Taxpayers in the financial services area were hoping for additional guidance concerning what triggers state income tax nexus, but recently the U.S. Supreme Court denied certiorari in a nexus case involving a credit card issuer. It now seems likely that more states will attempt to tax out-of-state companies based on economic nexus principals. 

In a column in the Journal of Taxation of Financial Products, Benedict Cabaltica, Marianne Evans and Ann Holley explain economic nexus theory and its application to financial service entities.

The Tax Relief and Health Care Act of 2006 amended Code Sec. 7623 of the IRC, substantially enhancing the IRS’ informant program. This reflects Congress’ intent to move the IRS program closer to the False Claims Act. 

In the Journal of Tax Practice and Procedure, Steven Toscher and Heather Kim Lee report on the establishment of a special IRS whistleblower task force, legal issues raised, dangers for taxpayers and problems for tax administrators.

An article in Executive’s Tax & Management Report details efforts to stop high-interest “piggyback” down payment loans and exclude gain from sales of rental and vacation homes.

Year-end tax planning allows taxpayers to minimize their 2007 tax bills by timing the receipt of income and the claiming of deductions. Take advantage of Code Sec.179 by expensing, rather than depreciating, $125,000 worth of certain computer software or other business property purchased as late as Dec. 31, 2007. That expensing then saves more tax dollars by avoiding the mid-quarter convention, as an article in Federal Tax Course Letter explains along with other tips.

Most accountants would consider the preparation of tax accrual workpapers as accounting work. However, the U.S. Supreme Court decision in Arthur Young Inc. (1984) allowed the IRS to obtain accrual workpapers from the taxpayer’s independent auditors. 

Robert W. Wood and Alfred K. Leong, in their article in M&A Tax Report, demonstrate that a recent District Court decision, Textron Inc. (2007), emphasizes the importance of involving tax attorneys in the preparation of accrual workpapers to protect the papers from later disclosure in an IRS audit.