vacancies.

The ACT is an organized public forum for the IRS and representatives who deal with employee plans, exempt organizations, tax-exempt bonds, and federal, state, local and Indian tribal governments. The ACT allows the IRS to receive regular input on administrative policy and procedures of the Tax Exempt and Government Entities Division.

Members are appointed by the Secretary of the Treasury and serve two-year terms, beginning in June 2008. Applications can be made by letter or by completing an application form, available on the IRS Web site. In either case, applications should reflect the proposed member’s qualifications. A notice published in the Federal Register, dated Oct. 31, 2007, contains more details about the ACT and the application process.

Applications will be accepted through Nov. 30, 2007

Applications should be sent to Steven Pyrek, TE/GE Communications and Liaison Director, Internal Revenue Service, 1111 Constitution Ave., NW – SE:T:CL Penn Bldg., Washington, DC 20224, or by fax to 202-283-9966 (not a toll-free number).

IR-2007-179: IRS Tax Talk Today Focuses on Worker Classification

IRS Tax Talk Today Focuses on Worker Classification

WASHINGTON — The IRS’s November 6, 2007 Tax Talk Today Webcast, “What’s Hot in Employment Taxes: Independent Contractor or Employee?”, will focus exclusively on worker classification issues. The program starts at 2 p.m. ET.

A critical issue for all businesses is properly classifying workers as employees or independent contractors.

During the live, one-hour Webcast, a panel of experts will discuss legislative and judicial background and recent changes regarding worker classification, why the worker classification issue is important and what the IRS is doing about it, and what workers who feel they have been misclassified can do to correct their situation.

Tax professionals and business persons who wish to learn about the subject of worker classification are encouraged to watch and submit questions. The live Webcast enables viewers to ask questions via e-mail to the panelists and receive on-air answers.

Panelists will be Mary C. Gorman, Attorney, IRS Counsel; Richard Schampers, Senior Program Analyst, Employment Tax Policy, IRS; Joseph Tiberio, Program Manager, Employment Tax Policy, IRS; Rebecca Wilson, Attorney, IRS Counsel; Michael P. O'Toole, Esq., Senior Director, Publications and Government Relations, American Payroll Association; and F. Gordon Spoor, CPA/PFS, Spoor & Associates, P.A.

To access the Webcast at no charge, viewers can register online at www.TaxTalkToday.tv. Tax professionals in need of continuing education credits (CECs) are eligible to receive one CEC by viewing the November Webcast.

Archived shows are available on the Web site.

Mark your calendars for the Tuesday, December 11, 2007 and Tuesday, January 8, 2008 shows, which focus on “Getting Ready for Filing Season 2008” for individuals and businesses respectively.

October’s show – “The ABC’s of OPR” – is now available to view via archive.

IR-2007-178: IRS Grants Tax Relief for Southern California Wildfire Victims

IRS Grants Tax Relief for Southern California Wildfire Victims

WASHINGTON — The Internal Revenue Service is extending tax return filing and payment deadlines for victims of the severe Southern California wildfires.

Taxpayers in the Presidential Disaster Area –– consisting of Los Angeles, Orange, Riverside, San Bernardino, San Diego, Santa Barbara and Ventura counties –– will have until Jan. 31, 2008, to file returns, pay taxes and perform other time-sensitive acts.

The extended deadline applies to items due on or after Oct. 21, 2007, when the fires began, and on or before Jan. 31, 2008. This includes the federal withholding tax return, Form 941, normally due Oct. 31, and the estimated tax payment for the fourth quarter, normally due Jan. 15.

In addition, the IRS is waiving the failure to deposit penalty for employment and excise deposits due on or after Oct. 21, 2007, and on or before Nov. 5, 2007, as long as the deposits are made by Nov. 5, 2007.

If any affected taxpayer receives a penalty notice from the IRS, the taxpayer should call the number on the notice to have the IRS abate any interest and any late filing or late payment penalties that would otherwise apply during the period from Oct. 21, 2007, to Jan. 31, 2008, or Oct. 21, 2007, through Nov. 5, 2007, for failure to deposit penalties. No penalty or interest will be abated for taxpayers that do not have a filing, payment or deposit due date, including an extended filing or payment due date, during this period.

