Archive for Taxpayer Advocate

Loving v. IRS deals blow to IRS Regulation of Tax Return Preparers

January 21, 2013 Enrolled Agent, IRS Enforcement, PTIN, Tax Abuse, Tax Court, Tax Fraud, Tax Guidance & Preparation, Tax Preparer, Tax Problems & Requests, Tax Whistle Blower, Taxpayer Advocate

In Loving v. IRS the IRS’ authority to regulate commercial tax return preparers has been successfully challenged. United States District Court for the District of Columbia Judge James E. Boasberg granted Loving’s motion for summary judgment describing the IRS Rules as “Ultra Vires.”

“Ultra Vires” as I understand is a legal term meaning “beyond the powers” referring to an activity that exceeds the powers granted to the person (or entity) engaging in that activity creating what the opinion calls “an invalid regulatory regime.” 

As I further understand this means that tax return preparers who have not yet taken the competency test do NOT have to take it.  It also means that there will be no Registered Tax Return Preparers (RTRPs) with the IRS and that the industry goes back to the way things were in 2009, before the Tax Return Preparer Initiative was launched. The wild, wild west where incompetency and fraud ran rampant. The only exception noted is that all tax return preparers still must register for and receive an annually renewable practitioner tax identification number or PTIN.

How will the IRS respond?  This will be interesting to watch develop. Check out The Original Complaint.

 

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IRS Standards for Continuing Education Providers and Accrediting Organizations

November 26, 2012 Tax Guidance & Preparation, Tax Preparer, Taxpayer Advocate, Taxpayer Identification Number

The Internal Revenue Service announced the standards to become an IRS-approved Continuing Education (CE) Provider and the requirements to become an IRS CE Accrediting organization.  The guidance paves the way for the implementation of new CE requirements for certain tax return preparers starting next year.

Individuals who are required to take the Registered Tax Return Preparer competency test before the end of 2013 must begin completing continuing education courses in 2012. The 15-hour annual requirement consists of 10 hours of federal tax law topics, three hours of tax law updates and two hours of ethics and/or professional conduct. Preparers must obtain the courses from IRS-approved providers.

To be an IRS-approved CE Provider, an organization must be one of the following:

  • An accredited educational institution,

  • Recognized for continuing education purposes by the licensing body of any state or U.S. territory,

  • Approved by a qualifying organization as a provider of CE on subject matters designed for registered tax return preparers, enrolled agents, and enrolled retirement plan agents (such qualifying organizations will be known as accrediting organizations), or

  • Any other professional organization, society or business recognized by the IRS as a provider of CE on subject matters designed for registered tax return preparers, enrolled agents, and enrolled retirement plan agents.

Any organization that wants to become an accrediting organization can immediately submit the required documentation outlined in section 4 of Revenue Procedure 2012-12 to the address provided in the revenue procedure. Once approved, any accrediting organizations will be publicized by the IRS and must renew their status as accrediting organization with the IRS every three years.

New provider application process

Organizations in all four categories must obtain an IRS CE provider number. Organizations are able to apply through a new on-line process beginning today.  As part of the process, continuing education providers are required to pay an annual fee to the third-party vendor selected by the IRS to administer the CE provider application and renewal processes. The fee covers costs to maintain a public listing of all approved providers and to collect course completion information from providers, identifying to the IRS, by PTIN, those attendees who have completed a program. There is no additional IRS fee.

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IRS Restrictions on Contacting Taxpayers

October 1, 2012 Appeals & Audit Resolution, Audit Reconsideration, Audit Technique Guide, IRS Appeal, IRS Audit, IRS Collections, IRS Criminal Enforcement, IRS Enforcement, IRS Examination, IRS Mediation, Tax Abuse, Tax Guidance & Preparation, Tax Relief, Taxpayer Advocate, TIGTA

I’ve worked with many good people inside the IRS on a wide variety of cases. So please do not get me wrong I’m not bashing ALL IRS employees. However like any big bloated bureaucracy I’ve also worked with some real shit heads inside the IRS who take their orders to advocate on behalf of the US government a little too seriously. When indeed government bureaucrats should be focused on getting maters resolved some use their vested authority to wreak havoc on good people’s lives using what I refer to as procedural maneuvers.

