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State and local tax resources from the AICPA.

When the Federal government enacts new tax legislation, state and local governments must find ways to react to it (and, in the case of the Federal government's recent tax-reduction acts, to maintain revenue). They can adopt and/or decouple from Federal statutes, adjust tax rates, alter the timing of tax receipts and modify the number of taxpayers and/or transactions subject to tax in that jurisdiction (i.e., the tax base). Tax advisers for individuals or entities that file income tax returns in a number of state or local jurisdictions are probably aware of the increasing amount of correspondence their clients receive from state and local governments. How is a privately owned business or small practitioner supposed to keep track of all the changes?

The website maintained by the AICPA's State and Local Tax Technical Resource Panel (TRP) was designed for just that reason. Its resources can help tax professionals deal with state and local tax issues and comply with state and local tax obligations. The available products are summarized below.

* State Corporation Income Tax Return Checklist. This is a single checklist containing inquiries to be considered when preparing many state and local corporation income tax returns. It includes prompts as to where the corporation should file returns, which income and expense items may be treated differently in various jurisdictions, what should be considered in a jurisdiction's tax computation, etc. The checklist also encourages tax advisers to consider other issues, such as business/non-business treatment, apportionment and allocation factors, net operating losses (NOLs) and supporting documentation.

* State Individual Income Tax Return Checklist. Similar to the state corporation checklist, this is a single checklist that prompts tax advisers to consider, for example, the jurisdictions in which an individual should file a return, state and local conformity with Federal laws, income and expense items that may be treated differently in various jurisdictions, certain S corporation shareholder and partner concerns and tax computation and credit issues.

* State Passthrough Entity Checklist (coming soon). New for 2006 is a passthrough entity checklist that addresses issues such as state conformity to Federal provisions, composite return options, withholding requirements, nonresident income tax agreement options and entity-level taxes.

* Unique Considerations for State Business Tax Returns. This guide provides a state-by-state analysis of unique items that tax advisers might need to consider when preparing a business's income or franchise tax return. Examples include state add-backs, NOL treatment, unusual apportionment formulas and minimum taxes.

* Unique Considerations for State Individual Tax Returns. This guide provides a state-by-state analysis of items unique to a particular state that practitioners might need to consider when preparing an individual income tax return. Examples include state tax treatment of retirement and military income, filing thresholds and credit information.

* Nexus, Multistate Tax and State Net Operating Loss Issues Practice Guides. This guide provides overviews of issues surrounding state tax nexus, allocation and apportionment (including business/non-business treatment, unitary business determination and formulary apportionment) and NOLs. It also provides a checklist of questions commonly found in state tax nexus questionnaires.

* Business Activity Matrix for Determining Nexus with States. This matrix includes a list of questions to assist tax advisers in determining those jurisdictions in which a business may have a return filing obligation.

* Voluntary Disclosure Programs Practice Guide. Businesses frequently find that they are not filing tax returns in every jurisdiction in which they need to. One way to limit exPosure for prior periods (and potentially limit exposure to interest and penalties) is to participate in a voluntary disclosure program (VDP). This guide provides an overview of VDPs, including state contacts and standard terms for VDP agreements.

These products should assist tax advisers in providing value-added services to taxpayers.

Where to Get The Guides

State Corporation Income Tax Return Checklist, available at http://tax.aicpa.org/NR/rdonlyres/ E59CD09C-EC90-49D4-A382-33CB8506ESE4/0/ 1605StateCorpChecklist2005.pdf

State Individual Income Tax Return Checklist, available at http://tax.aicpa.org/NR/rdonlyres/ 0A4BDO66-5CS8-41E3-944C-0A99915E4E45/0/ 1606StateIndivChecklist2005.pdf

State Passthrough Entity Checklist, not yet available.

Unique Considerations for State Business Tax Returns, available at http://tax.aicpa.org/NR/ rdonlyress/83543F5D-757A-411E-8EB7-5D4D4BBA2758/ 0/1602UniqueStateBusinessPracGd2005.pdf

Unique Considerations for State Individual Tax Returns, available at http://tax.aicpa.org/NR/rdonlyres/ 7E77EA34-42C9-40DE-8112-3AE87172AB30/0/ 1603UniqueStateIndividualPracGd2005.pdf

Nexus, Multistate Tax and State Net Operating Loss Issues Practice Guides, available at htlp://tax.aicpa.org/NR/rdonlyres/ FA4C1A4E-4D26-43D6-85DC-9DAE4CDFC651/0/ 1604NexusGuide2005.pdf

Business Activity Matrix for Determining Nexus with States, available at http://tax.aicpa.arg/Resources/State+and+Local/ AICPAs+Business+Activity+Matrix+ for+Determining+Nexus+With+States.htm

Voluntary Disclosure Programs Practice Guide, available at http://tax.aicpa.org/Resources/State+and+Local/ AICPA+Practice+Guide+Voluntary+Disclosure+Progams.htm

By Deborah K. Rood, CPA, Senior Tax Manager, Blackman Kallick Bartelstein LLP, Chicago, IL and member, AICPA Tax Division's State and Local Tax Technical Resource Panel
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Author:Rood, Deborah K.
Publication:The Tax Adviser
Date:Sep 1, 2006
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