IR-2008-1, Jan. 2, 2008

Filing Season Fact Sheets | Filing Season Kickoff Audio Interview / Text Script

Washington — With millions of tax packages beginning to arrive in mailboxes this week, the Internal Revenue Service today reminded taxpayers to watch for commonly overlooked tax credits and late tax law changes that could affect their tax returns.

"The IRS will work to make this tax season as smooth as possible for taxpayers," said Linda Stiff, Acting IRS Commissioner. “We strongly encourage taxpayers to file electronically, particularly those affected by late tax law changes. Filing electronically makes things easier by reducing errors and speeding up refunds.”

The IRS is sending 16.5 million 1040 tax packages to taxpayers this month who have filed paper tax returns in the past. The number of paper packages has dropped rapidly in recent years, falling from 34 million packages in just four years. The paper packages are becoming much less common as the popularity of electronic filing soars. Last year, nearly 80 million tax returns used e-file, representing about 57 percent of all returns.

IR-2008-2, Jan. 3, 2008

WASHINGTON — The Treasury Department and the Internal Revenue Service today released final regulations and a related revenue procedure giving taxpayers greater protection and control over their tax return information held by tax return preparers. Treasury and the IRS also issued a separate request for public comment on a proposal to restrict the marketing of refund anticipation loans and similar products.

The final rules update disclosure and privacy laws related to preparers for the first time in more than 30 years and bring taxpayer consent requirements into the electronic age. Preparers will have until Jan. 1, 2009 to implement the new consent requirements, giving preparers a full year to make any necessary changes.

The final rules apply to Code section 7216 and a related provision of the Code, section 6713, which provide penalties against tax return preparers who make unauthorized use or disclosure of tax return information. Regulations published in 1974 provide certain exceptions to the penalties in cases of taxpayer consent. However, the 1974 regulations did not address issues raised by electronic preparation and filing of tax returns. Currently, 57 percent of all individual taxpayers file their tax returns electronically.

The final rules affirm a general rule in place for more than three decades that taxpayers, not the IRS, control their own tax return information held by preparers and, within appropriate limits and safeguards, taxpayers are able to direct preparers to disclose tax return information as taxpayers see fit.  More than 60 percent of individual taxpayers use a preparer.

IR-2008-3, Jan. 3, 2008 WASHINGTON — The Internal Revenue Service and the Treasury Department today announced that they will work to publish guidance on a method for integrated utilities to use when calculating the tax deduction for domestic production of electricity and natural gas, as well as other production activities.

The goal is to develop an alternative method that integrated utility companies can use to compute qualified production activities under Internal Revenue Code Section 199(c).  

“Providing taxpayers an optional method to comply with a very complex area of the law serves the primary purposes of the Industry Issue Resolution Program (IIR), which provides taxpayers with the guidance that will produce tax certainty and mitigate potential tax controversy,” said Frank Y. Ng, Commissioner of the IRS Large and Mid-Size Business Division.

By selecting the issue for the IIR program, the IRS hopes to clear up concerns about a possible inconsistency among integrated utilities in their approach to computing the deduction for domestic production. To properly compute the section 199 deduction, integrated utility companies are required to determine their domestic production gross receipts, cost of goods sold and direct expenses.

Since its inception in 2000, the IIR program has resulted in resolution of many different tax issues cumulatively affecting thousands of taxpayers in many different lines of business. For each issue selected, a multi-functional team gathers and analyzes the relevant facts and recommends guidance.

IR-2008-4, Jan. 9, 2008

WASHINGTON — National Taxpayer Advocate Nina E. Olson today released her annual report to Congress, focusing particular attention on the consequences of changes to the tax code enacted late in the year and the need for a coordinated IRS approach to combat the cash economy portion of the tax gap. Olson also urged Congress to enact a Taxpayer Bill of Rights and to authorize symbolic “apology payments” in egregious cases where taxpayers suffer significant harm as a result of IRS errors. The report contains a second volume that describes the results of six research studies, including one that shows that low income taxpayers fare much better in IRS Earned Income Tax Credit audits when they are represented by practitioners.

Impact of Late-Year Tax Code Changes on Taxpayers
The report designated the frequency and magnitude of late-year changes to the tax code as the most serious problem facing taxpayers. In each of the last two years, Congress has acted in December to provide tax benefits with retroactive effect for the full year. In 2006, Congress extended several popular tax deductions.  In 2007, Congress provided an Alternative Minimum Tax “patch” to protect approximately 20 million additional taxpayers from the AMT.  The report notes that late action causes a variety of problems:

IR-2008-5, Jan. 10, 2008

Conversation with Director, IRS e-File Program Audio Interview  / Text Script

WASHINGTON — Most taxpayers may file their 2007 tax returns electronically beginning Jan. 11 as the Internal Revenue Service opens the e-file program.

Benefits of E-File

Taxpayers who use IRS e-file and who choose direct deposit can receive their refund in as little as ten days. With e-file there is no paper return going to the IRS and with direct deposit, there is no paper refund going to the taxpayer. It’s all electronic. Tax return information is protected through encryption. Taxpayers receive an acknowledgement within 48 hours that the IRS has accepted the return.

“IRS e-file is the fastest, easiest and most accurate way to file a tax return,” said IRS Acting Commissioner Linda E. Stiff. "We strongly encourage taxpayers to take advantage of the benefits that electronic filing offers."

