After Documentary, Scientology’s Tax-Exempt Earnings Attracting Attention

Scientology's Tax Exempt Earnings Under Scrutiny
Scientology’s Tax Exempt Earnings Under Scrutiny

The Church of Scientology is getting a lot of attention these days thanks to “Going Clear”, HBO’s recent documentary on Scientology and a number of its practices. One aspect of Scientology which is receiving even more attention than before is the church’s tax-exempt status. Part of the controversy extends to how the Church of Scientology actually received its tax-exempt status—and to just what ends it uses it. After being hit with over 2,400 lawsuits at once from Scientologists, the IRS, after years of rejecting Scientology’s requests for a change in their tax status, gave it tax exemptions typically applied towards churches in 1993.

Tax Exemptions All Around

While the Church of Scientology hasn’t issued a clear response to questions raised by the documentary, one thing that’s definitely not in question is whether Scientology is making use of its tax-exempt status. Fortune’s Chris Matthews, citing the Scientology news website The Scientology Money Project, estimates that the Church of Scientology is worth somewhere in the area of $1.75 billion, with most of that money wrapped up in real estate. About 70% of that real estate is tax-exempt, meaning that a change in tax could possibly land the church a tax bill of $20 million or so a year.

Matthews cites a number of different sources which make a compelling case that Scientology uses its tax-exemption in ways that are clearly commercial, with examples such as a Tampa Bay Times investigation from 2010 which discovered that Scientology had not been paying a 5% occupancy tax for years. It turns out that Scientologists visiting the head offices in Clearwater were staying at hotels owned by Scientology without paying the tax. It is cases such these, now becoming increasingly visible as more similar stories emerge, that are keeping the debate surrounding Scientology’s tax-exempt status alive in the public.

Against the Public Interest?

In a recent interview with The Wrap, Alex Gibney, the director of Going Clear, noted that the main argument against Scientology losing its tax-exempt status was not predicated on whether or not it’s a “real” church, but rather that Scientology wields its tax-exempt status in order to pursue policies which are not in the public interest. In his documentary alleging that people working for the Church of Scientology often earn as little as 40 cents an hour and accusing the Church of illegal imprisonment and torture at the highest levels, Gibney’s central argument departs from the usual tack: that Scientology isn’t a real religion. Gibney argues instead that the religion is a public threat.

While tax exemption is hard to get, it’s also extremely hard to lose, and the IRS will require a great deal of proof of the claims like those made in the documentary and those from former church members who see themselves as victims of a cult. The Church of Scientology reportedly keeps files on all its members to use against them in case they leave the church, making getting that proof even more difficult than it otherwise would be. The evidence presented in Going Clear is damning, but it hasn’t cost Scientology its tax-exempt status—yet.

Filing for Divorce? 5 Important Tax Tips

5 Tax Tips For Divorced Couples
5 Tax Tips For Divorced Couples

Divorce can be a sensitive topic and a difficult period of time for all the parties involved. Whether you live in a common law or community property state, the process of filing taxes once the divorce has been finalized can be both emotional and complicated. Deciding how assets are split, the cost basis of these assets, new filing status and even which former spouse will claim children as dependents are all important considerations that go into the tax filing process after divorce. Here are 5 things to keep in mind when filing taxes after a divorce

#1 Determine Which Taxpayer Will Claim Children as a Dependent

After 2009 a tax filer with shared custodial rights of a child or children must cede their claim for a tax exemption to the controlling ex-spouse by filing Form 8332. The significance of this filing should not be taken lightly. A custodial parent who is able to claim a child as a dependent is permitted a deduction of $3,900 on their tax return, which reduces their taxable income. This applies to all children living at home at least 6 months old up to age 19, or 24 if the child is a full-time college student.

#2 Determine Your New Tax Filing Status

A divorce will change a formerly married filing separately or joint filing status to single, regardless of when the divorce was finalized within the tax year. Also consider that if you want to file as head of household, you will have had to have lived apart from your ex-spouse for at least six weeks and contribute more than half of the money to support the household. Being able to file as head of household can result in a bigger tax savings, so review your situation–or have and experienced tax professional review your situation–carefully.

#3 Understand the Impact Alimony Will Have Upon Divorce

Alimony may be necessary as a source of income for a divorcing spouse that has either stopped working, is returning to the workforce or is making significantly less than the other spouse. Be careful, however, as alimony payments made from one spouse to another are considered taxable income to the recipient spouse. Depending on your income level, if you are the one receiving alimony from your former spouse, the additional income could affect your tax bracket potentially pushing you into a higher bracket and a bigger tax liability.

#4 Understand the Impact of Dividing Assets Upon Divorce

There are some tradeoffs that come when assets are divided, particularly a home. Gains that may have been subject to exemption as a result of a sale, for example, would be halved if the asset is sold under a divorce decree. The spouse who receives the home as part of the divorce settlement (if a sale is not ordered) will have the ability to claim the mortgage interest deduction. Discuss with a tax professional carefully how the receipt or sale of certain assets will show up on your tax return and what tax benefits or disadvantages you will receive or give up.

#5 Understand How Divorce Will Affect Your Retirement Plan

Many times divorce results in the splitting up of retirement assets held by a working spouse, such as those held in an IRA or 401(k). Be sure to secure what is known as a qualified domestic relations order (QDRO) in order to secure treatment of these assets as your personal retirement assets and not those of your former spouse. Failure to do so could result in disastrous tax treatment once those assets pass from one spouse to another, such as in the case of death.

It’s important to take all the details of a divorce into account when filing your taxes. If you have questions about what you are entitled to and how your tax status is changing after a divorce, don’t hesitate to contact an experienced R&G Brenner tax professional

What Do I Do If I Haven’t Received My Tax Refund?