One such example is when IRS Revenue Officers can negatively impact the ability of taxpayers to obtain appropriate and effective representation during collection investigations.  According to the Treasury Inspector General for Tax Administration (TIGTA) “IRS employees are required to stop an interview if the taxpayer requests to consult with a representative and may not bypass a representative without supervisory approval.” Evidently this is not happening as provided for by law in that “between October 2010 and September 2011, TIGTA’s Office of Investigations closed 19 direct contact complaints involving IRS employees, of which eight were disciplined or counseled for their actions by IRS management officials.” AKA – a slap on the wrist.

The IRS’s compliance with Internal Revenue Code Sections 7521(b)(2) and (c) is in my opinion woefully inadequate. The audit report I reference goes on to state that “in the sample of 73 cases, TIGTA found that 14 revenue officers deviated from procedures by: 1) contacting the taxpayer directly, instead of the authorized representative, on the initial or subsequent contact in the collection investigation, 2) not sending copies of taxpayer correspondence to the authorized representative, or 3) not allowing enough time for the taxpayer to obtain a representative.” The report in question clearly states “IRS personnel are intentionally disregarding the direct contact provisions of the Internal Revenue Code.”

As such if you are under investigation you need to know your rights. You also need to keep in mind that IRS employees are specifically trained to create the perception that they are ‘helping’ you ‘achieve compliance’ when indeed they are compiling evidence to portray you as a delinquent or even a criminal. Check out the report yourself here ->

http://www.treas.gov/tigta/auditreports/2012reports/201230089fr.html.

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IRS’ Taxpayer Advocate Service Changed Case Acceptance Criteria

August 31, 2012 Taxpayer Advocate

The Taxpayer Advocate Service (TAS) at the Internal Revenue Service changed the cases it will consider going forward. As of essentially today IRS TAS will generally NOT accept cases involving problems in these four areas:

1. processing of original tax returns,

2. processing of amended returns,

3. Processing of rejected and unpostable returns, and

4. injured spouse claims.

You can receive consideration from TAS for opening a case file if you are suffering an economic burden, were referred by a congressional office, and if you specifically request TAS gets involved.

Cases TAS will accept are those that fall into the following four categories:

1) Where a taxpayer is experiencing some financial difficulty, emergency, or hardship, and the IRS needs to move much faster than it usually does (or even can) under its normal procedures.  In those cases, time is of the essence.  If the IRS doesn’t act quickly (for example, to remove a levy or release a lien), the taxpayer will experience even more financial harm.

2) Where many different IRS units and steps are involved, and the case needs a “coordinator” or “traffic cop” to make sure everyone does their part.  TAS plays that role.

3) Where the taxpayer has tried to resolve a problem through normal IRS channels but those channels have broken down.

4) Where the taxpayer is presenting unique facts or issues (including legal issues), and the IRS is applying a “one size fits all” approach, isn’t listening to the taxpayer, or does not recognize that it needs new guidance for those circumstances.

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IRS Stakeholder Liaison Meeting Summary

July 31, 2012 IRS Appeal, IRS Audit, IRS Centralized Insolvency, IRS Collections, IRS Criminal Enforcement, IRS Enforcement, IRS Examination, Tax Fraud, Tax Guidance & Preparation, Tax Preparer, Tax Problems & Requests, Taxpayer Advocate

The following are the notes from the most recent IRS Stakeholder Liaison Meeting held in Denver Colorado as prepared by IRS Senior Stakeholder Liaison Deborah Rodgers

Michael Shuler,  Local Taxpayer Advocate

Nina Olson, the National Taxpayer Advocate’s (NTA) objectives report was released in June, revealed some issues that will be coming out in the annual report in January. Some of Nina’s concerns were around the difficult filing season. The expiring tax provisions cause chaos for the tax professionals and taxpayers, when Congress waits until the end of the year to address these provisions. The AMT tax, sales tax deduction, mortgage insurance premium deduction, and age 70 1/2 IRA charitable contributions are included in this list and are  usually retroactive when reinstated.

In 2013 ,  the Bush tax cuts sunset. These include the long-term capital gains rate cuts, child tax credit and the adoption credit.

Tax fraud and identity theft are growing. Innocent people are caught in the system to prevent fraud ID theft. The ID theft line is understaffed. One in nine calls were getting through during the filing season.

