Tax News Roundup

Every Saturday, we'll take a look at the top tax stories in the newspaper, and even some stories that haven't made the news (yet).

• IRS Setting Tax Breaks for Hybrids (USA Today) - Reports on the IRS announcement that hybrid car buyers can rely on written documentation from car manufacturers at tax time. (I reported the same announcement, and updated the hybrid car tax credit page with all the details.)


• What Is the I.R.S. Trying to Hide? (NY Times Op/Ed) - The IRS is attempting to stonewall academic researchers from obtaining statistical data about audits. The academic researchers are the good people at Syracuse University running the TRAC-IRS data base. You can learn more about their dispute with the IRS through their press release.


• IRS Urged to Restructure Fraud Program (NYSSCPA) - The IRS is holding back taxpayer refunds as part of its fraud detection program, but critics claim the program has gone too far and is holding back refunds of innocent people. In response, Senator Charles Grassley of Iowa has urged the IRS to restructure its fraud detection program. Related stories: IRS Holding Back Tax Refunds, Sen. Grassley's Letter to Treasury Secretary John Snow (PDF).


• Lawyer: 'Survivor' Agreed to Pay Hatch's Taxes (Fox News) - Richard Hatch of TV show 'Survivor' fame is in deep tax trouble. He failed to report his $1 Million prize money from winning the first season of 'Survivor.' Apparently, his latest legal defense is that he had a "deal" with the CBS network. Related stories: Accountant says he told Hatch about tax obligations (Boston Globe), Hatch tax-evasion trial begins (Boston Globe), and Richard Hatch and other Celebrity Tax Lore (Tax Prof Blog).

And now, one final story that didn't make it into the newspapers. There's been an enormous debate in the tax accounting community over an ever-so-slight revision in the instructions for Schedule D (reporting capital gains) from the IRS. The difference caught the attention of several tax accountants, who have persuaded the IRS to clarify their position. Here's what's going on: some people prepared a Schedule D and reported their total capital gains. Instead of listing each stock trade separately, they attached a spreadsheet. Some people even went further and wrote "details available upon request." Nice try! The IRS wants taxpayers to report each and every single trade, with all the necessary figures to accurately calculate the gains, reported directly on Schedule D or the continuation pages Schedule D-1. Spreadsheets can be used instead of Schedule D-1, but the attachments must have all the same information. Follow this accounting snafu through these resources:

• New IRS Instructions Should Alleviate Tax Preparer Panic CLARIFICATION (AccountingWeb)
• Changes to Current Tax Forms and Publications (IRS Clarification of the Rules)
• IRS Backtracks on Schedule D Reporting Change, Will Continue to Accept Attachments Listing Capital Gains Transactions (TaxProf Blog)

Bottom line in this snafu? Don't try to pull a fast one on the IRS. Just like your high school math teacher, you must show all your work to arrive at your calculations.