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April 22, 2009
American Recovery and Reinvestment Act (ARRA) Updates
The IRS is still working diligently to complete an analysis of the new American Recovery and Reinvestment Act (ARRA) to determine its full effect on processes and forms and to implement the changes. Information has recently been added to the ARRA information page on IRS.gov concerning the First Time Homebuyers Credit (old and new) and COBRA, including new Q&As. Please continue to monitor IRS.gov for the latest information over the course of the next few weeks and months.
IRS Eliminates Inserts Related to Business Mail
In an effort to improve its communications with taxpayers, the Internal Revenue Service will eliminate the nearly dozen inserts that go into a notice informing businesses that they owe additional tax. The change to the CP 161 notice, which is mailed to business taxpayers who underpay their taxes, is part of an ongoing agency review of how it communicates with its 240 million taxpayers. This initial step will halt tens of millions of pieces of paper, reduce burden and save on expenses. There are more than 2.3 million of these notices generated each year. Each notice contains as many as 13 inserts, and has been a source of complaints from both taxpayers and tax professionals. As of March 9, the CP 161 notice will contain only two inserts: Publication 1, Your Rights as a Taxpayer, and a return envelope for the tax payment. The IRS will monitor the slimmer correspondence to determine whether additional changes are needed.
IRS Issues Guidance to Victims of Ponzi-Type Investment Schemes
IRS has issued Revenue Ruling 2009-09 clarifying the income tax law governing the treatment of losses in Ponzi-type investment schemes. Revenue Procedure 2009-20 is also available that provides a safe-harbor method of computing and reporting the losses.
The revenue ruling is important because determining the amount and timing of losses from these schemes is factually difficult and dependent on the prospect of recovering the lost money (which may not become known for several years). In addition, it clarifies the reach of older guidance on these losses that is somewhat obsolete.
The revenue procedure simplifies compliance for taxpayers (and administration for the IRS) by providing a safe-harbor means of determining the year in which the loss is deemed to occur and a simplified means of computing the amount of the loss.
Can an ERO electronically file tax returns prepared by another practitioner outside of their firm?
A practitioner can only transmit electronically filed returns prepared by another tax practitioner outside of their firm if that preparer is also an Authorized IRS e-file Provider (ERO) that has not been suspended, barred, or otherwise denied participation in the IRS e-file program. Additional information on provider roles and responsibilities may be found in Publication 3112, IRS E-file Application and Participation (PDF), revised March 2009.
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Page Last Reviewed or Updated: May 05, 2009