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.

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.

$917 Million In Unclaimed Refunds

The IRS currently has $917 Million for clients in unclaimed refunds for taxpayers just like you, that have not filed a 2009 tax return.  If these returns are not filed by the April, 15th deadline, your money then becomes the property of the U.S. treasury.  The most common reason for not filing a tax return is that many workers believe they did not make enough money to have to file a return. This very well may be true however, if you worked, you most likely had taxes taken out of your paycheck.  This could equate to hundreds or even thousands of dollars that the IRS will be putting into their pockets instead of yours.

If you did not file a 2009 tax return and you worked that year, you may be due a refund.  Please contact an R&G Brenner professional today, and we will help you determine if filing a tax return can get you back the cash you deserve.

Check out this article for more information.

Certain H&R Block Client’s Refunds Are Delayed

H&R Block (HRB)–the largest public retail tax preparation company in the United States–has confirmed that they have filed many tax returns containing certain delayed credits too early, causing their clients refunds to be delayed.  The primary issue is the Education Tax Credit which was not accepted for electronic filing until recently (February 22nd).  This has prompted the IRS to send letters to HRB clients instead of their expected refunds.  HRB has released the following statement:

“H&R Block has confirmed with the IRS that there was an issue with certain tax returns filed before February 22, 2013 that included certain education tax credits claimed on Form 8863.  We have worked with the IRS to expedite a solution to this issue for all of our affected clients.”

If you are a current HRB client, and have received notification from the IRS concerning the early filing of your tax return–or you think you may be affected–it is advised that you contact your local HRB office, or contact their executive headquarters by calling 1-800-HRBLOCK.

Source: ABC

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

Avoid Audit Red Flags

Nothing brings on the cold sweats like an official letter from the Government; particularly the IRS. Like being pulled over by the police while driving, thoughts of everything you have ever done (or may have done) wrong begin to flood your mind. There are two different classes of IRS Audits: Correspondence Audits & Desk Audits.

A Correspondence Audit is by far the most common type of audit the IRS issues to Taxpayers. These are generally the lowest level of an audit and usually involve small amounts of money. Verification of income & expenses are done almost completely by Mail or Fax and you may never even speak to your auditor. Conversely, A Desk Audit–or Office Audit–is when the IRS directs a taxpayer to an IRS office for an in-person interview. These generally involve larger amounts of money.

Regardless of what type of Audit a taxpayer receives, thoughts of asset seizures and/or jail time are common worries. However, being locked up or having your bank account seized are very rare. Usually, the punishment is simply the difference in tax calculated in the IRS’ favor, accompanied by a late payment penalty and interest. If a taxpayer can’t pay the penalties and taxes immediately, the IRS will usually accept a payment plan; as long as payments are made there is no need to worry that bank accounts will be raided or assets liquidated. Nevertheless, the stress and burden of the taxpayer to produce the documentation if very real. If fact, the Taxpayer Advocate wrote that Correspondence audits are not necessarily less work for the taxpayer. While there is no sure fire way to eliminate your chances to being audited (the IRS & States issue many random audits a year), there are many Red Flags a taxpayer can avoid to reduce their chances of being audited:

1. Not Reporting All Of Your Income: The IRS cross checks your income sources with 1099s and W-2s. If your income has dropped, that may be a red flag. Do not under report your income, no matter how tempting. If you have some self-employed income, report it and then use every deduction or write off you can find.

2. Claiming Large Charitable Deductions: The IRS calculated what the average donation is for a person in your income bracket. So if indeed you made a large donation last year be sure to have proper documentation. A cancelled check will do if the amount is under $250. Over that amount, you will need a letter from the charity.

3. Earning A Bunch Of Money: Over $100,000. You are 5 times more likely to be audited if you make the big bucks so be sure to document all of your deductions and income.

4. Taking Higher Than The Average Deductions: If the deductions on your return are disproportionately large compared to your income, the IRS audit formulas will go “tilt”. So if you have large medical deductions be sure you can prove them if need be.

5. Home Office Deduction: The IRS is always interested in this deduction, because history has shown that many people who claim a home office should not. If you work out of your bedroom or dining room, the deduction may be invalid.

6. Business Meals, Travel And Entertainment: Schedule C is filled with tax deductions for the self-employed individual. And the IRS has figured out that often some self-employed individuals tend to claim excessive deductions. They then make the assumption that all such individuals may cheat so Schedule C will get a review.

