Taxsoftware.com News

 

Sponsored by Taxsoftware.com   http://www.taxsoftware.com        March, 2008        Issue 17

Special Interest Articles

Interest Rates Drop for the Second Quarter of 2008 

Special Economic Stimulus Letters Reach Mailboxes in March

IRS Seeks New Issues for the Industry Issue Resolution Program 

IRS Automates Installment Agreement User Fees

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

                 

E-filing Deadline for Business Returns is March 17

Different types of returns are due in different dates.  See the chart below to understand the differences.

Form                   Series IRS                    Copy Due Recipient/ Participant Copy Due Corresponding Extension Form Extension Form Due Date Extended To
1040 April 15, 2008 N/A 4868 April 15, 2008 October 15, 2008
1041 April 15, 2008 April 16, 2008 7004 April 15, 2008 October 15, 2008
1065  and K-1 April 15, 2008 April 16, 2008 7004 April 15, 2008 October 15, 2008
1098, 1099, W-2G, and March 31, 2008 January 31, 2008 8809 March 31, 2008 April 30, 2008
5498 and 5498-SA June 2,  2008 June 2,  2008 8809 June 2,  2008 July 2, 2008
5498-ESA June 2,  2008 April 30, 2008 8809 June 2,  2008 July 2, 2008
1042S March 17, 2008 N/A 8809 March 17, 2008 January 31, 2008
8027 March 31, 2008 January 31, 2008 8809 March 31, 2008 April 30, 2008
1120, and 1120S and K-1, and 1120POL March 15, 2008 March 15, 2008 7004 March 15, 2008 September 17, 2008

 Interest Rates Drop for the Second Quarter of 2008 

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

bullet six (6) percent for overpayments [five (5) percent in the case of a corporation];
bullet six (6) percent for underpayments;
bullet eight (8) percent for large corporate underpayments; and
bullet three and one-half (3.5) 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 in Revenue Ruling 2008-10 are computed from the federal short-term rate based on daily compounding determined during January 2008.   

Special Economic Stimulus Letters Reach Mailboxes in March

More than 130 million American households will begin receiving Internal Revenue Service letters next week reminding them to file a 2007 tax return in order to receive a 2008 economic stimulus payment.

The mailings by the IRS will begin the first week in March and continue throughout the month. The informational notice, titled Economic Stimulus Payment Notice, alerts people that they may be eligible for a one-time stimulus payment of up to $600 ($1,200 married filing jointly) starting in May. There also is a $300 per child payment for qualifying children younger than 17.

“This special letters remind people that they won’t need to do anything more than file a 2007 tax return in order to put the stimulus payment process in motion,” Acting IRS Commissioner Linda Stiff said.

The notice is informational and does not seek any financial information. The main mailings, which will take place in three weekly batches, will go to taxpayers who filed a tax return last year.

“To receive a payment in 2008, individuals who qualify will not have to do anything more than file a 2007 tax return. The IRS will determine eligibility, figure the amount and send the payment,” the notice states. “This payment should not be confused with any 2007 income tax refund that is owed to you by the federal government. Income tax refunds for 2007 will be made separately from this one-time payment.”

However, some people must take an extra step this year to receive a stimulus payment. In late March, the IRS will send a special mailing to certain recipients of Social Security and Veterans Affairs benefits. Generally, those benefits are nontaxable and recipients do not file tax returns. In order to receive a stimulus payment, people in this group need to file a tax return if they have at least $3,000 from a combination of certain Social Security benefits, Veterans benefits and earned income. The minimum stimulus payment for these people is $300 ($600 for married filing jointly).

The IRS has created a sample of Form 1040A with information on how to fill out a few lines that will enable eligible people who do not normally file a tax return to receive the stimulus payment.  

 

IRS Seeks New Issues for the Industry Issue Resolution Program 

The Internal Revenue Service is encouraging business taxpayers, associations and other interested parties to submit to the Industry Issue Resolution (IIR) Program tax issues for resolution involving a controversy, a dispute or an unnecessary burden on taxpayers.

Though submissions can be made at anytime for consideration in the IIR program, submitted issues received by March 31, 2008, will be considered for acceptance in April.

The objective of the IIR program is to resolve business tax issues common to significant numbers of taxpayers through new and improved guidance. In past years, issues have been submitted by associations and others representing both small and large business taxpayers, resulting in tax guidance that has affected thousands of taxpayers.