The Advocate’s office is also concerned about IRS disregarding the Taxpayer Assistance Orders (TAOs). The TAO process is provided by statute. A TAO is effective because it can raise issues to higher levels of management.  Taxpayer Advocate Service  is successful with TAOsevery day, but there are issues with the program raised in the NTA’s Objectives Report, including  there not being any consequences if the TAO is disregarded. The Systemic Advocacy Management System also known as SAMS is another very effective way to raise issues. Every one of these will get a high level contact and some result in systemic advocacy projects.  Sam’s link is:  http://apps.irs.gov/app/samsnet/IssueQualification.jsp

Question: Are you aware of any steps to fix the OVDP program?

Response:  No.  The OVDP program is closed.  The OVDI is the current program.  TAS has raised the issue through TAOs and a TAD about IRS not following their own FAQ #35 which appeared to state that reasonable cause and mitigating factors could be considered in the calculation of the closing  agreements.

Comment: In cases of inadvertent or inherited funds one size does not fit all.

Response: The IRS says that the participants can always withdraw from the voluntary program.  Most people don’t look at withdrawal as a viable option. It should be considered in those types of cases.

Comment: A lot of practitioners are concerned about their advice.  Although we cannot offer comment on what advice to provide to your clients, the National Taxpayer Advocate is continuing to advocate for changes to the program that will address the “one size does not fit all” criticism and provide for a more fair process for those who did not shift assets overseas to avoid tax reporting but inadvertently got caught in a non-disclosure.

Bessie Castro-Zepeda, Colorado Department of Revenue

Q: Why does the CDOR send out tax notices disallowing credits and deductions on e-filed returns PRIOR to reviewing the supporting documentation that is mailed in with form DR 1778 “E-filer Attachment Form”?

A: It is the policy of the Taxpayer Service Division, in the event of a review of a credit or deduction claimed on an e-filed return, to wait 30 days for supporting documentation to be received. If the documentation is not received after the 30 day window, the credits/deductions are denied and a letter is sent requesting the backup documentation.

Q: Why is the CDOR disallowing the Colorado Minimum Tax Credit on line 31 of Form 104CR when the credit is simply a calculation based from information reported on the Federal return?

A: The Colorado Minimum tax credit is being disallowed in cases where Form 104AMT is missing or incomplete. There may have initially been a training issue where the credit was being disallowed incorrectly by an examiner but for the most part, the credit is denied due to missing or incomplete information.

In general, CDOR and, specifically the Income Tax Accounting Section, only denies credits/deductions when there is missing or incomplete documentation. The tax booklet makes it clear what documentation is needed when a credit is claimed. Most of the issues we (Income Tax Accounting Section) run into are missing documentation on amended returns. The taxpayer may have claimed a credit on the original filing and supplied the appropriate documentation, but if the credit is unchanged (or even reduced) on the amended form and there is no supporting documentation we will deny it.

A few tips for filing this year: It is highly encouraged that e-file is used to file returns. Also, we encourage the use of our website, Revenue Online (www.colorado.gov/revenueonline) to file protests and for taxpayers to review their accounts. This is the preferred method to correspond with DOR as the phone system is very difficult to get through on.

The inclusion of forms (104cr, 104pn) and all backup documentation on original AND amended returns needs to be stressed. Even if a credit remains unchanged on an amended filing, it will be denied if the corresponding form is not attached.

To ensure payments are correctly posted to the proper account, ACH debits are recommended – as well as payment through our online portal (this is done through Revenue Online website).

Question: What if it is a carryover from prior year do we still have to resubmit?

Response: We will follow up on this question.

Goretti Lysek and Douglas Wildfong, Automated Collection Site (ACS)

Goretti spoke to the Colorado Society of Enrolled Agents in May about the new provisions of the Fresh Start program. She responded to some questions that came out of that presentation.

Question: When calling into ACS representative asked for Form 2848, then transferred the call and the next assistor asked for the 2848 again, what is happening?

Response: If the taxpayer identification number is input correctly the call will go directly to  ACS, otherwise it will be directed to Accounts  Management first.

Question: Practitioners were set up on an installment agreement and the installment agreement defaulted, no fault of the taxpayer.

Response: The installment agreement needed substantiation. This installment agreement should have been set up as an IA pending, but some assistors did not set IA pending so levies ensued. We reminded assistors about this problem.

Question: Why do federal tax lien withdrawals for direct debit installment agreements take so long?

Response: We need to get the first three months before withdrawal can take place, but it is taking six months and we will look into that.

If an installment agreement request is beyond ACS authority the case will be taken out of queue and sent to the field.

Question: Is the office that processes 433D’s separate from ACS?