IR-2008-6, Jan. 10, 2008

Audio: Conversation with Director, IRS e-File Program

WASHINGTON — The Internal Revenue Service and its private-sector partners today announced the Jan. 11 opening of this year's Free File program. The free tax preparation and electronic filing initiative begins its sixth year with high customer satisfaction ratings.

Most Taxpayers Eligible

Seven out of 10 taxpayers — 97 million filers — qualify for Free File. Taxpayers must have an adjusted gross income of $54,000 or less to be eligible.

This year taxpayers can choose from 19 tax preparation software companies. The program is operated by the IRS and the Free File Alliance. The Alliance is a consortium of tax preparation software companies. Each company sets its own criteria for who can use the service.

"Free File gives taxpayers an opportunity to use private-sector tax preparation programs for free," said Acting Commissioner Linda E. Stiff. "The IRS encourages taxpayers to take advantage of this valuable program from the IRS and the Free File Alliance."

High Customer Satisfaction

Taxpayers consistently give high marks to Free File in satisfaction surveys. According to Russell Research, 98 percent said they would recommend Free File to a friend or family member. The results also found that 95 percent intend to use Free File again this year.

IR-2008-7, Jan. 11, 2008

The Internal Revenue Service announced the selection of 20 new members of the Information Reporting Program Advisory Committee (IRPAC), which provides an organized public forum for discussion of relevant tax administration issues between IRS officials and representatives of the public.

“The new members of IRPAC will contribute to this important group their years of experience and depth of understanding about tax administration,” said Linda Stiff, Acting IRS Commissioner. "I look forward to working with IRPAC as it continues to provide the IRS with valued feedback and insight."

The 20 new IRPAC members will join 14 returning members in 2008. IRPAC members generally serve a three-year term and are picked to represent the financial, payroll, and software industries, the state tax administrations, colleges and universities and tax professionals.

IRPAC was established in 1991 in response to a recommendation in the final Conference Report of the Omnibus budget Reconciliation Act of 1989. IRPAC meets periodically and will submit a report to the IRS in October 2008 at a public meeting.

New members include:

Mark Castro, CPA, of Bellevue, Wash.  He is a Tax Support Manager with Orrtax Software Solutions and a member of the National Association of Computerized Tax Processors and the Council for Electronic Revenue Communication Advancement.

Lisa M. Chavez, CPA, JD of Chicago. She is a Senior Attorney in the Corporate Legal department of the Northern Trust Company and is a member of the American Bar Association, the Hispanic Lawyers Association of Illinois and the American Bankers Association.

IR-2008-8, Jan. 14, 2008

WASHINGTON — The Internal Revenue Service today issued a notice that lists four additional erroneous legal positions that taxpayers should refrain from using as an excuse to avoid paying their taxes.

An individual or group may not avoid paying their fair share of taxes by making “frivolous” legal arguments such as those listed in this notice. The IRS publicizes these frivolous claims to help taxpayers understand the law and avoid penalties.

Notice 2008-14 lists positions identified as frivolous for purposes of the penalty under section 6702 of the federal tax code for filing a frivolous tax return or submitting to the IRS a frivolous request for a collection due process hearing or application for an installment agreement, offer-in-compromise, or Taxpayer Assistance Order.

Taxpayers who file a tax return or make a submission based on a position listed in this notice are subject to a $5,000 penalty. This notice adds to the positions listed in Notice 2007-30, 2007-14 I.R.B. 883. The positions that have been added are found in paragraphs 9(g), 11, 14, and 25.

The four new frivolous claims pertain to the following:

IR-2008-9, Jan. 15, 2008

WASHINGTON — The Internal Revenue Service is joining national TV network Telemundo in a special one-hour tax program for Spanish-speaking taxpayers on Sunday, Jan. 27. The program, “Los Impuestos y Usted” (“Taxes and You”), will air at:

• 3:30 p.m. Eastern and Pacific Time.
• 2:30 p.m. Central Time.
• 1:30 p.m. Mountain Time.

Consult your local listings for exact times.

“Los Impuestos y Usted” will focus on a variety of tax issues. Topics include who must file a return and who can claim deductions and benefits, such as the Earned Income Tax Credit (EITC) for low-income taxpayers. In addition, the program will explain Free File, a service that allows many taxpayers to file their taxes online at no cost. The show will also discuss other kinds of free assistance available from the IRS.

Mónica Noguera, host for many of Telemundo’s special programs, will present the IRS program, which features in-studio interviews with IRS tax experts.

Information about the IRS is available in Spanish at El IRS en Español, which is part of the IRS Web site. Or, call toll-free at 1-800-829-1040, extension 8.

Notes:

The IRS continues to make strong progress in a number of key enforcement areas. The IRS is showing consistent improvements in areas critical to maintaining a fair, efficient tax system while bringing billions of additional dollars into the Treasury. At the same time, the agency continues to improve service to taxpayers.

The IRS enforcement efforts increased again in fiscal year 2007. For instance, during 2007 the IRS audited 84 percent more returns of individuals with incomes of $1 million or more than during 2006. Overall, enforcement revenue reached $59.2 billion, up from $48.7 billion in 2006 and nearly $34.1 billion in 2002.

Highlights of the enforcement and services numbers for fiscal year 2007, which ended on September 30, include:

Individuals

Audit rates increased in 2007, both for overall individual rates and for higher-income taxpayers.