Recent submissions accepted into the IIR program include:

bullet Integrated Public Utilities - regarding an optional method to be used by integrated utility companies in computing their qualified production activities income under IRC section 199(c). 
bullet Automobile Last In, First Out (LIFO) - for auto wholesalers, manufacturers and dealers regarding the proper treatment of the dollar-value, LIFO inventory method for pooling purposes of crossover vehicles, which have characteristics of trucks and cars.
Recent guidance issued as a result of the IIR program includes:
bullet Valuation of Parts Inventory by Heavy Equipment Distributors (Revenue Procedure 2006-14)
bullet Clarification regarding circumstances when facsimile signatures may be used to sign employment tax forms. (Revenue Procedure 2005-39)
bullet Explanation of the circumstances under which insurance companies that make incentive payments to health care providers will be permitted to include those payments in unpaid losses. The revenue procedure also provides procedures under which a taxpayer may obtain automatic consent of the Commissioner to change their accounting method for such payments. (Revenue Procedure 2004-41)

For each issue selected, an IIR team of IRS and Treasury personnel gather relevant facts from taxpayers or other interested parties affected by the issue. The goal is to recommend guidance to resolve the issue. This benefits both taxpayers and the IRS by saving time and expense that would otherwise be expended on resolving the issue through examinations.

IIR project selections are based on the criteria set forth in Revenue Procedure 2003-36. For each issue selected, a multi-functional team of IRS, Chief Counsel, and Treasury personnel will be assembled. The teams will gather and analyze the relevant facts from industry groups and taxpayers for each issue and recommend guidance.

Requests for guidance on tax issues under the IIR program can be submitted at any time to IIR@IRS.gov.  Submissions received are reviewed semi-annually with selections next being made from issues submitted by March 31, 2008.

 

IRS Automates Installment Agreement User Fees

The Internal Revenue Service has automated the user fee calculations for taxpayers entering into an installment agreement.

Previously, taxpayers were required to submit a paper Form 13844 to request a reduced user fee. Now, eligibility for reduced fees is determined automatically by the IRS.

An installment agreement allows taxpayers to pay their full tax debt in smaller, more manageable amounts, though penalties and interest continue to accrue on the unpaid portion of that debt. Taxpayers are charged a one-time fee to set up an installment agreement with the IRS. A reduced fee is available for qualifying taxpayers.

Generally, user fees are $105 for non-direct debit agreements, $52 for direct debit agreements and $45 for reinstatements. However, the fee is only $43 for taxpayers with income at or below certain U.S. Department of Health and Human Services poverty guidelines.

All taxpayers entering into an installment agreement will automatically be considered for the reduced user fee using information the IRS already has on hand from the taxpayer’s current tax return. Those who qualify will be charged the reduced $43 fee for all installment agreements established through any method. These include the Online Payment Agreement application on the IRS Website at IRS.gov, telephone, face-to-face or mail.

“This new process will improve service for and reduce the paperwork burden on taxpayers applying for an installment agreement,” said acting IRS Commissioner Linda E. Stiff. “Now, taxpayers who are eligible for the reduced fee will automatically receive it without extra work on their part.”

In some instances, taxpayers may receive an installment agreement acceptance notice from the IRS but not a reduced user fee even though they believe they still should qualify for one. In that situation, taxpayers can request a reduced fee by completing Form 13844, Application for Reduced User Fee for Installment Agreements, and submit it to the IRS within 30 days of receipt of the installment agreement acceptance notice. The IRS will evaluate the application and respond to the taxpayer. Form 13844 is available on the IRS Web site at IRS.gov or may be ordered by calling toll-free 1-800-TAX-FORM (1-800-829-3676).

The IRS reminds the public that the Online Payment Agreement application launched in 2006 provides an easy way to resolve tax liabilities and allows eligible taxpayers or their authorized representatives to self-qualify, apply for and receive immediate notification of approval.

Taxpayers must have filed all required tax returns to use the online application. Agreements can be established on existing outstanding balances or on pre-assessed amounts from current year Form 1040 liabilities.

Three payment options are available when applying online:

bullet Payment in full — Taxpayers pay within 10 days to avoid interest and penalties.
bullet Short-term extension — Taxpayers receive a short-term extension of up to 120 days. No fee is charged, but additional penalties and interest will accrue.
bullet Monthly payment plan — The appropriate user fee is added to the amount owed, and interest and penalty continues to accrue on the unpaid balance.

To access the online application, use the pull-down menu under “I need to...” on the front page of IRS.gov and select “Set Up a Payment Plan.” The application is available Monday through Friday from 6 a.m. to 12:30 a.m., Saturday from 6 a.m. to 10 p.m. and Sunday from 4 p.m. to midnight (all are Eastern Time).