Baldwin Haspel Burke & Mayer LLC

BHBM Tax Law Alert 06/30/11


FEDERAL TAX LAW UPDATES

Tax Patents

The House and the Senate have each passed separate legislation that would ban the patenting of tax strategies. The House bill (H.R. 1249) passed on June 23. This bill will now go to the Senate for a vote.

At one point, a member of the House sought to amend the legislation to allow the 162 pending patent applications to be approved and accepted via a grandfathering clause, but this change was rejected by the remaining House members.

Patents on software developed for tax preparation and filing of tax returns will not be affected by either bill. One of these bills should find its way to the President’s desk for signature in the very near future.

Extensions for Partnerships, Trusts and Estate Returns

Treasury Department has promulgated final regulations which permanently shorten the automatic extension for filing partnership, estate or trust income tax returns from six (6) months to five (5) months. The due date for these returns for year end taxpayers is September 15. The final regulations have adopted the temporary changes which were promulgated in July 2008.

Pursuant to 2005 regulations, partnerships, estates and trusts were allowed automatic six (6) month extensions. Prior to the 2005 regulations, pass-through entities were entitled to an automatic three (3) month extension to file income tax returns and then could apply for another discretionary three (3) month extension. Treasury previously asked for written comments and most comments suggested that the five (5) month extension was made more sense for pass-through entities, as the six (6) month extension may unduly burden individual and corporate taxpayers who might not receive Schedule K-1s in sufficient time to complete their income tax returns timely.

See Treas. Reg. §1.6081-2 and §1.6081-6.

Stock Transaction Forms

The new cost-basis reporting rules will be reflected in brokerage forms for the 2011 tax year. In a recent speech, a representative from the IRS stated that there will be changes to Form 1099-B and Form 8949. The representative also stated that there will be boxes reporting the date of acquisition, the cost or other basis, the amount disallowed for wash sales and whether the gain is long-term or short-term.

E-File Mandate Statistics

As we have previously reported, recent legislation imposed an e-filing mandate on certain tax return preparers for certain covered returns filed in 2011 or thereafter. Beginning on January 1, 2012, if a tax preparer files or reasonably expects to file 11 or more covered returns, the tax preparer must e-file all such returns. Several IRS officers recently spoke at the meeting held in Washington, D.C. to discuss the e-filing initiative. There were several key statistics of interest.

The number of individual returns filed on paper fell thirty percent (30%) this year.

The IRS received hardship waivers from 670 tax preparers. The IRS did not announce the number of hardship waivers that it granted.

The IRS received returns from more than one million taxpayers who requested that their preparer file paper copies of their tax returns rather than file their returns electronically.

More than 100 Million individual income tax returns have been electronically filed during 2011.

STATE TAX LAW UPDATE

Louisiana Filings

The Louisiana Department of Revenue issued a release detailing free training that is available for businesses who want to file their state taxes online. The training sessions available include an overview of the Louisiana Taxpayer Access Point (the state’s online portal for business tax filing), a tutorial on registering and filing severance taxes, and instructions for registering for International Fuel Tax Agreement decals. The courses are free of charge and can be found here.


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