The IRS has issued general requirements and conditions for the development, printing, and approval of all substitute tax forms to be acceptable for filing in lieu of official IRS-produced and distributed forms. The IRS accepts quality substitute tax forms that are consistent with the official forms and that do not have an adverse impact on processing. The IRS Substitute Forms Program administers the formal acceptance and processing of these forms nationwide. While the program deals primarily with paper documents, it also interfaces with other processing and filing media, such as electronic filing.
This guidance covers the following forms: (1) tax returns and their related forms and schedules; (2) worksheets as they appear in instruction packages; (3) applications for permission to file returns electronically and forms used as required documentation for electronically filed returns; (4) powers of attorney; (5) over-the-counter estimated tax payment vouchers; and (6) forms and schedules relating to partnerships, exempt organizations, and employee plans.
The guidelines do not cover a number of forms, including Forms W-2, W-2c, W-3, W-3c, 941 and Schedule B, 1040-ES (OCR), 1041-ES (OCR), 1096, 1098 series, 1099 series, W-2G and 1042-S. Also, they do not cover requests for information or documentation initiated by the IRS, forms used internally by the IRS, state tax forms, forms developed by other agencies and general and specific instructions.
The guidelines also address new policies and procedures, such as allowing taxpayers to assume e-mailed substitute forms have been approved if the taxpayer does not hear from the IRS within 20 days and address and e-mail address changes.
Rev. Proc. 2007-24, I.R.B. 2007-11, 692, is superseded.
Rev. Proc. 2007-68, 2007FED ¶46,735
Other References:
Code Sec. 7513
CCH Reference - 2007FED ¶42,702.12
CCH Reference - 2007FED ¶42,702.40
Tax Research Consultant
CCH Reference - TRC FILEBUS: 12,052.10
CCH Reference - TRC FILEBUS: 12,250
The IRS has released the Fall 2007 issue of the Statistics of Income (SOI) Bulletin. The SOI Bulletin is a quarterly compilation of information from federal tax returns and other documents. This issue of the bulletin contains information from 134.4 million individual tax returns filed for tax year 2005. Included, as well, is information regarding municipal bond issuance, private foundations, charities, corporate foreign tax credits and growth trends in partnerships. The bulletin also includes an article highlighting historical corporate data.
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. Both subscriptions and single issues are available. The Bulletin is also available online at www.irs.gov.
IR-2007-195, 2007FED ¶46,736
Other References:
Code Sec. 6801
CCH Reference - 2007FED ¶36,942.01
CCH Reference - 2007FED ¶36,942.40
Tax Research Consultant
CCH Reference - TRC IRS: 3,152.10
As Congress remained on recess, the IRS released several annual inflation-adjusted figures during the past two weeks. Several instances of instructive, but niche, guidance were released. A nominee was chosen by the White House to be the new IRS Commissioner and worries about delay in essential tax legislation for the alternative minimum tax (AMT) "patch" continue to focus on delays that will result in getting the filing season underway in January.
AMT. The IRS Oversight Board urged Congress "to take quick action" to adopt legislation to provide an AMT "patch" (TAXDAY, 2007/11/27, I.3). The board "is gravely concerned about the serious risks to the 2008 filing season if legislation to change the AMT is delayed. A delay threatens the IRS's ability to process returns and issue refunds in a timely manner and imposes significant burden on taxpayers," the board wrote in a November 26 letter to the leaders of the congressional tax-writing committees.
IRS Commissioner Candidate. Ending months of speculation, President Bush announced on November 21 his intention to nominate Douglas H. Shulman, a securities regulator, to be the 47th Commissioner of the Internal Revenue Service (TAXDAY, 2007/11/26, I.4). Shulman was senior policy advisor and, later, chief of staff of the bipartisan National Commission on Restructuring the IRS. The commission was formed in the late 1990s after public outcry about alleged heavy-handed tactics by IRS agents. Congress ultimately passed the IRS Restructuring and Reform Act of 1998 (P.L. 105-206) to correct many of the abuses uncovered by the commission.
Standard mileage rates for 2008 The IRS has released the 2008 optional standard mileage rates to be used by employees, self-employed individuals and other taxpayers to compute deductible costs of operating an automobile (including vans, pickups and panel trucks) for business, medical, moving and charitable purposes (IR-2007-192; Rev. Proc. 2007-70; TAXDAY, 2007/11/28, I.1). The standard mileage rate for business mileage will be 50.5 cents per mile, an increase of two cents over the 2007 rate. The standard mileage rate for medical and moving expenses has been decreased to 19 cents per mile from 20 cents per mile in 2007. The standard mileage rate for charitable purposes remains at 14 cents per mile.
Interest rates for first quarter 2008.
Interest rates for the calendar quarter beginning January 1, 2008, will drop to seven percent for tax overpayments (six percent in the case of a corporation), seven percent for underpayments, and nine percent for large corporate underpayments (IR-2007-193; Rev. Rul. 2007-68; TAXDAY, 2007/11/29, I.1). The interest rate for the portion of a corporate overpayment exceeding $10,000 will drop to 4.5 percent.
Income Reporting. The IRS has released a fact sheet to help taxpayers better understand miscellaneous income and what they are required to report as taxable on their Forms 1040 (IRS Fact Sheet FS-2007-26; TAXDAY, 2007/11/29, I.3). The fact sheet discusses several types of reportable income, including cash earned from side jobs (no matter in what amount), barter exchanges of goods or services, awards, prizes, contest winnings (including the fair market value of merchandise or products) and gambling proceeds.
The IRS has issued proposed regulations under Code Sec. 6045(e), pertaining to information reporting requirements applicable to sales or exchanges of standing timber in return for lump-sum or "outright" payments (NPRM REG-155669-04; TAXDAY, 2007/11/29, I.4). The proposed regulations require information reporting of lump-sum payments received by landowners on sales of standing timber. This would bring the reporting requirements for lump-sum sales of standing timber in line with the reporting requirements applicable to pay-as-cut timber sales.
Schedule D. Contrary to recent news reports, the IRS's Schedule D, Capital Gains and Losses, project is not new, a spokesperson for the Service told CCH on November 28 (TAXDAY, 2007/11/30, I.2). The project is actually on hold. Earlier during the week of November 26, news reports surfaced that the IRS had launched a "new" Schedule D project. These reports were apparently based on a notice on the IRS website that some organizations interpreted as being newly posted. The Schedule D project is intended to make Schedule D more user-friendly and improve compliance.
Accounting Method. The IRS has issued proposed regulations that would clarify and simplify current regulations regarding the accounting method or combination of methods to be used after corporate reorganizations and tax-free liquidations under Code Sec. 381 (NPRM REG-151884-03; TAXDAY, 2007/11/19, I.7). The proposed regulations would apply when issued as final regulations.
Employee Benefits. The 2007 Cumulative List of Changes in Plan Qualification Requirements has been published (Notice 2007-94; TAXDAY, 2007/11/30, I.1). The 2007 Cumulative List informs plan sponsors and practitioners of issues the IRS has specifically identified for review in determining whether individually designed single-employer plans filing in Cycle C and Code Sec. 414(d) governmental plans have been properly updated.
The IRS has provided tables of covered compensation under Code Sec. 401(l)(5)(E) for the 2008 plan year (Rev. Rul. 2007-71; TAXDAY, 2007/11/21, I.2). Covered compensation with respect to an employee is defined as the average of the contribution and benefit bases in effect under section 230 of the Social Security Act for each year in the 35-year period ending with the year in which the employee attains Social Security retirement age.
The IRS has ruled that payments made by the U.S. Department of Veterans Affairs under the Compensated Work Therapy (CWT) Program are exempt from federal income tax as veterans' benefits (Rev. Rul. 2007-69; TAXDAY, 2007/11/19, I.2). The ruling reflects the IRS's acquiescence (TAXDAY, 2007/10/29, I.5) to the Tax Court's decision in R. Wallace, 128 TC 132, Dec. 56,899
(TAXDAY, 2007/04/17, J.1), that payments received under the CWT Program constitute nontaxable veterans' benefit under 38 U.S.C. §5301.
Disqualified Interest Expenses. Proposed Form 8926, Disqualified Corporate Interest Expense Disallowed Under Section 163(j) and Related Information, has been posted to the IRS website under Draft Tax Forms (TAXDAY, 2007/11/29, I.6). Pursuant to a mandate in the American Jobs Creation Act of 2004 (P.L. 108-357), the IRS conducted a study of the effectiveness of the earnings stripping rules (TAXDAY, 2007/11/29, T.1). The proposed form has been issued in response to that report.
Tax-Exempts. The IRS has provided model plan language that may be used by public schools and certain eligible employers that are tax-exempt organizations in order to comply with the requirements of Code Sec. 403(b) and accompanying final regulations (Rev. Proc. 2007-71; TAXDAY, 2007/11/28, I.3). Public school employers that amend their plans to adopt this model plan language on a word-for-word basis or adopt an amendment that is substantially similar in all material respects can rely on the language as meeting the requirements of Code Sec. 403(b).
As elections draw nearer, the IRS is reminding churches and other organizations that are exempt under Code Sec. 501(c)(3) of the prohibition against political activity that has been in effect for over 50 years (TAXDAY, 2007/11/20, I.1). While such organizations may support or oppose a specific issue, they are banned from supporting or opposing a specific candidate. The IRS warned that violation of the prohibition can result in the imposition of an excise tax or loss of tax-exempt status. Organizations should refer to Rev. Rul. 2007-41, I.R.B. 2007-25, 1421, for guidance and examples of allowable activity.
Hybrid Vehicle Credit. The IRS announced that the American Honda Motor Company, Inc., has reported it has reached the 60,000-vehicle limit as of the quarter ending September 30, 2007, for purposes of the alternative motor vehicle credit; therefore, the credit phase-out for all new passenger vehicles and light trucks will begin on January 1, 2008 (IR-2007-191; Notice 2007-98; TAXDAY, 2007/11/20, I.2). The allowable credit for vehicles purchased between January 1, 2008, and June 30, 2008, is 50 percent of the otherwise allowable amount; it is 25 percent of the otherwise allowable amount for vehicles purchased between July 1, 2008, and December 31, 2008. No credit is allowed for vehicles purchased on or after January 1, 2009.
By Torie Cole, CCH News Staff