7. Claiming 100% Use Of Your Car For Business: If you are self-employed and use your car for business be honest with how much you actually use the car for business. Keep very good records of the miles you drive. I know it’s a nuisance, but necessary.

8. Cash Businesses: If you have a cash-intensive business like an antique shop, junk shop, car wash, a bar, a hair salon, or a restaurant you are probably on the IRS’ short list! Whenever a lot of cash is involved, the assumption is someone is slipping some under the table!

9. Large Cash Transactions: The IRS requires reports to be filed for cash transactions in excess of $10,000 involving banks, casinos, car dealers and other businesses.

10. Math Errors: If you do your tax return in long hand, check your math and be sure to sign the return and put in the correct social security numbers. A sloppy return can trigger an audit.

Doing a tax return yourself is almost never a good idea.  Having a professional with many years of experience preparing tax returns can help reduce your chances of being audited even more by avoiding common errors do-it-yourselfers make.  If you’d like more information about how R&G Brenner can help you, please contact us here.

Source: CBS

Protect yourself from Identity Theft

Identity theft has become a huge problem for the IRS.  Last year alone, there were nearly 650,000 cases of Identity Theft reported to the IRS.  Some believe the skyrocketing amount of cases are a direct result that the IRS now requires all tax returns to be filed electronically.  The IRS has implemented “digital safeguards” this year to intercept returns which they deem have a high probability of identity theft, and have deployed a task force of 3,000 agents who’s job it is to investigate Identity Theft.  Unfortunately, many taxpayers who are legitimate “early filers” are bound to get caught up in the web of “digital safeguards” and have their much-needed refunds delayed. And while the Task Force the IRS has deployed to investigate cases is good, it’s effectiveness is limited to after identities are already stolen are returns are filed fraudulently; no real relief to the victims. While this influx of electronic data has clearly exposed the IRS safeguards of personal & private electronic data to be lacking, the are certain steps that the taxpayer can take to help secure their sensitive information:

1. Avoid sending or receiving W2′s, 1099′s or any other personal tax documentation to or from anyone by e-mail.  Encryption offers some defense, but there are still safer ways to communicate your tax data.  REMEMBER: A single W2 or 1099 contains your name, address, social security number/EIN; all the info that any would be thief needs to file a fraudulent return.  An email server can be anywhere in the world and could be susceptible to attack.  Furthermore, the email accounts of the sender and receiver are susceptible to hackers as well especially since it has been shown that password security for the average user is sorely lacking.  The best alternatives are to a) send everything by mail or b) fax your documentation (however many fax services are increasingly turning to “E-Fax” technology whereby faxes are converted to emails…thats why option a) is still the most secure.)
2. Do not carry your social security card with you, or supply your SS# to anyone over the phone/internet without confirming who they are and why they need it.  This appears to be a “no brainer”, but many taxpayers carry their Social Security numbers in their wallets/bags along with their driver’s licenses and IDs. Again, a lost wallet gives everything a thief needs to steal identities. Beware of online & phone scams as well asking for your SS#’s.  The IRS will NEVER request sensitive private information over the web/phone unsolicited.
3. Maintain physical safe-guards to protect your private data.  This is as simple as a locking file drawer or cabinet.
4. Maintain digital safe-guards.  Sometimes it is impossible to keep all your private information only in paper format.  If you keep data on your computer it is important to have in place: a) strong passwords which are changed frequently b) a firewall; never plug a wire directly into your computer from a your broadband modem c) anti-virus software.
5. Verify your credit report.  This should be done once every 12-18 months.  Anything out of the ordinary like a steep drop in your rating is a good indicator that your identity may have been compromised.
6. Optional: Obtain Identity Theft Protection.  If you have ever been a victim of identity theft, buying protection is recommended; who knows who still has your information out there?  If you relay or store a lot of personal data via the web, protection may be a good idea as well.  There are many affordable services that would be well worth the cost if you become a victim of Identity Theft just once.

While there is no “magic bullet” to prevent Identity Theft entirely, following the general rules above will limit your exposure. If you’d like more information on how to safeguard yourself and your family from Identity Theft–or have any tax related inquiries–feel free to contact and R&G Brenner professional here, or call us toll free (888) APRIL-15.