Response: Yes, after it leaves ACS and gets manager approval, Compliance Services Collection Operation (CSCO) takes over. We are analyzing where the delays are and hope to improve the timing.

Michael: If there is a hardship bring it to the Taxpayer Advocate’s attention. The Taxpayer Advocate’s Office can withdraw a lien within 4 to 5 days. Taxpayer Advocate can address the issue separately from the direct debit installment agreement if they can’t wait for six months due to the hardship.

Diane Sandoval, Collection

Question: Are there any appeal rights available to third-party if a revenue officer asserts nominee/alter ego liability against him/her/it?  Are there any appeal rights for collection action taken against property held by a purported nominee/alter ego third-party?  In this context, if the Service files a tax lien and/or issues a Final Notice of Intent to Levy to a third-party nominee/alter ego, does that party have standing to request a hearing with Appeals?  What about the taxpayer?  Neither?

Response:  The nominee only has CAP appeal rights (using Form 9423); the nominee would not be granted CDP rights.  The taxpayer does not have an appeal right in regard to the nominee’s lien.  As far as post-appeal rights, they can petition based on the lien to the Federal District Court.

Question:  Historically, a revenue officer would grant an in-business taxpayer owing trust-fund tax an installment agreement, if, among other conditions, the individuals who would potentially be liable for the trust-fund recovery penalties would grant an extension to assess these penalties.  These assessment extensions are no longer requested and/or accepted, and the revenue officer now insists on making the assessments of the trust-fund recovery penalties before granting the in-business installment agreement.  Why did this change and is there any negotiation on this?  In some instances, a business might qualify for an installment agreement, but potentially responsible individuals will not consent to the assessment of the trust-fund recovery penalties, thus creating conflict which would not have previously presented itself.

Response: There is not a one-size-fits-all answer for this question; the answer will depend on the type of installment agreement and the individual taxpayer.

If a Partial Payment Installment Agreement is being considered, the Trust Fund Recovery Penalty (TFRP) will usually be assessed because the underlying liability will not be fully paid.  The only exception to this requirement is in circumstances in which there is no collection potential from the responsible officers.

Before granting In-Business Installment Agreements the TFRP must be considered, the Assessment Statute Expiration Date (ASED) protected, and an assessment determination made on all in-business trust fund cases.  Area management must ensure consideration is given to securing waivers to extend the statutory period for assessment from each responsible individual when the delinquent taxes will not be fully paid prior to the original ASED.  In general, the Revenue Officer will not request the assessment of the TFRP if business taxpayers meet the terms of the installment agreements.  However, TFRPs must be considered on the potentially responsible persons of the business entity based on the following procedures.  If the agreement will not full pay all balances due at least one year prior to the earliest ASED, then the RO will assemble all documentation for completion of the penalty to the point of proposing the assessment, complete interviews of all potentially responsible parties, secure F433-A (Collection Information Statement) from all potentially responsible parties and request signature of F2750 (Waiver Extending Statutory Period for Assessment of the Trust Fund Recovery Penalty).  If a potentially responsible officer refuses to extend the ASED, and the TFRP is determined collectible, the RO is to complete and recommend assessment of the TFRP for that responsible person.  If potentially responsible persons have the ability to pay from current assets or income, the Revenue Officer should request payments be made to reduce the trust fund portion of the liability.  If they have the ability to make a significant payment or payments on the trust fund portion of liabilities, but do not make such payments (or do not make plans for payment from personal assets), the Revenue Officer should consider recommending assessment of the TFRP.

If taxpayers are currently ”Repeaters,” the TFRP will normally be assessed.

If accounts qualify for In-Business Trust Fund  Express agreements, the Revenue Officer must ensure that the ASED is protected.

Question:  Closely related to #5, it seems that many (but not all) revenue officers will resolve a business account with trust-fund tax issues and assess the trust-fund recovery penalties where appropriate, but then close out the file without resolving the individual collection cases.  This creates the needless hassle of having to resolve the individual trust-fund recovery penalty cases with the Automated Collection System, even though the revenue officer is generally in the best position to resolve the individual cases.  Is this new policy, or does this approach differ depending upon the area or manager?  In one circumstance, a revenue officer properly assessed the trust-fund recovery penalty, but refused to work the individual collection case and closed it.  When this individual case was eventually assigned to the Automated Collection System, they indicated that it was at too high of a dollar threshold to resolve and sent it back to the field……to the same revenue officer.  Is this an isolated incident?

