Source: CBS News

IRS Commissioner Fired

By Benjamin K. Brenner, President

President Obama–through Treasury Secretary Jacob Lew–forced acting IRS commissioner Steven Miller to tender his resignation today following the recent disclosure that the IRS actively and unfairly targeted conservative and Tea Party groups applying for tax exempt status; a gross violation of a government body that is supposed to be above the political fray. 

The outrage has now reached a fevered pitch, with the FBI now getting involved with the investigation. While the President and his administration appears to be insulated from the fall out thus far, criminal charges may be forthcoming, with a key person of interest being Lois Lerner who is in charge of the Tax Exempt division of the IRS:

“Lois Lerner lied to me,” said Representative Jim Jordan, Republican of Ohio, who helped initiate the Congressional investigation of the I.R.S.

Ms. Lerner knew of the increased scrutiny given to Tea Party groups since 2010, but told reporters last Friday that she was not aware of any additional scrutiny given to any group and only heard about this through media reports.  She along with many other IRS employees are expected to be called in front of congress shortly:

The House Oversight Committee requested five senior I.R.S. officials be made available for interviews by May 20, including the director of rulings and agreements, Holly Paz; a former screening group manager in the exempt-organizations determinations division, John Shafer; and a former advocacy group manager, Joseph Herr.

“Potentially dozens of I.R.S. employees are involved with the original targeting, the failure to correct the problem and the failure to promptly report the truth to Congress and the American people,” said Meghan Snyder, a spokeswoman for Mr. Jordan.

While Mr. Miller–and what is sure to be others–has taken the fall for this scandal, one can’t help but think what involvement if any the previous IRS Commissioner Douglas Shulman had.  Mr. Shulman had been commissioner since May 2008, and just recently stepped down last November.  He oversaw an aggressive agenda that made some of biggest changes the IRS has seen in decades.  While initially lauded, many of these changes have been riddled with delays, errors and met with contempt.

Mr. Shulman was integral in developing and integrating a universal licensing and annual continuing education requirements for professional paid tax preparers.  But these requirements were halted by a federal judge right before the 2013 tax season began citing that the IRS did not have the authority to implement these requirements.  The IRS appealed part of the decision, but again were overruled.  With millions of dollars already spent and industries spawned to provide these paid preparer requirements, it seems like a foregone conclusion that eventually they will go into effect; either by appealing the decision or by going through a body that does have the authority to regulate the industry.  Nevertheless, this new scandal will only serve to divert more time & energy away from this project, ultimately leaving the consumer to suffer the most.

Furthermore, Mr. Shulman led the charge in “modernizing” the IRS; particularly the Modernized E-File Program (MeP).  With the new MeP, taxpayers would get their refunds in a matter of days, not weeks; all while being kept abreast of their entire filing process with faster updates.  The only problem was that it didn’t work.  The MeP was put into effect for the 2012 tax season.  When it became clear that the MeP was not functioning, it was scrapped, and the IRS was forced to go back to their old E-File program for the remainder of the 2012 tax season.  This year (2013) the IRS fully replaced the old program with the MeP, but the tax season was already riddled by delays, due to the last minute fiscal cliff negotiations. At first, the MeP was working as advertised: refunds were being released quicker, and the IRS even claimed you could get updates on refund statuses every 24 hours. But since then its been glitch after glitch, culminating in what has been dubbed the “Education Credit Debacle“, where the IRS allowed hundreds of thousands of tax returns with IRS form 8863 to be filed early causing serious delays.  Some of the affected taxpayers could not even get verification that their returns were filed!  And the problems haven’t stopped yet.  As of the writing of this post, many taxpayers who filed in February & March still have not received their refunds and the IRS is offering no explanation.  Last but not least, the new MeP has done next to nothing to combat the explosion of Identity Theft and Fraud that plagued the IRS is recent years.  

Once again, it is the hardworking taxpayer that is getting the short end of the stick.  If we don’t file our taxes on time, penalties, interest, garnishments, liens, levies, etc. can be and are assessed.  But what happens when the IRS does not live up to it’s end of the bargain?  As of now, it appears nothing. Supposedly the IRS must pay interest after a certain date if they do not release refunds, but that date is not static.  All the IRS has to do (and has done) is send a “document request” like requesting a copy of your W-2s…EVEN THOUGH THE IRS ALREADY HAS ACCESS TO THAT INFORMATION.  I have yet to see a taxpayer actually receive interest from the IRS.  And the interest rate they supposedly give is far less than what IRS charges us if we are late.

While there is sure to be more to come out from this story, the politicization of it is not good news for anyone.  Some politicians have been searching for a scandal ever since Obama took office.  So now that they have one, how will it play out to a public so tired of other “scandals”?  It’s the “Boy Who Cried Wolf” syndrome.  And that is the crux of the problem.  While our elected officials have their hearings, while IRS employees start losing their jobs, and the midterm campaign season heats up, average American taxpayers of all stripes, creeds and political affiliations are ultimately the ones that are being ignored. 

Do you have an IRS horror story?  Share it with us in the comments section.

