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IR-2006-143, Sept. 11, 2006
WASHINGTON — The Internal Revenue Service today announced there will be no change in the interest rates for the calendar quarter beginning October 1, 2006. The interest rates are as follows: 

eight (8) percent for overpayments [seven (7) percent in the case of a corporation];

eight (8) percent for underpayments;


ten (10) percent for large corporate underpayments; and



five and one-half (5.5) percent for the portion of a corporate overpayment exceeding $10,000.

Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points. Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.
The interest rates announced today are computed from the federal short-term rate based on daily compounding determined during July 2006.
Rev. Rul. 2006-49, below, announcing the new rates of interest, will also appear in Internal Revenue Bulletin No. 2006-40, dated October 2, 2006.
Related Item:
Rev. Rul. 2006-49PDF
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IR-2006-141, Sept. 8, 2006
WASHINGTON — Farmers affected by exceptional, extreme or severe drought conditions have been granted additional time to purchase replacement property for livestock they were forced to sell, the Internal Revenue Service announced today in Notice 2006-82.
When drought conditions result in an area being declared eligible for assistance by the federal government, taxpayers ordinarily have four years to replace — without recognizing any capital gain — the livestock that they were forced to sell because of the drought. For this purpose, the livestock in question must have been held for draft, breeding or dairy purposes.
Because of the intense, prolonged drought in parts of the United States, the IRS is providing additional time to replace livestock that was sold as a result of drought. Notice 2006-82 explains how a taxpayer can determine whether additional time is available. For example, the four-year replacement period scheduled to end on December 31, 2006, is extended for one additional year if, for any weekly period included in the 12-month period ending on August 31, 2006, severe, extreme or exceptional drought conditions were reported for any location in the county that experienced the drought that forced the sale of the livestock or for any location in a neighboring county. The replacement period may be further extended if the drought conditions persist after August 31, 2006.
To assist a taxpayer in determining whether his replacement period has been extended, the IRS will publish in September a list of counties that experienced exceptional, extreme or severe drought for the 12-month period ending on August 31, 2006. The list will be compiled after consultation with the National Drought Mitigation Center. The IRS expects to publish a similar list for succeeding years.
Taxpayers also may determine whether a county has experienced exceptional, extreme or severe drought conditions by referencing Drought Monitor maps produced by the National Drought Mitigation Center. For example, in determining whether the 12-month period ending on August 31, 2006, includes a period for which these drought conditions are reported, all maps with dates after August 31, 2005, and before September 8, 2006, are taken into account.
Related Items:

Notice 2006-82PDF, Extension of Replacement Period for Livestock Sold on Account of Drought


U.S. Drought Monitor maps


National Drought Mitigation Center

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IR-2006-140, Sept. 7, 2006
WASHINGTON — Taxpayers seeking IRS Chief Counsel advice as outlined in Revenue Procedure 2006-1 are reminded to submit their requests and additional information to the addresses listed in the revenue procedure. There may be some confusion related to a previous new release, IR-2006-138, concerning which mailing address should be used.
The correct Rev. Proc. 2006-1 mailing addresses for individuals and businesses using the U.S. Postal Service to transmit their requests are:
• For all submissions as described in Revenue Procedure 2006-1 other than providing additional information on changes in accounting method or period, or a § 301.9100 request for an extension of time on a request for change in accounting method or period, under the jurisdiction of Income Tax & Accounting, direct mail to P.O. Box 7604, Ben Franklin Station, Washington, DC, 20044.
• When providing additional information to assist with the processing of requests for changes in accounting method or period, or a § 301.9100 request for an extension of time on a request for change in accounting method or period, under the jurisdiction of Income Tax & Accounting, direct mail to P.O. Box 14095, Ben Franklin Station, Washington, DC, 20044.
Generally, all other mail whether transmitted by the U.S. Postal Service or a private delivery service should continue to be addressed as follows: (Name), (Title), Internal Revenue Service, Office of Chief Counsel (Office Symbols),1111 Constitution Ave., NW (Room Number), Washington, DC, 20224. The IRS mail contractor will receive, sort and deliver mail addressed as above to personnel in the Office of Chief Counsel at CM #4 in Crystal City or other temporary locations.
Other Links:
Revenue Procedure 2006-1
IR-2006-138, Additional Details for Directing Mail to IRS Chief Counsel
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Update March 1, 2012 — Effective April 1, 2012, user fees will be increased. Form 8802 applications received with a postmark dated on or after April 1, 2012, will be charged a flat rate fee of $85.00 per application, regardless of the number of certificates requested.
Update Sept. 29, 2006 — User fees will be charged for Form 8802 applications received with a postmark dated on or after Nov. 1, 2006, rather than on or after Oct. 2, 2006, as stated in the release below. See Notice 2006-90 (bottom).
IR-2006-139, Sept. 5, 2006
WASHINGTON — The Internal Revenue Service will begin charging user fees for processing Form 8802, Application for United States Residency Certification, for all Form 8802 applications received with a postmark date on or after October 2, 2006. These fees were announced in Revenue Procedure 2006-35, which will be published in Internal Revenue Bulletin (IRB) 2006-37 dated Sept. 11, 2006.
Form 8802 is used to request Form 6166, a letter that the applicant may use as proof of the applicant’s status as a resident of the United States to claim benefits under an income tax treaty or an exemption from a value added tax (VAT) imposed by a foreign country.
A single Form 8802 can be used to request multiple Forms 6166. The initial user fee of $35 covers a single Form 8802 requesting up to 20 Forms 6166 for a single Taxpayer Identification Number (TIN), regardless of the country for which certification is requested or the tax period to which the certification applies. An additional $5 covers up to 20 additional Forms 6166 on the same Form 8802. Applicants are therefore advised to include all Forms 6166 requests on a single Form 8802 to avoid a new $35 user fee charge for processing a second Form 8802 application.
The following fee schedule applies based on the number of Forms 6166 requested per Form 8802:

  1 to 20 — $35.00


21 to 40 — $40.00


41 to 60 — $45.00


61 to 80 — $50.00

The IRS implemented the Form 8802 user fee pursuant to an Office of Management and Budget directive instructing federal agencies to charge fees reflecting the full cost of goods or services that “convey special benefits to recipients beyond those accruing to the general public.”
Increases in other IRS user fees were announced in IR-2005-144 on Dec. 19, 2005.
Related Items:

Notice 2006-90PDF


Revenue Procedure 2006-35PDF


Form 8802PDF, Application for United States Residency Certification


Form 8802 InstructionsPDF


Foreign Certification Requests — Form 6166


IR-2005-144, IRS to Raise Some User Fees in 2006

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IR-2006-138, Sept. 1, 2006
Revised Sept. 7, 2006, See IR-2006-140
WASHINGTON — To ensure prompt delivery of mail to the Internal Revenue Service Office of Chief Counsel, the IRS is clarifying where different types of correspondence should be directed during the temporary closure of the main IRS building.
Generally, all matters to be transmitted by the United States Postal Service or a private delivery service intended for Chief Counsel personnel who have been temporarily displaced should continue to be addressed as follows: (Name), (Title), Internal Revenue Service, Office of Chief Counsel (Office Symbols),1111 Constitution Ave., NW (Room Number), Washington, DC, 20224.
The IRS mail contractor will receive, sort and deliver mail addressed as above to personnel in the Office of Chief Counsel at CM #4 in Crystal City or other temporary locations.
There are three exceptions to the use of the above address:
For all submissions as described in Revenue Procedure 2006-1 other than providing additional information on changes in accounting method or period, or a § 301.9100 request for an extension of time on a request for change in accounting method or period, under the jurisdiction of Income Tax & Accounting, direct mail to P.O. Box 7604, Ben Franklin Station, Washington, DC, 20044.
When providing additional information to assist with the processing of requests for changes in accounting method or period, or a § 301.9100 request for an extension of time on a request for change in accounting method or period, under the jurisdiction of Income Tax & Accounting, direct mail to P.O. Box 14095, Ben Franklin Station, Washington, DC, 20044.For all requests for changes of method of accounting under the jurisdiction of Income Tax & Accounting, direct mail to P.O. Box 14095, Ben Franklin Station, Washington, DC, 20044.
For user fee items, service of process and other items intended for the Office of Chief Counsel personnel in Crystal Mall #4 that were previously hand delivered to the courier’s desk at 1111 Constitution Ave., the hand delivery address now is Courier's Desk, Room 108, First Floor, Crystal Mall #4, 1941 Jeff Davis Hwy, 1901 S. Bell Street, Arlington, VA. Related Item: IR-2006-124, New Temporary Address for Certain Hand-Delivered Documents.
Related Item:
IR-2006-124, New Temporary Address for Certain Hand-Delivered Documents
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Update April 26, 2013 — Link to membership application removed as obsolete.
IR-2006-166, Oct. 31, 2006
WASHINGTON — The Internal Revenue Service is seeking applications for vacancies on the Advisory Committee on Tax Exempt and Government Entities (ACT). The committee provides a venue for public input into critical tax administration areas.
Vacancies exist in the following customer segments:

Employee Plans — two vacancies,


Exempt Organizations — two vacancies,


Tax Exempt Bonds — one vacancy, and


Indian Tribal Governments – one vacancy.

There are currently no vacancies for Federal, State and Local Governments.
The ACT is an organized public forum for the IRS and representatives who deal with employee plans, exempt organizations, tax-exempt bonds, and federal, state, local and Indian tribal governments. The ACT allows IRS to receive regular input on administrative policy and procedures of the Tax Exempt and Government Entities Division.
Members are appointed by the Secretary of the Treasury and serve two-year terms, beginning in June 2007. Applications can be made by letter or by completing an application form, available on this Web site. In either case, applications should reflect the proposed member's qualifications. A notice published in the Federal Register dated Nov. 1, 2006, contains more details about the ACT and the application process.
Applications will be accepted through December 1, 2006.
Applications should be sent to Steven Pyrek, TE/GE Communications and Liaison Director, Internal Revenue Service, 1111 Constitution Ave. NW — SE:T:CL Penn Bldg, Washington, D.C. 20224, or by fax to 202-283-9956 (not a toll-free number).
Related Items:

2006 ACT Membership Application


ACT Reports

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IR-2006-165, Oct. 20, 2006
WASHINGTON — The Internal Revenue Service has acknowledged the certification by Ford Motor Company that two of its 2005 vehicles meet the requirements of the Alternative Motor Vehicle Credit as qualified hybrid motor vehicles.
The tax credit for hybrid vehicles applies to vehicles purchased on or after January 1, 2006.
The hybrid vehicle certifications recently acknowledged by the IRS and their credit amounts are:

Ford Escape 2 WD Hybrid, Model Year 2005 — $2,600


Ford Escape 4 WD Hybrid, Model Year 2005 — $1,950

The 2006 Model Year Ford Escape Hybrid front wheel drive and 4 WD models previously were certified in the amounts of $2,600 and $1,950 respectively.
Consumers seeking the credit may want to buy early since the full credit is only available for a limited time. Taxpayers may claim the full amount of the allowable credit up to the end of the first quarter after the quarter in which the manufacturer records its sale of the 60,000th vehicle. For the second and third calendar quarters after the quarter in which the 60,000th vehicle is sold, taxpayers may claim 50 percent of the credit. For the fourth and fifth calendar quarters, taxpayers may claim 25 percent of the credit. No credit is allowed after the fifth quarter.
The total number of qualifying Ford hybrid vehicles reported sold as of June 30, 2006, was 11,885. Therefore, purchasers of Ford’s qualified vehicles may continue to rely on the previously issued IRS certifications under Notice 2006-9 concerning the vehicle’s qualification for the credit.
Related Item: Hybrid Cars and Alternative Motor Vehicles
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IR-2006-163, October 18, 2006
Washington — The Internal Revenue Service announced today that the Appeals arbitration process is no longer a pilot program but part of business as usual at the IRS. In arbitration the IRS and the taxpayer agree to have a third party make a decision about a factual issue that will be binding on both of them.
IRS Notice 2000-4 previously established a pilot program for cases in Appeals in which a taxpayer and IRS could jointly request binding arbitration on certain unresolved factual issues. When a limited number of factual issues remain unresolved during the course of an appeal, the taxpayer or the IRS can request arbitration and jointly select an Appeals or a non-IRS Arbitrator from any local or national organization that provides a roster of neutrals.
The permanent arbitration procedure may be used to resolve issues while a case is in Appeals, after settlement discussions are unsuccessful and, generally, when all other issues are resolved except specific factual issues for which arbitration is being requested.
Arbitration is not available for all issues.   Some examples include legal issues, issues already in any court, issues in a taxpayer’s case designated for litigation, collection cases with certain exceptions, and frivolous issues.
Revenue Procedure 2006-44PDF formalizes the arbitration process.
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IR-2006-161, Oct. 17, 2006
WASHINGTON — The Department of the Treasury and the Internal Revenue Service today issued proposed regulations that would address the tax treatment of an exchange of property for an annuity contract. The proposed regulations would apply the same rule to exchanges for both private annuities and commercial annuities.
A decades-old IRS ruling generally postpones tax on the exchange of appreciated property for a private annuity, a result inconsistent with the tax treatment of exchanges for commercial annuities or other kinds of property. This ruling was originally based in part on the assumption that the value of a private annuity contract could not be determined for federal income tax purposes. This assumption is no longer correct. The ruling has its roots in authorities that applied the "open transaction doctrine," which has been eroded in recent years. In addition, the Treasury Department and the IRS have learned that the ruling has been relied upon inappropriately in a number of transactions that are designed to avoid U.S. income tax. The guidance issued today proposes to declare the ruling obsolete. Charitable gift annuities would not be affected by the proposed guidance.
If adopted, the guidance would be effective immediately for transactions not completed before today. Recognizing, however, that many legitimate estate planning transactions may currently be in process, the effective date is postponed for six months for some transactions that pose the least likelihood of abuse.
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IR-2006-159, Oct. 16, 2006
WASHINGTON — Many individuals who owe delinquent federal income taxes will now be able to apply online for a payment agreement, the IRS announced today. The Online Payment Agreement (OPA) application, now available on IRS.gov, provides an easy way to voluntarily resolve tax liabilities.
"We think some people may feel more comfortable working out their payments on line rather than talking to a person, so we're making this option available," said IRS Commissioner Mark W. Everson.
Paying taxes on time and in full avoids unnecessary penalties and interest. However, taxpayers who cannot pay in full may request a payment agreement.
This new Web-based application allows eligible taxpayers or their authorized representatives to self-qualify, apply for, and receive immediate notification of approval.
Taxpayers must have filed all required tax returns in order to use the online application. They should also have the following information available:

Balance due notice from the IRS.
	 


Social Security number or Individual Taxpayer Identification Number.
	 


Personal identification number, which can be established online using the caller identification number from the balance due notice.

Three payment options are available when applying online:

Pay in full — Taxpayers who pay within 10 days save interest and penalties.
	 


Short-term extension — Receive a short-term extension of up to 120 days. No fee is charged, but additional penalties and interest will accrue.
	 


Monthly payment plan — A $43 user fee will be added to the amount owed, and interest and penalty will continue to accrue on the unpaid balance.