Follow These Steps To Track Your Refund
Follow These Steps To Track Your Refund

Filing your tax return was stressful, but now that it’s done you know the amount you’ve got coming and you can’t wait to get your hands on it. This is understandable; we all usually have that refund earmarked for something. That’s why it can be so frustrating when your tax refund doesn’t arrive on time. Read on to learn what to do if you’ve been waiting an exceptionally long time for your tax refund.

Gather Some Information

The first thing you should do when you have yet to receive your federal tax refund is to gather your social security number, filing status and the exact amount that you expect to get so you can check your return status online or over the phone. Having this information close at hand is necessary to start the process.

Check the Status of Your Return

It’s important to first check your return status before you check your refund status. You can do so over the phone or by logging in securely to your account on the IRS website. If you used an e-filing service to process your return, inquire about your status with that company. Many such services offer online log-ins where you can easily check your account. If you didn’t use an e-file service, you can call the IRS toll-free at 1-800-829-1040. If you are lucky to speak to an agent during your first call, hopefully they will be able to tell you if there was a delay, and what the cause was. Often, the return simply hasn’t been processed yet.

Once you’ve confirmed that your tax return has been processed, you can check your federal tax refund status. If you opted for a direct deposit into your bank account, call the bank and see if the check has been deposited. If it hasn’t, a quick way to check on your status is to use the Where’s My Refund? tool provided by the IRS and you can track where your refund is at any time. The site is updated every 24 hours in the evening, so you can start checking it the day after you e-file your return (or a month after you’ve mailed it in).  You can also call the IRS at 1-800-829-1954 to determine where your check is and why it’s taking so long.

Reasons for Delay

Tax season is a notoriously busy time for the IRS: people are filing taxes, refunds are being processed and issues are being sorted. If you wait to file close to the deadline of April 15th, you could wait longer than if you filed a month or two earlier. In some cases, refunds and identities can be stolen. If you suspect suspicious activity as the reason for your refund delay, contact the IRS immediately at 1-800-829-1040.

Often times, there are good reasons why your refund has been delayed. If you opted for a paper check from the IRS, expect to wait at least twice as long as if you did direct deposit. In order to minimize wait time in the future, plan on e-filing with a direct deposit option next year.

What If I Forgot To Include Information On My Taxes?

Forgot Something On Your Tax Return?  Don't Worry!
Forgot Something On Your Tax Return? Don’t Worry!

So, you worked hours on your tax return, gathered your documents, filed on time and you are now awaiting your tax refund with eager anticipation. All is well until that moment of mild terror when you realize you forgot to include a vital document or deduction on your taxes. Don’t panic: all is not lost. There are ways to include missed information on your taxes, even if you’ve already filed them.

File an Amended Tax Return

When you’ve omitted information on your return, the IRS allows you to file an Amended U.S. Individual Income Tax Return called Form 1040X. However, you can’t e-file amended returns; they’ll have to be submitted it in paper form which increases the wait time by many weeks for any potential additional refunds.

Reasons to File

There are lots of reasons you might need to file an amended tax return, but there are some things that don’t necessitate one. You’ll need to file a 1040X form if you have experienced a change in your filing status, income, credits or deductions. But you do not have to file if you caught a math error after the fact. The IRS is pretty good about catching these types of mistakes and usually adjust these automatically for you. For example, If you forgot to attach the proper tax forms and a W2 is missing,  there’s no need to file this amended form. You should get a request from the IRS requesting any missing items. The IRS can easily find income that you may have omitted from your tax return, but sometimes it can take a very long time for the IRS to notify you.  That means if you made an error where you underpaid your taxes in some manner, you will accrue penalties and interest until your tax liability is paid in full.  It could pay for you to file an amended return to minimize penalties & interests.  On the other hand,  the IRS isn’t as well-equipped for finding missing credits or deductions that you may have overlooked, and which could increase your refund.  In this case, don’t wait until you get a letter from the IRS looking for more information. Instead, be proactive and file the amended return.  After all it’s your money and the IRS does NOT have to pay you interest for holding onto your well deserved refunds.

Rules

You have three years from the original filing date to submit Form 1040X, or two years from the date of tax payment.   You’ll need to submit a separate 1040X form for each tax return you’re amending and mail them separately to the IRS. Also, don’t assume they are all being mailed to the same mailing address.  There are usually separate processing PO Boxes for each tax year you are amending.  If you plan on claiming more of a refund, you must wait until you get your original refund in the mail or via direct deposit before filing the 1040X. Again, keep in mind that amended refunds take awhile to process, so it could take up to 12 weeks before you receive anything. If you owe more taxes as a result of the amended return, pay what you owe right away to avoid fees and penalties from piling up, as the IRS will begin charging you based on the due date of your original tax return.

Track Your Status

Similar to tracking your original refund status, the IRS has a Where’s My Amended Return? tool (you can also check R&G Brenner’s Where’s My Refund page as we include State Refund links as well) that you can use to track your amended return’s status. Alternatively, you can call the IRS at 866-464-2050. Have your taxpayer identification number or social security number handy, along with your date of birth and zip code.

If you forgot to include some vital information on your tax return, follow the steps above to make sure you pay all the right taxes and get your full refund.  Or, simply contact an experience R&G Brenner tax professional today, and we’d be happy to assist you.

IRS: Get Refund Info Every 24 Hours

The IRS Released the following video.  Please watch for some valuable Tax Refund procedure information.  Highlights include:

  • 9 out of 10 Refunds received within 21 days
  • Use IRS Mobile App “Wheres My Refund”
  • Refund information available as soon as 24 hours after submitted to IRS

Source: IRS.gov