Source: NY Times

Cuts Are Hurting The Entire US Recovery; Not Just the IRS

Acting IRS Commissioner Steven Miller stated recently, that taxpayers will soon start feeling the effects of the Sequester now that the tax season has ended.  Deep cuts to IRS Staffing will impact taxpayers calling the IRS, as well as the agency’s ability to combat fraud and collect tax revenues.

Treasury secretary Jacob Lew also chimed in by saying that for every $1 dollar spent on IRS collection activities, $6 dollars are generated.  Therefore, cutting back on the ability for the IRS to collect revenues would be short-sighted to say the least.  Miller Said:

“Without a change in the current budget environment, the American people will see erosion in our ability to serve them, and the federal government will see fewer receipts from our enforcement efforts…”

Mandatory furloughs for IRS works have already been put into effect as well.  While there was early hope that Republicans & Democrats would come together to avoid what many are describing as “self-inflicted” wounds, that prospect has dimmed significantly since we fell off the “fiscal cliff”.  Democrats are adamant about including revenues and spending on projects such as infrastructure & early education, while Republicans are standing firm about extracting just cuts.  Unfortunately for the G.O.P., this “cuts only” policy is starting to show it’s negative effects on our fragile recovery.  With the extreme austerity measures being taken in the E.U., the evidence has shown that it has hampered–not improved–growth.  

After two years in which President Obama and Republicans in Congress have fought to a draw over their clashing approaches to job creation and budget deficits, the consensus about the result is clear: Immediate deficit reduction is a drag on full economic recovery.

According to economists, the unemployment rate would be 1 point lower (6.5%) and U.S. economic growth would be almost 2 point higher, had congress not cut spending and did not let the payroll tax cuts for Social Security expire.

Will Refunds Be Delayed Next Year?

Acting IRS commissioner Steven Miller recently sat before a congressional panel and hinted that the best way to combat the explosion of tax fraud may be to either delay the tax filing season, or wait to release all refunds until after the filing season concludes on April 15th.

The reasoning goes something like this:  The vast majority of fraud involving income taxes occurs early in the filing season (January & February). Delaying the filing season will reduce fraud because a) It gives the IRS a chance to cross reference filed tax data with what employers are required to send to the IRS and b) There will simply be less time to perpetrate fraud and thus less cases.  Looking simply at the black & white numbers, yes this would seem like a good idea.  However, like the tax code, this is not a black & white issue.  Millions of honest taxpayers file their returns as early as possible because they really need the money.  These are usually lower-income taxpayers who depend on their refunds to pay bills, rent, and put food on the table.  When you consider the money spent for the holiday season, the urgency for these refunds is magnified.   Delaying the start of the filing season could seriously put these taxpayers at risk.

Another proposal involves waiting until after April 15th to issue all refunds.  That way every tax return can be reviewed and verified before refunds are released, and would virtually eliminate the majority of fraud cases.  However, under current IRS regulations, the government would be required to pay taxpayers interest on their delayed refunds.  This cost of combating fraud could outweigh the cost of the fraud itself.

Either way, it is very early to speculate proposed changes and whether or not they will be implemented. Nevertheless, if either of these proposals are ultimately implemented in full or in part, it appears the group that will be affected the most will be the lower income taxpayer.

Source: Chicago Tribune

The IRS’ new “Modernized E-File Production (MeP) & Assurance Testing Systems” have been experiencing retrieval errors this past week.  The IRS issued the following statement on their website:

ETIN Retrieval Errors (Posted 2:00 pm, Eastern on 4/12/2013)

The Modernized e-File Production and Assurance Testing Systems are experiencing an issue with ETIN Retrieval errors that started around 12:00 noon Eastern Time. The IRS is working to resolve the problem as a top priority. Please refrain from accessing the MeF Production and ATS systems to transmit submissions, get acknowledgements, retrieve state submissions, send state acknowledgements or submit any other service requests until further notice.

The IRS will issue a Technical QuickAlert when the MeF system is operational.

We apologize for any inconvenience and thank you for your cooperation.

This means that no tax return can be electronically filed during this time.  This is at least the second time this week that the MeF systems have been down for an extended period of time.  With all the problems related to the delay of this tax season & tax forms/credits due to the fiscal cliff, continued MeF outages is the last thing the IRS (and taxpayers) need with only 3 days left to the tax deadline.

UPDATE:

The IRS has issued the following alert that the MeF system is now operational and accepting all tax returns.

MeF Alerts:

Update – Resolution of ETIN Retrieval Errors (Posted 12:00am, Eastern, 4/13/2013)

The IRS successfully resolved the issue causing the ETIN Retrieval errors impacting the Modernized e-File Production and Assurance Testing Systems.
Please resume transmitting submissions, transmitting other service requests, and retrieving acknowledgements.

We thank you for your patience and support.

The status of the IRS’ MeF system can be checked by clicking here.