“As California taxpayers start the recovery process, the last thing they should worry about is meeting a tax deadline,” said IRS Acting Commissioner Linda Stiff. “The IRS offers many resources for disaster victims online at IRS.gov, over the phone and in person.”

IRS computer systems automatically identify taxpayers located in the covered disaster area and apply automatic filing and payment relief. Taxpayers within the covered disaster area do not need to identify themselves as affected by the wildfires by writing on their returns or using the disaster designation in their tax software.

Affected taxpayers who reside or have a business located outside the covered disaster area are required to call the IRS disaster hotline at 1-866-562-5227 to identify themselves as eligible for disaster relief.

Casualty Losses

Affected taxpayers in a presidentially declared disaster area also have the option of claiming disaster-related casualty losses on their federal income tax return for either this year or last year. For details on figuring a casualty loss deduction, see IRS Publication 547, “Casualties, Disasters and Thefts.”

Affected taxpayers claiming the disaster loss on last year’s return should put the Disaster Designation “California Wildfires” at the top of the form so that the IRS can expedite the processing of the refund.

Related Information

See the local news release for more specific disaster relief provisions -- http://www.irs.gov/newsroom/article/0,,id=175261,00.html

IR-2007-177: IRS and GWU Host 20th Annual International Tax Conference

IRS and GWU Host 20th Annual International Tax Conference

WASHINGTON — Senior law professors from The George Washington University Law School will join with officials from the Treasury Department and IRS as well as officials from the tax authorities of Korea, Mexico and the United Kingdom to discuss significant tax compliance and treaty issues at the 20th Annual Institute on Current Issues in International Taxation.

The two-day program will be held on Dec. 13 and 14, 2007, at the Grand Hyatt Washington Hotel located at 1000 H Street, N.W., Washington, D.C. Those interested in attending can find out more about the topics, speakers and registration from the GWU Law School web site: http://www.law.gwu.edu/ciit.

The program is designed primarily for corporate tax executives responsible for international tax matters, tax counsels of domestic and foreign multinational corporations, lawyers working in the international tax area and accounting firm partners and managers working in the international tax area.

The conference has been arranged to provide opportunities for lively exchanges between members on the panels who represent government, academia and the private sector and to offer question and answer periods with members of the audience. It will include the perennially popular ‘ask the IRS’ session where IRS officials respond to questions from the audience.

The conference is further described in Announcement 2007-100 -- IRS and GWU Host 20th Annual International Tax Conference

WASHINGTON — Senior law professors from The George Washington University Law School will join with officials from the Treasury Department and IRS as well as officials from the tax authorities of Korea, Mexico and the United Kingdom to discuss significant tax compliance and treaty issues at the 20th Annual Institute on Current Issues in International Taxation.

The two-day program will be held on Dec. 13 and 14, 2007, at the Grand Hyatt Washington Hotel located at 1000 H Street, N.W., Washington, D.C. Those interested in attending can find out more about the topics, speakers and registration from the GWU Law School web site: http://www.law.gwu.edu/ciit.

The program is designed primarily for corporate tax executives responsible for international tax matters, tax counsels of domestic and foreign multinational corporations, lawyers working in the international tax area and accounting firm partners and managers working in the international tax area.

The conference has been arranged to provide opportunities for lively exchanges between members on the panels who represent government, academia and the private sector and to offer question and answer periods with members of the audience. It will include the perennially popular ‘ask the IRS’ session where IRS officials respond to questions from the audience.

The conference is further described in Announcement 2007-100.
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IR-2007-176: IRS to Hold Workshops for Small and Mid-Sized 501(c)(3) Exempt Organizations

IRS TO HOLD WORKSHOPS FOR SMALL AND MID-SIZED 501(C)(3) EXEMPT ORGANIZATIONS

WASHINGTON — The Internal Revenue Service today announced that it is offering one-day workshops for small and mid-sized section 501(c)(3) exempt organizations during fall and winter 2007 and spring 2008.