Response:  It is my expectation in the Denver Territory that related IMF and BMF cases should be worked simultaneously by the same Revenue Officer, as appropriate.   However, if there are no additional assessments on the IMF case and the RO has to wait on the TFRP to be assessed, there would be no case for the RO to hold open or to work until the TFRP assessment has been completed and posts to the account.

Lois Deitrich, Examination

Identity theft is a very hot topic being seen daily in exam, as well as our walk-ins across the country. SB/SE Exam proactively required every employee to take a briefing on identity theft by 12-31-2011.  Unraveling returns erroneously filed is difficult; the first return received by the Service posts (since the Service doesn’t know it is not the “real” return) and when the legitimate taxpayer files their return; that is often the first indication the Service (and the taxpayer) has that their identity has been stolen.

Following link is to identity theft information. http://www.irs.gov/privacy/article/0,,id=186436,00.html

Phishing schemes are still alive and well- phishing@irs.gov  is the link to send your suspicious e-mails to. We close them down as quickly as possible. IRS cannot e-mail you back but we are working on it a way to get a secure “portal” to legitimately answer POAs and taxpayers who email the Service.

We have frequently asked questions for the Offshore Voluntary Disclosure Program (OVDP) program on www.irs.gov . This program is heavily governed by technical experts. Examiners will discuss the options for taxpayers to ”opt-out” or remove themselves from the program when their participation in the program is not feasible.  In some instances, the penalty on the account exceeds 300% of the account.  Examiners look at what is most sensible and work very hard to work with POAs and taxpayers to achieve a good result for both the taxpayer and the Government.

Examination is not sure how we are going to respond to health care. There are a lot of high level people working on it.

Taxpayers who denounce citizenship because of taxes are usually approached as offering a frivolous argument.  For more information on frivolous arguments, http://www.irs.gov/taxpros/article/0,,id=159853,00.html

Gary Easley and Linda Alden, Appeals

Gary Easley replaced Jack Estoll as the Appeals Lead Team Manager. Appeals hired Appeals Officer Melodie Farris who is an attorney.

Appeals focus at the Nationwide Tax Forums is the topic of fast-track mediation.

Question: How long is it taking to complete a non-docketed case in Appeals?

Response: Inventory has dropped somewhat, hopefully will be less than a year to work out an agreement.

A fast-track appeal is a way to get resolution to a case more quickly. If it doesn’t work the taxpayer still has appeal rights hearing within 120 days. This process can help move the parties from their hard and fast positions.

Question: Are only certain people allowed to work such cases?

Response: Yes mediation training is required.

Question: Can small (non-Large Business and International) tax cases be heard?

Response: Yes, we have five trained mediators in Denver.  And if necessary, we can bring in other trained mediators if we need to.

Question: What type of cases can go through this program?

Response: See Publication 4167 and associated Revenue Procedures for details.

Lilia Ruiz, Criminal Investigation

Criminal Investigation investigates ID theft issues. We have one employee assigned to ID theft issues, his name is George Warnock at 303-603-4931. Criminal Investigation looks to see if these ID theft issues are tied to other schemes. We continue to investigate unscrupulous tax preparers.

Question: Non foreign voluntary disclosures where do these go?

Response: The Domestic Voluntary Disclosure (DVD) will need to be made to the Philadelphia Lead Development Center.  Attached is a template that POAs and taxpayers can use to disclose information relative to their domestic disclosure.

It was decided that centralization of this process is essential to processing these types of disclosures.  Once the Criminal Investigation Philadelphia Lead Development Center reviews the information they will direct the POA or taxpayer on where to send all other applicable documents.

The website addressing voluntary disclosures has not been updated to reflect this process and it still lists our local agent as a contact.  However, the attached procedures should be followed.

Question: Is there a resurgence of frivolous positions?

Response: No more than normal– just one of the things we investigate.

Question: Will you pursue criminally?

Response: Not necessarily depends on the facts and circumstances. We prefer to go after the promoter.

Question: Any other hot topics?

Response: False 1099s, tax evasion schemes.

Nancy Carver, Counsel

Nancy Carver is the new Area Counsel Associate for the district. She left private practice in New York and has been with the Internal Revenue Service for 12 years, spending most of her time in Washington DC.

