Source: CBS News

Scam Season Is Heating Up

Tax season may be over, but the scamming season has just begun.  The NY State Department of Taxation has issued a warning to be on the look out for phony tax collection letters that have recently made the rounds.  Gov. Andrew Cuomo said:

“This tax season, New Yorkers should be wary of misleading collection notices posing as official government letters used by private entities to prey on taxpayers…I urge anyone who thinks they have received one of these deceptive notices to call the State Tax Department or Department of Financial Services so we can investigate and put an end to these schemes.”

And example of the false collection notices have be found by clicking here.

It is reported that these particular notices are being sent to taxpayers who have a tax debt, and once they call the phone number on the notice they discover that it is a private company that will settle your tax debt for “pennies on the dollar”.

Remember: The IRS & NY State Department of taxation will never contact or request private tax information via email or the internet.  If you received this or a similar scam you can contact the following agencies:

Department of Taxation and Finance – (518) 457-5181

Department of Financial Services – (800) 342-3736

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

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.

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

Source: CBS

$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.

IRS Addresses Delayed Refunds

As many taxpayers now know, this tax season has been anything but a walk in the park. The irresponsible last minute negotiations of our elected officials saved us from going over the fiscal cliff, but it also delayed the filing season by two weeks–the latest start to the tax season in history.  Even with the late start of the tax season, many forms were not ready to be accepted by the IRS.  Only last week did the IRS finally announce that all tax forms were ready to be accepted.  However, it appears the problems are now starting to show.

H&R Block (HRB) recently released a statement indicating that they mistakenly filed tax returns containing delayed forms too early.  Instead of receiving their refunds, HRB clients instead received a notification from the IRS.  Complicating this fiasco even more, is that some taxpayers refunds have been delayed but haven’t been notified.  When they contact the IRS or check the “Where’s My Refund” section of the IRS Website, they can’t even confirm that their tax return has been received or even being processed.  Furthermore, these problems are not limited to HRB clients.  Popular Do-It-Yourself tax programs like TurboTax and other tax pros are reporting similar delays.

@taxgirl reported that the IRS is attributing the problems to the revamped form 8863:

This weekend, the IRS announced that the revised form 8863 appears to be giving taxpayers fits. The revised form included check boxes at lines 23-26 which were added to confirm basic qualifications for taxpayers claiming this credit. They look like this:

Look familiar? According to IRS, if you don’t check the boxes, “there will be a delay in the processing of the taxpayer’s return.” Apparently a number of taxpayers are overlooking the check boxes, causing the delays.

It is still early, and I expect this problem to be more widespread and caused by more factors than are being reported.  When you factor in the delayed filing season, delayed forms, extra due diligence for lower income taxpayers claiming the Earned Income Tax Credit, the sudden and unexpected halt to the IRS’ Paid Tax Preparer registration & continuing education requirements, the IRS transitioning solely to it’s new Electronic Filing system and the well documented and increased instances of Fraud & Identity theft hitting the IRS, there is a recipe for disaster and some serious refund delays.  Stay tuned… 

UPDATE 3/12/13:

As many as 3 Million taxpayer could be affected by these delays.  What is most frustrating taxpayers is that they received notification that their tax return was accepted many weeks ago, yet when they check “Where’s My Refund” there is no information.  This is being dubbed the form 8863 “Debacle” by some.  The news is even worse for H&R Block clients.  HRB is claiming that the IRS did not make them aware of the changes made to the 8863.  So what was supposed to be a couple week delay is now taking “a few more weeks” on top of the initial delay.

Sources: Forbes & ABC