Taxation Newsletters

Enrolled Agents

Most people know that both certified public accountants and attorneys prepare taxes and are entitled to represent them in front of the Internal Revenue Service. But fewer taxpayers are familiar with the role of the enrolled agent in income tax preparation.

Foreign Tax Credits

Congress passed legislation authorizing foreign tax credits to relieve a taxpayer of the double tax burden of paying tax on foreign source income to both the United States and a foreign country. Generally, if the foreign tax rate is higher than the U.S. rate, there will be no U.S. tax due on the foreign income. If the foreign tax rate is lower than the U.S. rate, U.S. tax on the foreign income will be limited to the difference between the rates. The foreign tax credit can only reduce U.S. taxes on foreign source income; it cannot reduce U.S. taxes on U.S. source income.

History of the Internal Revenue Service

Believe it or not, the Internal Revenue Service did not come over to this country on the Mayflower with the Pilgrims. The agency's history goes back to 1862 when Congress and President Lincoln created the position of the Commissioner of the Internal Revenue and enacted the first income tax to pay for the Civil War. After that tax was repealed on the ground that it was a direct tax and not apportioned among the states on the basis of population, Congress revived the income tax in 1894, but the Supreme Court determined that it was unconstitutional.

Taxation of Personal Service Corporations

Although most corporations are entitled to calculate their tax using graduated rates, there is an exception for "qualified personal service" corporations, which are subject to a flat tax rate of 35 percent. A corporation is a qualified personal service corporation if it meets certain tests.

Treasury Offset Program and Injured Spouse Relief

If you owe any past-due child support, Federal agency non-tax debts, or state income tax obligations, you might not be getting the federal income tax refund that you expected. Congress has authorized the Department of Treasury's Financial Management Service (FMS), which issues the refund checks, to set up the Treasury Offset Program, which can reduce your refund or any overpayment that you wanted to apply to next year's tax liability.