Increasing audit coverage will be a big focus over the next 12 months, according to an official with the IRS Small Business/Self-Employed (SB/SE) Division.

Speaking in Chicago at an American Law Institute – American Bar Association tax controversy conference on administrative concerns, Faris Fink, Midwest area director (examination) of SB/SE, said that audits will increase for individuals with adjusted income of more than $200,000. “That’s an area of focus that we want to get out,” he said.

Flow-through entities such as partnerships and subchapter S corporations will also be subject to greater scrutiny over the next year, Fink said. “That is where we’re seeing the most abuse,” he said.

When asked it the government would be targeting entities that issued Forms   K-1 with no wages, Fink answered, “Absolutely.”

He also said to expect a small increase in the number of corporate returns under $10 million examined, although “not near as dramatic.”

One challenge for IRS Small Business/Self-Employed (SB/SE) Division, Fink said, is that 70 percent of its employees have less than fours of experience.

Filing Season Opens on Time Except for Certain Taxpayers Potentially Affected by AMT Patch

IR-2007-209, Dec. 27, 2007

WASHINGTON — The Internal Revenue Service announced today that the upcoming tax season is expected to start on time for everyone except certain taxpayers potentially affected by late enactment of the Alternative Minimum Tax “patch.”

Following extensive work in recent weeks, the IRS expects to be able to begin processing returns for the vast majority of taxpayers in mid-January. However, as many as 13.5 million taxpayers using five forms related to the Alternative Minimum Tax (AMT) legislation will have to wait to file tax returns until the IRS completes the reprogramming of its systems for the new law.

The IRS has targeted Feb. 11, as the potential starting date for taxpayers to begin submitting the five AMT-related returns affected by the legislation. The February date allows the IRS enough time to update and test its systems to accommodate the AMT changes without major disruptions to other operations related to the tax season. As the IRS has said previously, it will take approximately seven weeks after the AMT patch was approved to update IRS processing systems completely.

December 7, 2007
 
Hong Kong's official foreign-currency reserve assets rose to US$150.4 billion in November, up US$8.2 billion on October, mainly due to the purchase of foreign currencies with Hong Kong dollars, the Monetary Authority says.

Including unsettled forward contracts, foreign-currency reserve assets stood at US$150.6 billion in November, up US$69 billion on October.

Hong Kong is the world's ninth largest holder of foreign-currency reserves based on the latest published figures - after the Mainland, Japan, Russia, India, Taiwan, Korea, Brazil and Singapore.

The total foreign-currency reserve assets of US$150.4 billion represent more than seven times the currency in circulation, or about 31% of Hong Kong dollar M3.

Misclassified Workers to File New Social Security Tax Form 
 
IR-2007-203, Dec. 20, 2007

WASHINGTON — The Internal Revenue Service has developed a new form for employees who have been misclassified as independent contractors by an employer. Form 8919, Uncollected Social Security and Medicare Tax on Wages, will now be used to figure and report the employee’s share of uncollected social security and Medicare taxes due on their compensation.

Generally, a worker who receives a Form 1099 for services provided as an independent contractor must report the income on Schedule C and pay self-employment tax on the net profit, using Schedule SE. However, sometimes the worker is incorrectly treated as an independent contractor when they are actually an employee. When this happens, Form 8919 will be used beginning for tax year 2007 by workers who performed services for an employer but the employer did not withhold the worker’s share of social security and Medicare taxes.