Area Counsel does advisory work for other functions. We preview statutory notices, and indirect methods of proof. Tax Court cases include international issues, conservation easement cases, abusive Roth IRAs, identity theft, hobby losses, first-time home buyers, unreported income, cancellation of debt, innocent spouse, and collection due process.

Question: Is there anyone working medical marijuana issues?

Response: One person in the group is working those types of cases.

Tax Court attorneys don’t have settlement authority. They must go through Nancy Carver or Bob Varra.  If more than $1 million it is elevated.

If an attorney gives advice on an Exam case, the same attorney cannot handle the case in Appeals.

Michael Rogers, Governmental Liaison

Governmental Liaison (GL) has scaled down to two areas East and West.

GL is engaged in several data exchange programs with State of Colorado. The state income tax levy program netted IRS 18 million in its first year of state refunds.

Our partnership with the Department of Motor Vehicles includes background checks for car dealers. IRS will perform compliance checks for Department of Motor Vehicles.

Colorado Department of Labor will be participating in the Treasury Offset Program (TOPs).  This will allow them to intercept federal income tax refunds to offset any debt a person may have with the Dept. of Labor.

We are currently in dialogue with the city of Denver to institute licensing compliance checks annually.

Our congressional office visits are centered on the issue of identity theft.

Charles Musso, Supervisory Taxpayer Advocate

Chuck accepted a job with the Safeguards division.  Chuck also mentioned that he interviewed for the Local Taxpayer Advocate position.

Chuck mentioned that the State issued a public announcement declaring the Colorado Wildfire areas disasters.

Kristen Hoiby, Stakeholder Liaison Field

Stakeholder Liaison is still in the business of responding to education requests from practitioner organizations. We are exploring new and innovative ways to educate the practitioner community. We are in the process of obtaining our own webinar system and we also partner with other agencies in using their webinar systems.

One of our major focus areas is the registered tax return preparer’s and enrolled agent CE program.

There are several webcasts that are available to view on IRS.gov. They include ethics and  authorizations and can be found at http://www.irsvideos.gov/Professional/UpcomingWebinars

With all the discussion today, Kristen mentioned a useful chart on IRS.gov which is a  comparison of FATCA vs FBAR requirements.

She also encouraged practitioners to sign up for the electronic FATCA information list.

There are many questions surrounding the RTRP test and why so many individuals have not yet taken the test. We encourage practitioners to take the test as soon as possible.

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2011 IRS Changes

February 13, 2012 Tax Guidance & Preparation, Tax Preparer, Taxpayer Advocate

Be sure to check out the IRS - Fact Sheet 2012-01 2011 Changes Offer Tax Benefits to Almost Everyone. The following are excerpts worthy of note:

Due date of return. File your federal tax return by April 17, 2012. The due date is April 17, instead of April 15, because April 15 is a Sunday and April 16 is the Emancipation Day holiday in the District of Columbia.

New forms.In most cases, you must report your capital gains and losses on the new IRS Form 8949, Sales and Other Dispositions of Capital Assets. Then, you report certain totals from that form on Schedule D (Form 1040). If you had foreign financial assets in 2011, you may have to file the new IRS Form 8938, Statement of Foreign Financial Assets, with your return.

Standard mileage rates. The 2011 rates for mileage are different for January 1 through June 30 than for July 1 through December 31. For business use of your car, you can deduct 51 cents a mile for miles driven the first half of the year and 55 ½ cents for the second half. Medical and moving mileage are both 19 cents per mile for the early half of the year and 23 ½ cents in the latter half.

Standard deduction and exemptions increased. The standard deduction increased for some taxpayers who do not itemize deductions on IRS Schedule A (Form 1040). The amount depends on your filing status. Also the amount you can deduct for each exemption has increased $50 to $3,700 for 2011.

Self-employed health insurance deduction. This deduction is no longer allowed on Schedule SE (Form 1040), but you can still take it on Form 1040, line 29.

Alternative minimum tax (AMT) exemption amount increased. The AMT exemption amount has increased to $48,450 ($74,450 if married filing jointly or a qualifying widow(er); $37,225 if married filing separately).

Health savings accounts (HSAs) and Archer MSAs. The additional tax on distributions from HSAs and Archer MSAs not used for qualified medical expenses increased to 20 percent. Beginning in 2011, only prescribed drugs or insulin are qualified medical expenses.