To access the application, use the pull-down menu under “I need to...” on the front page of this Web site and select “Set Up a Payment Plan.” The application is available Monday through Friday from 6 a.m. to 12:30 a.m., Saturday from 6 a.m. to 10 p.m. and Sunday from 4 p.m. to midnight (all are Eastern Time).
Related Items:

Online Payment Agreement (OPA) Application


Payment Plans, Installment Agreements

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IR-2006-158, Oct. 13, 2006
 
WASHINGTON — The Internal Revenue Service has selected Andrew E. Zuckerman as the new Director of Rulings & Agreements in the Employee Plans division. In this position, Zuckerman will be responsible for developing and managing the IRS’s up-front compliance programs for Employee Plans, including the EP voluntary compliance programs, the determination letter program and the development of guidance and rulings.
Zuckerman had served as the director of the Federal, State and Local Governments division in the Tax Exempt and Government Entities division, before going into the IRS’s Executive Development Program.
“We welcome Andy back to TE/GE,” said Steven T. Miller, TE/GE Commissioner.  “He will be an important member of our new EP team, and help us continue to improve the administrative efficiency with which we deliver service and to enhance compliance in the pension community.” 
Zuckerman replaces Joseph Grant, who was recently named Director of Employee Plans.
Zuckerman comes to Employee Plans from his position as the Wage & Investment division’s Field Director for Accounts Management for the IRS Philadelphia Campus.  He has also served as the Assistant to the Director of Pre-Filing and Technical Guidance in the IRS’s Large and Mid-Size Business division. His private sector experience includes working as an attorney and a consultant for more than 19 years in law, accounting and actuarial consulting firms specializing in tax, ERISA, employee benefits, executive compensation and employment tax law.
Zuckerman will begin his new assignment in EP in mid-November.
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IR-2006-157, Oct. 12, 2006
WASHINGTON — The Internal Revenue Service today announced the 19th Annual Institute on Current Issues in International Taxation. It is jointly sponsored by the IRS and The George Washington University Law School and will be held on December 14 and 15, 2006, at the Grand Hyatt Washington Hotel in Washington, DC. Registration is underway for the Institute, which is intended for international tax professionals.
The program will present an opportunity for top IRS and Treasury officials, tax experts and leading private sector specialists to address breaking issues and present key perspectives on new developments. The first day will feature a discussion by U.S. and foreign tax authorities of current international tax controversies and includes sessions on:


Developing Treaty Issues


Foreign Tax Credit Guidance for Pass-Through Entities


Transfer Pricing Update


New Guidance on Foreign Branch Transactions


Case Studies in International Restructurings


IRS Commissioner Mark W. Everson will deliver the luncheon address.
The second day will focus on the following topics: 


International Tax Challenges


Working with the New Subpart F “Look Through” Rule


Emerging Issues in Cross-Border Private Equity Transactions


Ask the IRS” panel featuring senior officials from the Service 


Eric Solomon, Acting Deputy Assistant Secretary for Tax Policy at the Treasury Department, will deliver the luncheon address.  
Those interested in attending or obtaining more information should contact The George Washington University Law School.
IR-2006-156, Oct. 10, 2006
WASHINGTON — The Internal Revenue Service today announced the assignment of William P. O’Shea to the position of Associate Chief Counsel, Passthroughs and Special Industries, effective Oct. 8, 2006.
"I am pleased that Bill was willing to take on this new assignment,” said Donald L. Korb, IRS Chief Counsel. “Bill has been with the Office of Chief Counsel for 28 years, and his selection again points out Counsel’s ability to train and grow executives from within. His extensive managerial and executive experience in our office makes him well suited to serve in this important position.”
The Associate Chief Counsel, Passthroughs and Special Industries provides legal advice on a wide variety of issues including partnerships, S corporations, trusts, estate and gift taxation, energy taxation, excise taxes, low income housing, domestic production deductions, research credit and tax shelters.
In March 2001, O'Shea was appointed to the position of Deputy Associate Chief Counsel, Passthroughs and Special Industries and since has worked directly with the Associate Chief Counsel, Passthroughs and Special Industries to meet the goals of the Office of Chief Counsel. O’Shea joined Passthroughs and Special Industries as a Branch Chief upon its formation in 1988. His branch issued various forms of guidance, including regulations involving partnerships, S corporations, tax shelters, and passive activity losses.
O’Shea joined the Office of Chief Counsel in 1978 as an attorney in the former Interpretative Division. In that division he worked for a time in each of four branches: the international tax branch, the income and accounting branch, the corporate tax branch and the partnership tax branch. At the end of 1981 he was promoted to Assistant Branch Chief and in 1986 he became a Branch Chief. For a period in 1993 he was the Acting Assistant Chief Counsel, International.
O’Shea holds a B.A. in Political Economics from the University of Massachusetts at Amherst and a J.D. from Boston College Law School. He was a member of law review and a teaching assistant. O’Shea lives in West Springfield, Va., with his wife and three children.
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IR–2006–155, Oct. 3, 2006
WASHINGTON — The Internal Revenue Service announced today that the new version of the 2006 IRS Special Enrollment Examination (SEE) is ready. The test, required for those who want to become Enrolled Agents, has been substantially revised and is being offered more often and in more places than in the past. The first testing window begins October 5, 2006.
The exam has been reformatted from four sections to three, to more accurately reflect the current state of the art in taxpayer representation.  Each of the three new sections (Individuals, Businesses, and Representation, Practice and Procedures) will have about 100 questions.
IRS worked with Thomson Prometric, a company specializing in assessment services,  to develop the test. The exam was redesigned with new content derived from extensive involvement by subject matter experts from the Enrolled Agent community. 
Significantly, additional changes make taking the test more convenient than ever:
The examination will be offered throughout the year, providing candidates the opportunity to take the examination at a time that fits their schedules;
The test will be offered at approximately 290 testing center sites throughout, in a highly secure, professional testing environment;
Candidates are no longer required to take the entire exam in one sitting;
Starting in May, 2007, candidates will have their exam results in hand before leaving the test site;
If necessary, candidates will be able to re-take each part of the examination several times each year; and
There is no longer a deadline for registering.  Candidates now apply on-line throughout the year, and pay with a credit card. 
There are more than 42,000 Enrolled Agents currently practicing in the United States.
Related Items: 

Information about enrolled agents

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IR-2006-185, Nov. 30, 2006
 
WASHINGTON — Today Treasury and the IRS issued Notice 2006-100 providing guidance to employers and payers on their reporting and wage withholding requirements for calendar years 2005 and 2006 with respect to deferrals of compensation and amounts includible in gross income under IRC § 409A and relief from reporting deferrals that are not includible in income during those years. The notice supersedes Notice 2005-94.
Under the relief in the notice, employers and other payers need not report annual deferrals of compensation that are not includible in income under § 409A on Form W-2 or Form 1009-MISC for 2005 or 2006. However, amounts includible in income under § 409A for 2005 and 2006 must be reported on Form W-2 or Form 1099-MISC, as appropriate. Employers and payers were alerted last year in Notice 2005-94 that they might have to file amended information returns to report amounts includible in income for 2005. In addition, the notice provides guidance on how to meet  income tax withholding requirements for amounts includible in income under § 409A for 2006.  The notice also provides guidance to service providers on their income tax reporting and tax payment requirements for amounts includible in gross income under § 409A for 2005 and 2006.
The notice provides interim rules for 2005 and 2006 on calculating amounts includible in gross income under § 409A. These rules apply to service providers who must include amounts in income pursuant to § 409A and to employers or other payers who must report and withhold on the amount to be included in income under § 409A.
Related Items:
Notice 2006-100PDF
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IR-2006-184, Nov. 30, 2006
 
WASHINGTON — The Internal Revenue Service announced that it has allocated nearly $1 billion of tax credits to nine planned clean coal projects.
The Energy Policy Act of 2005 authorized $1.65 billion in tax credits for clean coal projects. The Act allocated $800 million of credits to integrated gasification combined cycle (IGCC) projects, $500 million to non-IGCC advanced coal electricity generation projects and $350 million to gasification projects. The $800 million allocated to IGCC projects is required to be allocated in relatively equal amounts among bituminous coal, sub-bituminous coal and lignite projects. Within these caps, the IRS is required, after consultation with the Department of Energy, to allocate the credit to specific projects.
The projects receiving credits are located in nine different states. Credits were allocated to two IGCC bituminous coal projects ($133.5 million each), an IGCC lignite project ($133 million), two non-IGCC advanced coal electricity generation projects ($125 million each) and four gasification projects (amounts ranging from $40.663 million to $130 million).
Approximately $650 million of additional tax credits will be available for allocation to clean coal projects in 2007. Of this total, $267 million will be available for IGCC sub-bituminous coal projects, $133 million will be available for IGCC lignite projects, $250 million will be available for non-IGCC advanced coal electricity generation projects and $337,000 will be available for gasification projects. The application period for the 2007 allocation is now open and will remain open until Oct. 1, 2007. IRS Notices 2006-24 and 2006-25 provide complete instructions for submitting an application for the 2007 credit allocation.  Under those notices, the application for DOE certification for the 2007 allocation is due to DOE on or before June 30, 2007. The IRS expects, however, that the notices will be modified to provide that the application for DOE certification for the 2007 allocation is due to DOE on or before June 1, 2007.
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IR-2006-183, Nov. 22, 2006
 
WASHINGTON — The Internal Revenue Service has acknowledged the certification by American Honda Motor Company, Inc., that several of its Model Year 2007 vehicles meet the requirements of the Alternative Motor Vehicle Credit as qualified hybrid motor vehicles.
The hybrid vehicle certifications recently acknowledged by the IRS and their credit amounts are:
Honda Civic Hybrid CVT, Model Year 2007$2,100
Honda Accord Hybrid AT, Model Year 2007$1,300
Honda Accord Hybrid Navi AT, Model 2007$1,300
Consumers seeking the credit may want to buy early since the full credit is only available for a limited time. Taxpayers may claim the full amount of the allowable credit up to the end of the first quarter after the quarter in which the manufacturer records its sale of the 60,000th vehicle. For the second and third calendar quarters after the quarter in which the 60,000th vehicle is sold, taxpayers may claim 50 percent of the credit. For the fourth and fifth calendar quarters, taxpayers may claim 25 percent of the credit. No credit is allowed after the fifth quarter.
The total number of qualifying Honda hybrid vehicles reported sold as of Sept. 30, 2006, was 28,408. Therefore, purchasers of Honda’s qualified vehicles may continue to rely on the previously issued IRS certifications.
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IR-2006-182, Nov. 22, 2006
WASHINGTON — The Internal Revenue Service has acknowledged the certification by American Honda Motor Company, Inc., that its Honda Civic GX Model Year 2007 vehicle meets the requirements of the Alternative Motor Vehicle Credit. 
The qualified Alternative Fuel Motor Vehicle Credit was enacted by the Energy Policy Act of 2005. The new credit includes separate credits for four distinct categories: (1) fuel cell vehicles, (2) advanced lean burn technology vehicles, (3) hybrid vehicles and (4) alternative fuel vehicles.  
The credit amount for the Honda Civic GX Model Year 2007, which operates solely on compressed natural gas, is $4,000. The credit is equal to a percentage of the incremental cost of the alternative fuel technology.
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IR-2006-180, Nov. 17, 2006
WASHINGTON — The Internal Revenue Service today encouraged U.S.-based employees and former employees of foreign embassies, foreign consular offices and international organizations to participate in a one-time settlement initiative to resolve tax matters related to their employment.
The offer is only open to U.S. citizens, green-card holders and foreign employees with a U.S. tax obligation. Accredited diplomatic personnel are generally exempt from income taxes on their wages under international treaties or agreements.
The IRS estimates that as many as half of the employees subject to U.S. tax either fail to report their wages, claim deductions they are not entitled to, incorrectly establish SEP/IRA retirement plans, fail to pay self-employment tax or fail to file tax returns at all.
The IRS is offering a settlement initiative for these employees which will expire on February 20, 2007. In order to participate in the initiative the employees must submit amended or original tax returns for tax years 2003, 2004 and 2005 which properly reflect their income and expenses.
Failure to act now could mean facing a costly audit process in the future. Foreign embassy, consular office or international organization employees who fail to come forward may be subject to IRS audits and penalties which could cover more than just three years.
The IRS is offering a settlement initiative for these workers if they come forward between now and February 20, 2007. 
Related Item: Announcement 2006-95PDF
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IR-2006-178, Nov. 16, 2006
WASHINGTON — An average refund of $963 is waiting for 95,746 taxpayers whose refund checks have been returned to the Internal Revenue Service as undeliverable.
The checks, worth a total of $92.2 million, can be claimed as soon as their owners update their addresses with the IRS. In some cases, a taxpayer has more than one check waiting.
“Every year, many taxpayers miss their refunds because they move without notifying the IRS or Postal Service of a change of address,” IRS Commissioner Mark W. Everson said. "For those missing their check, the IRS is making it easier than ever for taxpayers to update their information and claim their refunds."
Taxpayers can use the "Where's My Refund?" feature on the home page of the IRS.gov Web site to learn the status of their refunds. To use it, a taxpayer must enter a Social Security number, filing status (such as single or married filing jointly) and the refund amount shown on the taxpayer’s 2005 tax return. When the information is submitted, “Where’s My Refund?” will display the status of a refund and, in some cases, provide instructions on how to resolve potential account issues.
Taxpayers can access a telephone version of “Where’s My Refund?” by calling 1-800-829-1954.
How to Update an Address with the IRS
Refund checks can go astray for a variety of reasons. Sometimes a life change results in a change of address. When a taxpayer moves or changes address and fails to notify the IRS or the U.S. Postal Service, a check sent to the taxpayer’s last known address is returned to the IRS.
“Where’s My Refund?” now has an online mailing address update feature for taxpayers whose refund checks were returned to IRS. If an undeliverable check was originally issued within the past 12 months, the taxpayer will be prompted online to provide an updated mailing address.
The address update feature is only available to taxpayers using the Web version of “Where’s My Refund?” Taxpayers with undelivered refund checks who access “Where’s My Refund?” by phone will receive instructions on next steps. Individuals whose refunds were not returned to IRS as undeliverable cannot update their mailing addresses through the “Where’s My Refund?” service.
A taxpayer can also ensure the IRS has his or her correct address by filing Form 8822, Change of Address. Download the form from IRS.gov or request it by calling 1-800-TAX-FORM (1-800-829-3676).
Those who do not have access to the Internet and think they may be missing a refund should first check their records or contact their tax preparer, then call the IRS toll-free assistance line at 1-800-829-1040 to update their address.
Direct Deposit Can Put an End to Lost Refunds
To put an end to undelivered refunds, taxpayers can take advantage of Direct Deposit. Taxpayers who choose this service receive their refunds directly into a personal checking or savings account. Direct Deposit, which also guards against theft or lost refund checks, is available for filers of both paper and electronic returns.
Links:

Where's My Refund?


IRS Change of Address, Form 8822PDF

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IR-2006-177, Nov. 15, 2006
WASHINGTON — The Internal Revenue Service announced that purchasers of qualified American Honda Motor Company, Inc., vehicles may continue to claim the Alternative Motor Vehicle Credit.
Honda sold 9,912 qualifying vehicles to retail dealers during the quarter ending Sept. 30, 2006. The credit amount and make and model of qualified vehicles sold are:

Honda Accord Hybrid, Model Year 2006*  $1,300


Honda Accord Hybrid Navi Model Year 2006*  $1,300


Honda Civic Hybrid Model Year 2006   $2,100


Honda Insight Model Year 2006    $1,450

* 2006 Honda Accord Hybrid and Navi without updated calibration qualify for a credit of $650.
This brings the total number of qualifying Honda hybrid sales as of the end Sept. 30, 2006, to 28,408. Purchasers of Honda’s qualified vehicles may continue to rely on the previously issued IRS certifications concerning the vehicles’ qualification for the credit.
Consumers seeking the credit may want to buy early because the full credit is only available for a limited time. Taxpayers may claim the full amount of the allowable credit up to the end of the first calendar quarter after the quarter in which the manufacturer records its sale of the 60,000th vehicle. For the second and third calendar quarters after the quarter in which the 60,000th vehicle is sold, taxpayers may claim 50 percent of the credit. For the fourth and fifth calendar quarters, taxpayers may claim 25 percent of the credit. No credit is allowed after the fifth quarter.
Related item: Hybrid Cars and Alternative Motor Vehicles
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This news release is superseded by News Release IR-2006-196, dated Dec. 28, 2006.
IR-2006-176, Nov. 13, 2006
WASHINGTON — The Internal Revenue Service announced today increases in user fees for installment agreements. The increases — the first since the fees were implemented in 1995 — result from increases in labor and other costs of processing the various applications.
The Office of Management and Budget has directed federal agencies to charge user fees reflecting the full cost of goods or services “that convey special benefits to recipients beyond those accruing to the general public.”
Effective Jan. 1, 2007, the following fees will increase:

The fee for new direct debit installment agreements, where payments are deducted directly from a taxpayer’s bank account, will increase from $43 to $52.
	 


The fee for other new installment agreements will increase from $43 to $105.
	 


The fee to restructure an existing or reinstate a defaulted installment agreement will increase from $24 to $45.

The new fees will also apply to installment agreements made using the Online Payment Agreement application on this Web site, which became available to the public on Oct. 16.
It is always in the taxpayer’s best interest to quickly pay any outstanding tax debts in full to minimize the amount of interest and penalty. But for those who cannot resolve their tax debt immediately, however, an installment agreement can be a reasonable payment option. To be eligible for an installment agreement, a taxpayer must first file all tax returns that are required to be filed and be current with estimated tax payments if applicable.
In fiscal year 2006, almost 2.8 million taxpayers established installment agreements to pay their tax bills.
Related Items:

Payment Plans, Installment Agreements


IR-2006-159, IRS Announces Online Payment Agreement Application

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IR-2006-175, Nov. 9, 2006
WASHINGTON — The Internal Revenue Service today issued guidance emphasizing the need for employers to track the amount of expense reimbursement allowances paid to employees on a per diem basis.
Revenue Ruling 2006-56 tells employers that if they routinely pay per diem allowances in excess of the federal per diem rates, but do not track the allowances and do not require the employees either to actually substantiate all the expenses or pay back the excess amounts, and do not include the excess amounts in the employee’s income and wages, then the entire amount of the expense allowances is subject to income tax and employment tax.
Generally, amounts employers pay employees to reimburse them for substantiated business expenses are not subject to income tax or employment tax. For reimbursements for expenses for meals and other incidentals associated with business travel, employees get this exclusion for reimbursements for each day of travel up to the federal per diem rates without having to actually substantiate the amounts of the expenses. However, if an employer pays expense allowances that exceed the federal per diem rates, the excess amounts are subject to income tax and employment tax if they are not repaid to the employer, unless the employee actually substantiates all of the expenses covered by the per diem allowance.
The revenue ruling illustrates when a per diem allowance arrangement that fails to track the excess amounts and does not include the unsubstantiated, unrepaid excess amounts in the employee’s income and wages constitutes a pattern of abuse of the rules for tax-free expense reimbursements. The finding that the arrangement is abusive causes all allowances paid under the arrangement to be subject to income tax and employment tax, not just the excess amounts. While the revenue ruling uses a scenario in the trucking industry because of the industry’s widespread use of per diem allowances, the analysis in the revenue ruling applies to any employer in any industry that uses per diem allowances to reimburse employee expenses. 
IRS Revenue Ruling 2006-56 is effective immediately upon issuance. However, the IRS recognizes that employers may need some time to adjust their systems so they can track excess allowances and account for them correctly. The IRS is issuing instructions to its agents not to apply the results under the revenue ruling for taxable periods ending on or before Dec. 31, 2006, in the absence of intentional noncompliance.
Link:

Revenue Ruling 2006-56PDF

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IR-2006-173, Nov. 9, 2006
WASHINGTON — Personal exemptions and standard deductions will rise, tax brackets will widen and income limits for IRAs will increase in 2007, thanks to inflation adjustments announced today by the Internal Revenue Service.
By law, the dollar amounts for a variety of tax provisions must be revised each year to keep pace with inflation. As a result, more than three dozen tax benefits, affecting virtually every taxpayer, are being adjusted for 2007. Key changes affecting 2007 returns, filed by most taxpayers in early 2008, include the following:

The value of each personal and dependency exemption, available to most taxpayers, will be $3,400, up $100 from 2006.
	 


The new standard deduction will be $10,700 for married couples filing a joint return (up $400), $5,350 for singles and married individuals filing separately (up $200) and $7,850 for heads of household (up $300). Nearly two out of three taxpayers take the standard deduction, rather than itemizing deductions, such as mortgage interest, charitable contributions and state and local taxes.
	 


Tax-bracket thresholds will increase for each filing status. For a married couple filing a joint return, for example, the taxable-income threshold separating the 15-percent bracket from the 25-percent bracket will be $63,700, up from $61,300 in 2006.

In 2007, for the first time, inflation adjustments will raise the income limits that apply to the retirement savings contributions credit, contributions to a Roth IRA and deductible contributions to a traditional IRA where the taxpayer or the taxpayer’s spouse is covered by a retirement plan at work.  
Revenue Procedure 2006-53 PDFcontains a complete rundown of inflation adjustments.
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IR-2006-172, Nov. 9, 2006
 
WASHINGTON — After reviewing the third quarter sales of Toyota Motor Sales, USA, Inc., the Internal Revenue Service announced that purchasers Toyota and Lexus vehicles may continue to claim the Alternative Motor Vehicle Credit. Given the number of vehicles sold, the phase out period for Toyotavehicles began on Oct. 1, 2006.
 
Toyota sold 57,606 qualifying vehicles to retail dealers in the quarter ending Sept. 30, 2006. This brings the cumulative sales of qualified Toyota hybrid vehicles sold from the period of Jan. 1, 2006, to Sept. 30, 2006, to 144,216.
Taxpayers may claim the full amount of the credit up to the end of the first calendar quarter after the quarter in which the manufacturer records its sale of the 60,000th qualified vehicle. For the second and third calendar quarters after the quarter in which the 60,000th vehicle is sold, taxpayers may claim 50 percent of the credit. For the fourth and fifth calendar quarters, taxpayers may claim 25 percent of the credit. No credit is allowed after the fifth quarter.
Toyota qualified vehicles bought or leased on or after Oct. 1, 2006, and on or before March 31, 2007, the credit is 50 percent of the otherwise allowable credit amount. Taxpayers buying or leasing vehicles on or after April 1, 2007, and on or before September 30, 2007, can only get 25 percent of the credit.
The make and model year of qualified vehicles sold are:
Toyota Prius, Model Years 2005, 2006 and 2007
Toyota Highlander, Hybrid, Model Years 2006 and 2007
Toyota Camry Hybrid, Model Year 2007
Lexus RX 400h, Model Years 2006 and 2007
Lexus GS 450h, Model Year 2007
The applicable credit amounts are as follows:
 

Qualifying Vehicle


Full Credit When Purchased By 9/30/06


Reduced Credit When Purchased From 10/1/06 through 3/31/07


Reduced Credit When Purchased From 4/1/07 through 9/30/07


Beginning 10/1/07


05, 06 and 07Toyota Prius


$3,150


$1,575


$787.50


$0


06 and 07 Toyota Highlander  2WD and 4WD


$2,600


$1,300


$650


$0


07 Toyota Camry Hybrid


$2,600


$1,300


$650


$0


06 and 07 Lexus RX 400h
			2WD and 4WD


$2,200


$1,100


$550


$0


07 Lexus GS450h


$1,550


$775


$387.50


$0

Related Item:Hybrid Cars and Alternative Motor Vehicles
IR-2006-171, Nov. 9, 2006
 
Washington — The Internal Revenue Service announced that purchasers of General Motors Corp. qualified vehicles may continue to claim the Alternative Motor Vehicle Credit. The announcement comes after the IRS concluded its quarterly review of the number of hybrid vehicles sold.
GMC sold 812 qualifying vehicles to retail dealers in the quarter ending Sept. 30, 2006. This brings the cumulative number of qualified GMC hybrid vehicles sold to 2,200. The credit amount and make and model of qualified vehicles sold are:
Chevrolet Silverado Hybrid 2WD, Model Years 2006 and 2007 — $250
Chevrolet Silverado Hybrid 4WD, Model Years 2006 and 2007 — $650
GMC Sierra Hybrid 2WD, Model Years 2006 and 2007 — $250
GMC Sierra Hybrid 4WD, Model Years 2006 and 2007 — $650
Saturn Vue Green Line, Model Year 2007 — $650
Purchasers of GMC’s qualified vehicles may continue to rely on the certifications concerning the vehicles’ qualification for the credit.
Taxpayers may claim the full amount of the credit up to the end of the first calendar quarter after the quarter in which the manufacturer records its sale of the 60,000th vehicle. For the second and third calendar quarters after the quarter in which the 60,000th vehicle is sold, taxpayers may claim 50 percent of the credit. For the fourth and fifth calendar quarters, taxpayers may claim 25 percent of the credit. No credit is allowed after the fifth quarter.
Related Item:Hybrid Cars and Alternative Motor Vehicles