The workshop is designed for administrators, volunteers or tax practitioners who are responsible for an organization's tax compliance. Each workshop is limited to 200 attendees and will be filled on a first-come, first-served basis. The non-refundable cost is $45 and includes a text and other IRS forms and publications. Pre-registration is required.

The dates and locations for the one-day workshops in 2007 are as follows:

* Salt Lake City, Utah — Nov. 13, 14 and 15
* Columbia, S. C. — Dec. 4, 5 and 6
* Sacramento, Calif. — Dec. 18, 19 and 20
* Arlington, Va. — April 1, 2 and 3
* Austin, Texas — May 6, 7 and 8
* Columbus, Ohio — May 20, 21 and 22

The workshops will explain what 501(c)(3) organizations must do to keep their tax-exempt status and comply with tax obligations. Each workshop will cover the benefits and responsibilities of tax-exempt status and actions that could jeopardize that status; unrelated business income and gaming; employment issues; an explanation of Form 990 and the new "e-Postcard" filing requirement; and required disclosures. Workshop leaders will also discuss how the Pension Protection Act of 2006 affects exempt organizations.

The workshop does not cover how to apply for tax-exempt status or compliance requirements for non-501(c)(3) organizations.

For more information or to register, go to the Charities & Non-Profits page on the IRS Web site at www.irs.gov/eo and click on the “Calendar of Events” link. Information and registration is also available by calling Events by Design, the IRS’ registration services provider, at 1-800-521-3980.

IR-2007-175: Purchasers of GM Hybrids Still Qualify for Tax Credit

Purchasers of GM Hybrids Still Qualify for Tax Credit

WASHINGTON — The Internal Revenue Service announced that purchasers of qualified General Motors Corp. hybrid vehicles may continue to claim the Alternative Motor Vehicle Credit.

GMC sold 123 qualifying vehicles to retail dealers in the quarter ending Sept 30, 2007. This brings the cumulative number of qualified GM hybrid vehicles sold to 9,577. The credit amount and make and model of qualified vehicles sold are:

* Chevrolet Silverado Hybrid 2WD, Model Years 2006 and 2007 $250
* Chevrolet Silverado Hybrid 4WD, Model Years 2006 and 2007 $650
* GMC Sierra Hybrid 2WD, Model Years 2006 and 2007 $250
* GMC Sierra Hybrid 4WD, Model Years 2006 and 2007 $650
* Saturn Vue Green Line, Model Year 2007 $650
* Saturn Aura Hybrid, Model Year 2007 $1,300

Purchasers of GMC’s qualified vehicles may continue to rely on the certifications concerning the vehicles’ qualification for the credit.

Original owners may claim the full amount of the allowable credit up to the end of the first calendar quarter after the quarter in which the manufacturer records its sale of the 60,000th vehicle. For the second and third calendar quarters after the quarter in which the 60,000th vehicle is sold, taxpayers may claim 50 percent of the credit. For the fourth and fifth calendar quarters, taxpayers may claim 25 percent of the credit. No credit is allowed after the fifth quarter.

Related Item: Hybrid Cars and Alternative Fuel Vehicles

IR-2007-174: Purchasers of Ford Hybrids Still Qualify for Tax Credit

Purchasers of Ford Hybrids Still Qualify for Tax Credit

WASHINGTON — The Internal Revenue Service announced that purchasers of qualified Ford Motor Company vehicles may continue to claim the Alternative Motor Vehicle Credit.

The announcement comes after the IRS concluded its quarterly review of the number of hybrid vehicles sold. Ford sold 5,196 qualifying vehicles to retail dealers during the quarter ending Sept. 30, 2007. This brings the cumulative number of qualified Ford hybrid vehicles sold to 38,743.

