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NewsNotes Lesli S. Laffie, J.D., LL.M. Frequent-Flyer Miles • Tax
Shelter Disclosures
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From the IRS Ann. 2002-18 answers questions about the taxability of frequent-flyer miles and other promotional items received from business travel and used for personal purposes. For more information, see "Tax Trends," this issue.
According to IR-2002-22, midway through the 120-day "window of opportunity" for disclosing tax shelter transactions, the IRS has taken new steps to protect a taxpayer's right to assert attorney-client and work-product privileges when voluntarily disclosing shelter transactions. On Dec. 21, 2001, the IRS started a 120-day window of opportunity for taxpayers to voluntarily disclose tax shelters and other questionable items reported on returns. According to the Service, 21 taxpayers thus far have disclosed more than $1 billion in claimed losses under this initiative. The disclosure initiative is part of an IRS and Treasury effort to identify and curtail shelter activity. Information obtained through disclosures helps the IRS more readily identify unregistered shelter promoters and find other taxpayers who have not disclosed their shelter participation. The IRS hopes to encourage taxpayers to disclose shelters and other questionable items potentially resulting in a tax underpayment, by waiving certain accuracy-related penalties. A taxpayer need not agree that the disclosed shelter or item resulted in an underpayment to avoid penalties. Taxpayers who make disclosures must, among other things, describe the transaction's material facts, provide the names and addresses of the promoters who solicited their participation, provide on request copies of materials and documents related to the transaction or item, and sign a penalty-of-perjury statement as to the accuracy of the information provided. The IRS will waive the accuracy-related penalty for tax underpayments attributable to one or more of the following:
The disclosure initiative does not apply to taxpayers involved in fraud, criminal conduct, concealment of a foreign financial account or foreign trust or deduction of personal expenses as business expenses. Disclosure creates no inference that the taxpayer treated the item improperly or that the accuracy-related penalty will apply. The IRS encourages taxpayers who have reported questionable items on their tax returns to come forward. To make a disclosure, taxpayers should submit the disclosure information to their assigned IRS Team Manager or, if not under Examination, to:
See Ann. 2002-2, available at www.irs.gov; for more information, call the IRS Office of Tax Shelter Analysis at (202) 283-8425.
According to IR-2002-23, Pub. 3920, Tax Relief for Victims of Terrorist Attacks, explains how to file claims under the Victims of Terrorism Tax Relief Act of 2001 (VTTRA). The new booklet is available via the IRS Website (www.irs.gov) or by calling (800) TAX-FORM. Under the VTTRA, the Federal income tax liability of those killed in terrorist attacks in the U.S. is erased for at least two years. The new law applies to victims of the Sept. 11, 2001 and anthrax attacks, as well as the April 1995 Oklahoma City bombing. The law also exempts from tax certain payments received by the survivors of those killed and disability payments received by those injured. Pub. 3920 has worksheets to compute the amount of tax forgiven, including one for married persons who filed jointly. Another worksheet helps taxpayers get the law's minimum tax relief amount of $10,000. Pub. 3920 offers details on required documentation and where to send returns claiming the relief. It also explains the types of disaster-relief payments that are tax-exempt, which taxpayers qualify for IRS-granted tax-deadline postponements and the estate-tax reduction available for victims' estates. Surviving spouses or executors of September 11 or anthrax victims may file original or amended tax returns for 2000 until April 15, 2004, and may claim the tax relief for 2001 when they file the decedent's return. Survivors or executors of those killed in Oklahoma City must file any returns claiming this tax relief by Jan. 22, 2003.
Miscellaneous Taxpayers wishing to pay income taxes by credit card should visit www.officialpayments.com or call (800) 2PAY-TAX. Official Payments Corp. has agreements with the IRS and 19 states (and the District of Columbia) to process income tax payments made by American Express, MasterCard or Discover credit cards. Federal taxpayers can make balance due, extension, estimated, installment and balance-due notice payments as follows:
Payments are accepted regardless of the whether the return is on paper, filed electronically or prepared with tax-preparation software by the taxpayer or a professional. Payment by credit card is convenient, may offer points or miles (depending on the credit card used) and promotes better cash management. In 2001, Official Payments Corp. processed more than 225,000 Federal tax payments, totaling nearly $800 million. |
