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.