The credit amount and make and model of the certified vehicles sold are:

* Ford Escape 2WD Hybrid Model Year 2008 $3,000
* Ford Escape 2WD, Model Years 2005, 2006 and 2007 $2,600
* Ford Escape 4WD Hybrid Model Year 2008 $2,200
* Ford Escape 4WD, Model Years 2005, 2006 and 2007 $1,950
* Mercury Mariner 4WD Hybrid Model year 2008 $2,200
* Mercury Mariner 4WD, Model Years 2006 and 2007 $1,950
* Mercury Mariner 2WD Hybrid Model Year 2008 $3,000

Purchasers of Ford’s qualified vehicles may continue to rely on the certifications concerning the vehicles’ qualification for the credit.

Original owners may claim the full amount of the allowable credit up to the end of the first calendar quarter after the quarter in which the manufacturer records its sale of the 60,000th vehicle. For the second and third calendar quarters after the quarter in which the 60,000th vehicle is sold, taxpayers may claim 50 percent of the credit. For the fourth and fifth calendar quarters, taxpayers may claim 25 percent of the credit. No credit is allowed after the fifth quarter.

IR-2007-173: Poker Tournament Winnings Must be Reported to the IRS

Poker Tournament Winnings Must be Reported to the IRS

WASHINGTON — Starting next year, casinos and other sponsors of poker tournaments will be required to report most winnings to winners and the Internal Revenue Service, according to the IRS.

The new requirement, which goes into effect on March 4, 2008, was contained in guidance released Sept. 4 by the Treasury Department and the IRS. The guidance is designed to clear up confusion about the tax reporting rules that apply to poker tournaments. In recent years, some casinos and players have been confused over whether poker tournament sponsors who hold the money for participants in a poker tournament are required to report the winnings to the IRS and withhold tax on the winnings.

For tournaments completed during 2007 and before March 4, 2008, casinos and other sponsors of poker tournaments will not be required to report the winnings to the IRS or withhold tax on the winnings. But beginning March 4, 2008, the IRS will require all tournament sponsors to report tournament winnings of more than $5,000, usually on an IRS Form W-2G.

Tournament sponsors who comply with this reporting requirement will not need to withhold federal income tax at the end of a tournament. If any tournament sponsor does not report the tournament winnings, the IRS will enforce the reporting requirement and also require the sponsor to pay any tax that should have been withheld from the winner if the withholding requirement had been asserted. The withholding amount is normally 25 percent of any amounts that should have been reported.

So that tournament sponsors can comply with this requirement, tournament winners must provide their taxpayer identification number, usually a social security number, to the tournament sponsor. If a winner fails to provide this identification number, the tournament sponsor must withhold federal income tax at the rate of 28 percent.

The IRS reminds tournament winners that, by law, they must report all their winnings on their federal income tax returns. This rule applies regardless of the amount and regardless of whether the winner receives a Form W-2G or any other reporting form. This is true for 2007 and earlier years, and will continue to be the case after the new reporting requirement goes into effect.

Related Item: Revenue Procedure 2007-57 in Internal Revenue Bulletin 2007-36 -- http://www.irs.gov/pub/irs-irbs/irb07-42.pdf

IR-2007-172: 2008 Inflation Adjustments Widen Tax Brackets, Raise IRA/401(k) Limits and Expand Tax Benefits

2008 Inflation Adjustments Widen Tax Brackets, Raise IRA/401(k) Limits and Expand Tax Benefits

WASHINGTON — For 2008, personal exemptions and standard deductions will rise, tax brackets will widen and workers will be able to save more for retirement, thanks to inflation adjustments announced today by the Internal Revenue Service.

By law, the dollar amounts for a variety of tax provisions must be revised each year to keep pace with inflation. As a result, more than three dozen tax benefits, affecting virtually every taxpayer, are being adjusted for 2008. Key changes affecting 2008 returns, filed by most taxpayers in early 2009, include the following:

* The value of each personal and dependency exemption, available to most taxpayers, is $3,500, up $100 from 2007.
* The new standard deduction is $10,900 for married couples filing a joint return (up $200), $5,450 for singles and married individuals filing separately (up $100) and $8,000 for heads of household (up $150). Nearly two out of three taxpayers take the standard deduction, rather than itemizing deductions, such as mortgage interest, charitable contributions and state and local taxes.
* Tax-bracket thresholds increase for each filing status. For a married couple filing a joint return, for example, the taxable-income threshold separating the 15-percent bracket from the 25-percent bracket is $65,100, up from $63,700 in 2007.
* The maximum earned income tax credit for low and moderate income workers and working families with two or more children is $4,824, up from $4,716. The income limit for the credit for joint return filers with two or more children is $41,646, up from $39,783.
* The maximum Hope credit, available for the first two years of post-secondary education, is $1,800, up from $1,650 in 2007.
* The income limit for the savers credit is $53,000 for joint filers (up $1,000), $39,750 for heads of household (up $750) and $26,500 for singles and married persons filing separately (up$500). Low-and moderate income workers who contribute to a retirement plan, such as an IRA or 401(k), may qualify for the credit, which is available in addition to any other tax savings that apply.
* The contribution amount allowed for Roth IRAs begins to phase out for joint filers with incomes exceeding $159,000 (up from $156,000) and $101,000 (up from $99,000) for singles and heads of household.
* For contributions to a traditional IRA, the deduction phase-out range for an individual covered by a retirement plan at work begins at income of $85,000 for joint filers (up from $83,000) and $53,000 for a single person or head of household (up from $52,000).
* Participants in most employer-sponsored 401(k) plans and 403(b) plans for employees of public schools and certain tax-exempt organizations can contribute up to $15,500, unchanged from 2007. Individuals, age 50 or over, can make an additional contribution of up to $5,000, also unchanged from 2007.
* Individuals participating in SIMPLE retirement plans can contribute $10,500, unchanged from 2007. Those, age 50 or over, can make an additional contribution of up to $2,500, also unchanged from 2007.
* The annual contribution limit for most defined contribution plans rises to $46,000, up from $45,000 in 2007.

More information about the pension and retirement plan-related changes can be found in IR-2007-171. Other inflation adjustments are described in Revenue Procedure 2007-66.

Related Items:

* Revenue Procedure 2007-66 -- http://www.irs.gov/pub/irs-drop/rp-07-66.pdf
* IR-2007-171, IRS Announces Pension Plan Limitations for 2008 -- http://www.irs.gov/newsroom/article/0,,id=174873,00.html

IR-2007-171: IRS Announces Pension Plan Limitations for 2008

IRS Announces Pension Plan Limitations for 2008

WASHINGTON The Internal Revenue Service today announced cost of living adjustments applicable to dollar limitations for pension plans and other items for Tax Year 2008.

Section 415 of the Internal Revenue Code provides for dollar limitations on benefits and contributions under qualified retirement plans. It also requires that the Commissioner annually adjust these limits for cost of living increases.

Many of the pension plan limitations will change for 2008 because the increase in the cost-of-living index met the statutory thresholds that trigger their adjustment. However, for others, the limitation will remain unchanged. For example, the limitation under Section 402(g)(1) on the exclusion for elective deferrals described in Section 402(g)(3) remains unchanged at $15,500. This limitation affects elective deferrals to Section 401(k) plans and to the Federal Government’s Thrift Savings Plan, among other plans.

Effective January 1, 2008, the limitation on the annual benefit under a defined benefit plan under Section 415(b)(1)(A) is increased from $180,000 to $185,000. For participants who separated from service before January 1, 2008, the limitation for defined benefit plans under Section 415(b)(1)(B) is computed by multiplying the participant's compensation limitation, as adjusted through 2007, by 1.0236.

The limitation for defined contribution plans under Section 415(c)(1)(A) is increased from $45,000 to $46,000.

The Code provides that various other dollar amounts are to be adjusted at the same time and in the same manner as the dollar limitation of Section 415(b)(1)(A). These dollar amounts and the adjusted amounts are as follows:

The limitation under Section 402(g)(1) on the exclusion for elective deferrals described in Section 402(g)(3) remains unchanged at $15,500.