Tick-Tock, The Deadline Approaches

As the April 15th Deadline rapidly approaches, there are still hundreds of thousands of taxpayers expected to file the final week of the tax season.  The late start to the tax season and the fact that we are getting reports from clients that they still have not received all their tax documentation in order to file is making  this last minute crunch even more magnified.  Here are some last minuted tax-tips (even if you’ve filed already)

1) IRS E-mails: If you’ve received an email from the IRS relating to your refund or requesting taxpayer information, DON’T REPLY!  This is a common scam that thieves use to steal your identity.  Don’t even open the email if you can avoid doing so as some of these emails contain viruses or malware.  The IRS never initiates contact via E-mail.  If the IRS needs information from a taxpayer, they will send a formal notification via USPS mail on official letter head.  If you receive any suspicious communications you believe are scams via email, forward them to phishing@irs.gov.

2) April 15th Deadline: Many taxpayers don’t realize that the deadline for filing a tax return only applies to those that owe money to the government.  If you are due a refund the IRS allows you 4 years to file.  It is always best to file and receive your refund the year you are due it, as the IRS does not pay interest.  So, if you believe you are due a refund and you haven’t filed, have no fear, you’ve got plenty of time.  No need to wait on line to file before the deadline.  R&G Brenner has offices open after the tax season and throughout the year.  Even if you file a day after the deadline, you should have no wait time to see a professional.

3) Filing Extensions:  As stated above, if you are due a refund, you have 4 years to file your tax return and there is no need to file an extension.  However, if you believe you will owe the IRS/State(s) and have not received all of your tax documents or you are simply not ready to file, you should consider filing an extension.  Nevertheless, an extension for filing your tax return does not automatically grant you an extension to pay your taxes; the IRS still expects to be paid before the deadline.  If you cannot pay all that is due, simply send what you can.  The IRS will charge you interest on the balance due and you can set up a payment plan if you wish.  If you do not pay, not only with the IRS charge interest but also a late filing penalty.  The more money you owe, the steeper the penalty will be.  So, file on time, or file an extension.

4) File Yourself or Use A Tax Pro?:  The tax code is very complicated and littered with special credits & deductions.  Unless you are filing a very simple return, it is almost never a good idea to file your own taxes.  Simply put, even in this day and age, a computer questionnaire is not an adequate replacement for a professional.  Check out the True Cost of Doing Your Own Taxes.  On average, refunds using a Tax-Pro are $347-$841 HIGHER than Do-It-Yourself programs.  The time you save is just as valuable–if not more so–that the money you’d spend on a professional.

If you need help with any of the above, contact an R&G Brenner Tax Professional today, or call us toll free at (888) APRIL-15.

The following short video reviews some important information and common mistakes that taxpayers often make which can subject their tax returns to an Audit:

For more information, please contact an R&G Brenner Tax Professional today!

Source: CBS

The following IRS Video explains the new area where Health Insurance coverage is to be reported on future W-2s.

Refund Delays For Some

According to a recent article, refunds are being delayed for some lower income taxpayers; especially those that file for the Earned Income Tax Credit (EITC).  The primary reason for the delay is these taxpayers tend to file early, and these returns are particularly susceptible to Identity Theft & fraud.  Highlights include:

• Delays are due to the closer scrutiny the IRS is paying to these returns in an effort to combat fraud/Identity Theft
• IRS spokesmen Terry Lemons claims that fewer than 5% of these types of tax returns are being delayed
• Wal-Mart has reported that they have cashed $1.7 Billion in refund checks this year so far, compared to about $3 billion in 2012.  This significant drop is attributed to the delay in the tax filing season this year.
• Over 13 million filers claimed the EITC last year.  Using the 5% figure above, that equates to about 650,000 delayed refunds
• The IRS is asking taxpayers to provide documentation for children living with them like birth certificates, doctors bills or report cards

Source: Reuters

Name Change Tax Checklist

If you recently changed your name (most commonly due to a recent marriage or divorce), the following are some valuable IRS tax tips to follow to ensure your tax return is not negatively impacted due to the name change:

1. If you took your spouse’s last name — or if you hyphenated your last names — you may run into complications if you don’t notify the SSA. When newlyweds file a tax return using their new last names, IRS computers can’t match the new name with the Social Security number.

2. If you recently divorced and changed back to your previous last name, you’ll also need to notify the SSA of this name change.

3. Informing the SSA of a name change is easy. Simply file a Form SS-5, Application for a Social Security Card, at your local SSA office or by mail and provide a recently issued document as proof of your legal name change.

4. Form SS-5 is available on SSA’s website at http://www.socialsecurity.gov/, by calling 800.772.1213 or at local offices. Your new card will have the same number as your previous card, but will show your new name.

5. If you adopted your spouse’s children after getting married and their names changed, you’ll need to update their names with SSA too. For adopted children without SSNs, the parents can apply for an Adoption Taxpayer Identification Number – or ATIN – by filing Form W-7A, Application for Taxpayer Identification Number for Pending U.S. Adoptions with the IRS. The ATIN is a temporary number used in place of an SSN on the tax return. Form W-7A is available on the IRS website at www.irs.gov or by calling 800-TAX-FORM (800.829.3676).

If you require assistance filing any name change application, an R&G Brenner professional can assist you by contacting us here.

Source: IRS.gov