February 28, 1999

IRS Can Waive Interest

          The Internal  Revenue Service can  now  waive  interest  on unpaid taxes because of unreasonable delays  while taxpayers cases are being processed.  For example: long delays in transferring a case to another district after taxpayer moves, agent auditing taxpayer goes on extended sick leave and  IRS  does not  reassign auditor’s cases quickly, agent gets promoted and case lies dormant for  months, or IRS misplaces taxpayer’s file. But note that IRS has complete discretion in abating interest. Taxpayers whose requests to waive interest are denied cannot ask a court to overrule IRS. Easing is for tax years starting after July 30, 1996.

More Work for Tax Preparers of Returns With Earned Income Credit

          Tax preparers must verify a  filer’s eligibility for the  credit.    Can use the checklist in IRS Form 8867 which will soon be available.    They  must  also keep copies of the checklist and all  backup data  taxpayers provide for at least three years.

          There is a $100 per return fine for not complying with the rules.

Where was I?

          You may have been frustrated in the past several months trying to talk to me and finding out I was not in the office.   In order to  serve you better I have been taking  continuing education  both as  a  Certified  Public Accountant  and  as an Attorney. The courses and meetings attended have been  Accounting and Auditing, an  Annual  Update,  Current  Trends Under  Pensions,  New  York   State   Bar Association’s General Practice Section-Annual  Update and  New York State Bar Association’s Tax Section-Annual Update.

History of Taxation

          The Arabs brought peace and relief to  an overtaxed world.   The Moslems used mild taxation to make converts.    Reducing tax rates brought  more  converts to Islam than the sword and the Koran combined.    But when it also depleted the number of taxable infidels, the tax rates went back up.   In a contest between G-d and taxes, even G-d usually loses.

          Western governments learned from Islam the policy of  taxing  nonbelievers. Usually, it  was applied to their  Jewish  subjects  and  sometimes  to  the minority Christian sects. It soon was used by all Western religious groups, for once a nation discovers a productive new revenue technique, others quickly imitate it.

          Historians  believe the  Islamic advance  was stopped at the Pyrenees by Charlemagne, but the real reason is that in  Spain  the  Islamic tax system became corrupt to support the extravagances and enormous harems of the Caliphs. The tax system became the first fatal defect in the Islamic Empire,  for Islamic armies no longer brought liberation from oppressive taxes.

Are All Capital Gains Short Term?

          They are, according to the Internal Revenue Service if a Schedule D is not filed with the tax return.  Tax  rates on long term  capital gains of  non-corporate taxpayers are generally  lower than the rates on ordinary income and short term capital gains. In order to obtain the benefit of the lower rates, however, individuals and other non-corporate taxpayers must attach Schedule D to their tax return and compute the tax on it.

          For the ‘99 filing season,  the IRS will  process individual tax  returns with missing Schedule D’s.  However, it will assume that all capital gains are short term. After the tax return is processed,  the  IRS will send a notice to the taxpayer along with a blank Schedule D,  instructions for preparing the schedule and a blank Form 1040X (amended tax return for individuals).   The notice will  inform  the taxpayer that he/she may be able to save taxes by filing the  amended  return with  Schedule D.

          If you have any questions about these or any  other tax or financia issues, please call me.