Tax News

CCH (cch.taxgroup.com) reports:

North Carolina taxpayers are reminded that previously enacted legislation mandates that effective October 1, 2007, a taxpayer who is consistently liable for at least $10,000 a month in state and local sales and use taxes must make a monthly prepayment of the next month's tax liability. Such prepayments are due on the date a monthly return is due. As a consequence, beginning with the return for the month of October 2007, a taxpayer currently paying on a semimonthly basis is required to include a prepayment for the next period when filing the monthly return and remitting the tax due.
The prepayment must equal at least 65% of any of the following: (1) the amount of tax due for the current month; (2) the amount of tax due for the same month in the preceding year; or (3) the average monthly amount of tax due in the preceding calendar year. A taxpayer is not subject to interest or penalties for the underpayment of a prepayment if one of the above three calculation methods is used. Also, a taxpayer is not required to use the same method for calculating the amount of the prepayment each month.
During the month of October 2007, a taxpayer currently paying on a semimonthly basis must transition to this new prepayment procedure. There will be no semimonthly payment covering the period from October 1 through the 15th that would have been due on October 25, and there will be no semimonthly payment covering the period from October 16 through the 31st that would have been due on November 10. The October 2007 return and payment that is due November 20 must include all of October's liability plus the prepayment for November. For the November return that is due December 20, the prepayment shown on last month's return (October) will be deducted and a prepayment for the next period (December) will be included.
For those taxpayers who pay online via the Department's Web site at http://www.dornc.com/, the E-500 Sales and Use Online Filing and Payments system requires two separate payments: one payment for the current period and one payment for the prepayment for the next period. Both payments may be made with one login to the E-File system.
For those taxpayers who pay electronically by ACH Credit or ACH Debit (Touchtone, Voice, or PC Software), two payment transactions are required: one payment for the current period and a separate payment for the prepayment for the next period. For example, an October return due on November 20 will have a November prepayment. The prepayment will require a payment transaction denoting the November period. The balance from the October return will require another payment transaction denoting the October period.
CCH Tax Research NetWork subscribers may view the important notice in its entirety.
Important Notice, North Carolina Department of Revenue, September 7, 2007.

CCH (cch.taxgroup.com) reports:

An Idaho corporate income tax assessment against a multistate retail business was upheld as the taxpayer failed to substantiate its claims that the income in dispute was nonbusiness income or that it was entitled to use an alternative apportionment method to apportion its business income. The taxpayer's out-of-state insurance company affiliates were also required to be included in its combined report, and the taxpayer's reclassification of an IRC §1248 deemed dividend claimed on its federal return was rejected. As the taxpayer failed to provide any documentation to support its arguments, the negligence and substantial understatement penalties assessed by the Idaho State Tax Commission were also upheld.

CCH (cch.taxgroup.com) reports:

The IRS has ruled that a postponement of time to file a return pursuant to the grant of Code Sec. 7508 combat zone relief or Code Sec. 7508A relief due to a presidentially declared disaster does not change the date on which the return is last due, including extensions, for bankruptcy purposes and does not affect the priority and dischargeability of the tax liability in a bankruptcy proceeding.
In the three fact situations presented by the IRS, neither the Code Sec. 7508 relief nor the Code Sec. 7508A relief change or extend the due date for filing a tax return, including the extended due date under Code Sec. 6081. Instead, the period of postponement is disregarded.
Because relief under Code Sec. 7508 or Code Sec. 7508A neither changes nor extends the return's due date (or the return's extended due date), the postponement does not change the date on which the return is "last due, including extensions" under section 507(a)(8)(A)(i) of the Bankruptcy Code. Thus, the date on which an individual's return is last due, including extensions, is the return's due date or extended due date fixed by Code Sec. 6072 or 6081, rather than the last day of the relief period.
Under the facts presented, the date on which the individual's tax return is last due precedes the date that is three years before the filing of the bankruptcy petition. Therefore, the IRS's tax claim is not entitled to eighth priority under section 507(a)(8)(A)(i) of the Bankruptcy Code and the tax liability is not excepted from discharge under section 523(a)(1)(A) of the Bankruptcy Code.
In addition, with regard to the third fact situation, the date on which the tax return was "last due, under applicable law or under extension" under section 523(a)(1)((ii) of the Bankruptcy Code was likewise unaffected by the Code Sec. 7508 relief. Because under these facts the return was filed after the date on which the return was last due under applicable law or under any extension, and because the date of the petition was less than two years from the date on which the return was filed, the tax liability was excepted from discharge under sections 523(a)(1)((ii) and 727(b) of the Bankruptcy Code.
The IRS clarifies that the holding that Code Sec. 7508A relief does not affect the return's last due date, including extensions, for bankruptcy purposes also applies to an "affected taxpayer" other than an individual described in Reg. §301.7508A-1(d)(1).
Rev. Rul. 2007-59, 2007FED ¶46,624
Other References:
Code Sec. 7508
CCH Reference - 2007FED ¶42,687.22
Code Sec. 7508A
CCH Reference - 2007FED ¶42,687C.22
Tax Research Consultant
CCH Reference - TRC FILEIND: 15,204.20
CCH Reference - TRC FILEBUS: 15,108
CCH Reference - TRC FILEBUS: 15,110

CCH (cch.taxgroup.com) reports:

A multi-billion dollar tax bill that includes provisions to eliminate the alternative minimum tax (AMT), expand the earned income tax credit (EITC) and increase the child tax credit is currently in the planning stages, according to House Ways and Means Committee Chairman Charles B. Rangel, D-N.Y. Speaking at a wide-ranging press conference on September 7, Rangel told reporters that the revenue-neutral bill would likely cost $800 billion for AMT relief and at least another $250 billion for other middle-class tax relief provisions.
Rangel called the upcoming omnibus bill "the mother of all reform bills," saying the cost would be offset by corporate tax loophole closers and other revenue raisers, such as changing the taxation of carried interest. He said that the legislation could include many provisions that broaden the tax base or raise tax rates in order to pay for AMT elimination. Rangel added that he hopes the legislation will be considered by the House by the end of 2007.
"There are credits in the tax code that the people who put them in have forgotten them. They've been put in politically," Rangel said. "The question is not whether we can knock them out, it's how much money does it raise."
Rangel said that lawmakers would be trying to create a simplified, fairer tax system, but he noted the time constraints that lawmakers face. He said Congress must still find time to deal with energy, children's health, FAA modernization, trade, presidential vetoes and Senate filibusters.
While he expressed optimism that GOP lawmakers will participate in the process of drafting the legislation, Rangel said that he expects Republicans to vote against the final package. He said the tax legislation will be so large and affect roughly 90 million taxpayers that input from Republican lawmakers will be necessary to cut down on the number of mistakes and inefficiencies.
Any number of potential revenue raisers will be considered, even though not all of them have political backing, according to Rangel. For example, he quipped that lawmakers could consider changing the deduction for mortgage interest but, while it might generate needed revenue, it would never win passage in the House.
A second, faster track tax bill could likely include provisions to help homeowners who are currently facing foreclosure during the current mortgage crisis, Rangel noted. He added that lawmakers will be drafting legislation to allow taxpayers who have lost their homes to sidestep taxation on cancellation of debt income.
However, the legislation will be tightly drafted so that real estate speculators are not eligible for the tax relief. One thing lawmakers must decide is whether the tax relief will be based on the price of the house or the size of the mortgage, Rangel said.
By Stephen K. Cooper, CCH News Staff

Tax Analysts report: