Auditors Can Go Straight To Partner’s Return. The Internal Revenue Service says it need not audit a small partnership’s return before asserting that an individual partner owes more tax. In e-mail guidance that apparently was directed to a field auditor, the agency’s chief counsel said the IRS can issue a notice of deficiency based solely on information it receives from a third party. However, “the Service must be prepared to defend the adjustments if challenged,” the counsel advised. ECC 201035018, 2010 TNT 172-66.
Jobs Act Doesn’t Answer Cell Phone Questions. The Small Business Jobs Act signed by President Obama last month eased record-keeping requirements for employer-provided cell phones, but it failed to resolve a longstanding controversy over whether, and how, employees’ personal use of those phones should be taxed. The legislation removed cell phones from the category of “listed property” for which detailed logs of business and personal use must be maintained. Congress left it to the IRS to determine whether cell phones should be considered a nontaxable fringe benefit, or whether taxpayers should be required to use some yet-unspecified method to determine the taxable value of personal use of business phones. In practice, most taxpayers do not report income for using company cell phones, and the IRS raises the issue only occasionally on audit. The phones were first classified as listed property in 1989. H.R. 5297, the Small Business Jobs Act.
This Is A Job For Superman. A taxpayer, who may have been editor-in-chief of a major American metropolitan newspaper, needed to know ASAP whether comic books are subject to New York sales tax. Thinking this was a simple yes-or-no question, the chief assigned a rookie reporter to the story. The cub went to the state Department of Taxation and Finance for an advisory opinion. Then, the plot thickened. The department noted that “periodicals” are exempt from sales tax, but tax must be paid on books and collectibles. New York defines a “periodical” as a serial publication that is issued at least four times per year, is available for circulation for the public, has a variety of authors write about “literature, the sciences or the arts, news, some special industry, profession, sports or other field of endeavor,” and does not constitute a book either singly or when successive issues are combined, A garden-variety comic book qualifies as a periodical and is tax-exempt, the department advised, but a “graphic novel” is a taxable book. Also, a book that is a collection of a specific comics is subject to tax. So is a collectible comic that is sold at a price higher than its official retail value. “Write it up — and make it exciting!” the editor shouted. This was way beyond the young journalist’s abilities, so he called us to give this story a happy ending. TSB-A-10(35)S, 2010 STT 167-22.