Roth IRAs. If you converted or rolled over an amount from a traditional IRA to a Roth IRA or designated Roth in 2010 and did not elect to report the taxable amount on your 2010 return, you generally must report half of it on your 2011 return and the rest on your 2012 return.

Alternative motor vehicle credit. You can claim the alternative motor vehicle credit for a 2011 purchase only if the vehicle is a new fuel cell motor vehicle.

First-time homebuyer credit. The credit expired for most taxpayers for 2011. Some military personnel and members of the intelligence community can still claim the credit in 2011 for qualified purchases.

Health coverage tax credit. Recent legislation changed the amount of this credit, which pays qualified health insurance premiums for eligible individuals and their families. Participants who received the 65 percent tax credit in any month from March to December 2011 may claim an additional 7.5 percent retroactive credit when they file their 2011 tax return.

Mailing a return. The IRS changed the filing location for several areas. If you’re mailing a paper return, see the Form 1040 instructions for the correct address.

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How to Choose a Tax Expert

January 10, 2012 Estimated Taxes, PTIN, Tax Abuse, Tax Fraud, Tax Guidance & Preparation, Tax Preparer, Tax Relief, Taxpayer Advocate

With the fallout taking place in the financial services sector as represented by rampant layoffs everywhere you might have noticed that more and more people are going out on their own and hanging their shingle as having a certain tax expertise. It is a natural transition for many but beware usually these people lack acumen as a novice to most any industry would. Worse still many of these sales people are used to working for commissions and as such can only think in terms of wringing money our of your pocket and dripping it into theirs. It never ceases to amaze me what people will stoop to in chasing the almighty dollar. As the Vice President of the Colorado Society of Enrolled Agents I routinely find myself getting reports of specific and egregious allegations of tax practitioner misconduct in violation of United States Treasury Department Circular 230. The point of this blog post is to choose your tax ‘expert’ with care. Take ownership of the process. Make sure that you trust the person you are choosing to be reliable and consistent. Also make sure this person has a reasonable knowledge base and a solid support network. Ultimately you are legally responsible for what is reported on your tax return.

To make an effort at mitigating fraud and abuse starting this year the IRS has mandated that tax preparers who sign tax returns must enter their required IRS Preparer Tax Identification Number (PTIN). The following are some other helpful points to ponder as most recently produced by the IRS.

1. Check the preparer’s qualifications. New regulations require all paid tax return preparers to have a Preparer Tax Identification Number. In addition to making sure they have a PTIN, ask if the preparer is affiliated with a professional organization and attends continuing education classes. The IRS is also phasing in a new test requirement to make sure those who are not an enrolled agent, CPA, or attorney have met minimal competency requirements. Those subject to the test will become a Registered Tax Return Preparer once they pass it.

2. Check on the preparer’s history. Check to see if the preparer has a questionable history with the Better Business Bureau and check for any disciplinary actions and licensure status through the state boards of accountancy for certified public accountants; the state bar associations for attorneys; and the IRS Office of Professional Responsibility.

3. Ask about their service fees. Avoid preparers who base their fee on a percentage of your refund or those who claim they can obtain larger refunds than other preparers.  Also, always make sure any refund due is sent to you or deposited into an account in your name.  Under no circumstances should all or part of your refund be directly deposited into a preparer’s bank account.

4. Ask if they offer electronic filing.  Any paid preparer who prepares and files more than 10 returns for clients must file the returns electronically, unless the client opts to file a paper return.  More than 1 billion individual tax returns have been safely and securely processed since the debut of electronic filing in 1990.  Make sure your preparer offers IRS e-file.

5. Make sure the tax preparer is accessible.  Make sure you will be able to contact the tax preparer after the return has been filed, even after the April due date, in case questions arise.

6. Provide all records and receipts needed to prepare your return. Reputable preparers will request to see your records and receipts and will ask you multiple questions to determine your total income and your qualifications for expenses, deductions and other items. Do not use a preparer who is willing to electronically file your return before you receive your Form W-2 using your last pay stub. This is against IRS e-file rules.

7. Never sign a blank return. Avoid tax preparers that ask you to sign a blank tax form.

8. Review the entire return before signing it.  Before you sign your tax return, review it and ask questions. Make sure you understand everything and are comfortable with the accuracy of the return before you sign it.

9. Make sure the preparer signs the form and includes their PTIN.  A paid preparer must sign the return and include their PTIN as required by law. Although the preparer signs the return, you are responsible for the accuracy of every item on your return.  The preparer must also give you a copy of the return.