The annual compensation limit under Sections 401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii) is increased from $225,000 to $230,000.

The dollar limitation under Section 416(i)(1)(A)(i) concerning the definition of key employee in a top-heavy plan is increased from $145,000 to $150,000.

The dollar amount under Section 409(o)(1)(C)(ii) for determining the maximum account balance in an employee stock ownership plan subject to a 5 year distribution period is increased from $915,000 to $935,000, while the dollar amount used to determine the lengthening of the 5 year distribution period is increased from $180,000 to $185,000.

The limitation used in the definition of highly compensated employee under Section 414(q)(1)(B) is increased from $100,000 to $105,000.

The dollar limitation under Section 414(v)(2)(B)(i) for catch-up contributions to an applicable employer plan other than a plan described in Section 401(k)(11) or Section 408(p) for individuals aged 50 or over remains unchanged at $5,000. The dollar limitation under Section 414(v)(2)(B)(ii) for catch-up contributions to an applicable employer plan described in Section 401(k)(11) or Section 408(p) for individuals aged 50 or over remains unchanged at $2,500.

The annual compensation limitation under Section 401(a)(17) for eligible participants in certain governmental plans that, under the plan as in effect on July 1, 1993, allowed cost of living adjustments to the compensation limitation under the plan under Section 401(a)(17) to be taken into account, is increased from $335,000 to $345,000.

The compensation amount under Section 408(k)(2)(C) regarding simplified employee pensions (SEPs) remains unchanged at $500.

The limitation under Section 408(p)(2)(E) regarding SIMPLE retirement accounts remains unchanged at $10,500.

The limitation on deferrals under Section 457(e)(15) concerning deferred compensation plans of state and local governments and tax-exempt organizations remains unchanged at $15,500.

The compensation amounts under Section 1.61 21(f)(5)(i) of the Income Tax Regulations concerning the definition of “control employee” for fringe benefit valuation purposes remains unchanged at $90,000. The compensation amount under Section 1.61 21(f)(5)(iii) is increased from $180,000 to $185,000.

The Code also provides that several pension-related amounts are to be adjusted using the cost-of-living adjustment under Section 1(f)(3). These dollar amounts and the adjustments are as follows:

The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the retirement savings contribution credit for taxpayers filing a joint return is increased from $31,000 to $32,000; the limitation under Section 25B(b)(1)(B) is increased from $34,000 to $34,500; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D), from $52,000 to $53,000.

The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the retirement savings contribution credit for taxpayers filing as head of household is increased from $23,250 to $24,000; the limitation under Section 25B(b)(1)(B) is increased from $25,500 to $25,875; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D), from $39,000 to $39,750.

The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the retirement savings contribution credit for all other taxpayers is increased from $15,500 to $16,000; the limitation under Section 25B(b)(1)(B) is increased from $17,000 to $17,250; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D), from $26,000 to $26,500.

The applicable dollar amount under Section 219(g)(3)(B)(i) for determining the deductible amount of an IRA contribution for taxpayers who are active participants filing a joint return or as a qualifying widow(er) is increased from $83,000 to $85,000. The applicable dollar amount under Section 219(g)(3)(B)(ii) for all other taxpayers (other than married taxpayers filing separate returns) is increased from $52,000 to $53,000. The applicable dollar amount under Section 219(g)(7)(A) for a taxpayer who is not an active participant but whose spouse is an active participant is increased from $156,000 to $159,000.

The adjusted gross income limitation under Section 408A(c)(3)(C)(ii)(I) for determining the maximum Roth IRA contribution for taxpayers filing a joint return or as a qualifying widow(er) is increased from $156,000 to $159,000. The adjusted gross income limitation under Section 408A(c)(3)(C)(ii)(II) for all other taxpayers (other than married taxpayers filing separate returns) is increased from $99,000 to $101,000.

Administrators of defined benefit or defined contribution plans that have received favorable determination letters should not request new determination letters solely because of yearly amendments to adjust maximum limitations in the plans.