* The IRS has issued a notice on “Online Auction Sellers” and a fact sheet on “Reporting Auction Income and the Tax Gap” to provide guidance to individuals who sell items online (i.e. via e-bay).
* In news relating to my posting on “To Err is Human – To Forgive is Taxable” Market Watch reports that “the number of mortgage loans entering the foreclosure process in the second quarter set another record, according to the latest data from the Mortgage Bankers Association”.
* Note to Kirk Walsh, who blogs at kirkwalsh.com – “Right on, brother!” Check out his open letter to the cafones in Washington in his posting “Congress: Act on the AMT NOW!!!!!"
* And speaking of the cafones in DC, Joe Kristan of the ROTH AND COMPANY TAX UPDATE BLOG has this to say about them in his “Congress Writing New Tax Break for Owners of $2 Million Houses” posting update on foreclosure debt forgiveness – “So - to pay for a tax break for deadbeats with a net worth of $2 million or more, Congress proposes to remove a tax break for people who actually pay off their loans. Thank goodness we have Congress to look out for the little guy.”
* Kay Bell of DON’T MESS WITH TAXES reminds us that the IRS National Research Program (NRP) “Audits from Hell” – or more appropriately in this case, as she puts it, “Audits from Purgatory” – will begin this month. The “Audits from Hell” to which she refers were the old TCMP (Taxpayer Compliance Measurement Program) audits from the 1990s - under which every single line on a tax return had to be documented, including showing the IRS marriage and birth certificates.
This is the second go round for the NRP audits. 45,000+ returns were reviewed for tax year 2001 under this program. Only one of my clients fell victim – and the IRS couldn’t have made a better choice if they had asked me which of my clients I would want to be selected. They chose a client whose entire life is well documented via computer and hard copy back-up. We didn’t even go to the audit. I prepared a huge mailing of copies of all the requested documentation and mailed it to the auditor. Needless to say there was “no change”.
This time around the IRS is going to review 13,000 or so randomly selected 2006 Form 1040s. The IRS admits that returns for this program are chosen from "various categories", although it does not identify these categories. Kay feels, and I agree, that “you can expect the IRS to look at groups it believes are most likely to under report income. That includes self-employed individuals, independent contractors and folks with substantial capital gains and losses.”
Kay ends her posting with excellent advice – “And if you are unlucky enough to be one of the chosen, contact a tax professional as soon as you get the letter.”
* Ryan Ellis of TAX INFO BLOG ends his posting “Commuting Expenses Are Never Deductible” with some excellent basic tax planning advice - “The basic rule always applies: don't change your life for tax benefits, but construct your activities in such a way that they can become tax-advantaged.” The post also provides a good answer to a common question.
* I came across a new (at least to me) tax-related Q+A blog this week – that of “June Walker: Tax & Financial Advisor to the Self-employed since 1979” (not quite as long as me, but close). June provides the answer to a good question from a “freelancer” in “Shared Rent: You May Still Deduct For Home Office”
* THE Tax Foundation’s TAX POLICY BLOG discusses the IRS release of income tax data by AGI percentile for Tax Year 2005 in “New Data on Share of Federal Income Taxes Paid by Top 1%, Top 5%...” The blog reports that “In 2005, the top 1 percent of tax returns earned 21.2 percent of adjusted gross income and paid 39.4 percent of the nation's federal individual income taxes” and “in 2005, the top 1 percent of tax returns paid nearly the same amount in federal individual income taxes as the bottom 95 percent of tax returns”.
* Along the lines of “always leave them laughing” - the TAX GURU provides us with the laugh via his post on “Appropriate Attire for an IRS Audit?”, which he discovered on humor website FunnyBone.