10. Report abusive tax preparers to the IRS. You can report abusive tax preparers and suspected tax fraud to the IRS on Form 14157, Complaint; Form 3949-A, Information Referral (PDF 94K). Or directly contact The Office of Professional Responsibility (OPR). Also be sure to check out - Where Do You Report Suspected Fraud Activity?

Videos: Choosing a Tax Preparer – English | ASL  

Podcast: Choosing a Tax Preparer

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Taxpayer Advocate Service

April 5, 2010 Taxpayer Advocate

The Taxpayer Advocate Service is an independent organization within the Internal Revenue Service whose employees assist taxpayers who are experiencing economic harm, who are seeking help in resolving problems with the IRS, or who believe that an IRS system or procedure is not working as it should. Here are seven things every taxpayer should know about TAS.

  1. TAS is your voice at the IRS.

  2. TAS service is free, confidential, and tailored to meet your needs.

  3. You may be eligible for TAS help if you’ve tried to resolve your tax problem through normal IRS channels and have gotten nowhere, or you think an IRS procedure just isn’t working as it should.

  4. TAS helps taxpayers whose problems are causing financial difficulty or significant cost, including the cost of professional representation. This includes businesses as well as individuals.

  5. TAS employees know the IRS and how to navigate it. They will listen to your problem, help you understand what needs to be done to resolve it, and stay with you every step of the way until your problem is resolved.

  6. TAS has at least one local taxpayer advocate in each state, the District of Columbia, and Puerto Rico. You can call your local advocate, whose number is in your phone book, in Pub. 1546, Taxpayer Advocate Service — Your Voice at the IRS, and at www.irs.gov/advocate. You can also call our toll-free number at 1-877-777-4778 or TTY/TDD 1-800-829-4059.

  7. You can learn about your rights and responsibilities as a taxpayer by visiting the TAS online tax toolkit at www.taxtoolkit.irs.gov. You can also check out the TAS YouTube channel at www.youtube.com/tasnta.

Links:
Taxpayer Advocate Service
Publication 1546, Taxpayer Advocate Service – Your Voice at the IRS (PDF 902K)
Tax Topic 104, Taxpayer Advocate Service — Help for Problem Situations
Form 911, Request for Taxpayer Advocate Service Assistance (PDF 126K)
TAS YouTube Channel

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Martin Luther King and tax

January 20, 2010 Tax Guidance & Preparation, Tax Problems & Requests, Tax Relief, Taxable Income, Taxpayer Advocate

In honor of Martin Luther King, Jr. Day: reports on how some southern officials tried to use state tax laws to stop King and the nascent civil rights movement:

“In Alabama, … Governor John Patterson in early 1960 directed state revenue authorities to charge Martin Luther King, Jr., with tax evasion and perjury in completing his Alabama state income tax returns. The charges against King, who had already moved his ministry from the Dexter Street Church in Montgomery to his father’s church in Atlanta, specified that he had diverted money raised for the Southern Christian Leadership Conference (SCLC) into his own pockets without ever reporting it as income.” Kermit L. Hall, “Lies, Lies, Lies”: The Origins of New York Times Co. v. Sullivan, 9 Comm. L. & Pol’y 391, 404 (2004).

“The only person ever prosecuted under the Georgia income tax perjury statute was Martin Luther King.” Corey R. Chivers, Desuetude, Due Process, and the Scarlet Letter Revisited, 1992 Utah L. Rev. 449, 454 n.27

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How to Obtain a Transcript of Your Past Tax Information

January 20, 2010 IRS Transcript, Tax Guidance & Preparation, Tax Problems & Requests, Tax Relief, Taxpayer Advocate, Uncategorized

Taxpayers who need their past tax return information can obtain it from the IRS.

There are two easy and convenient options for obtaining free copies of your federal tax return information — tax return transcripts and tax account transcripts.

The IRS does not charge a fee for transcripts, which are available for the current year as well as the past three years.

A tax return transcript shows most line items from your tax return as it was originally filed, including any accompanying forms and schedules. It does not reflect any changes you, your representative or the IRS made after the return was filed. In many cases, a return transcript will meet the requirements of lending institutions, such as those offering mortgages and student loans.

A tax account transcript shows any later adjustments either you or the IRS made after the tax return was filed. This transcript shows basic data – including marital status, type of return filed, adjusted gross income and taxable income.

To request either transcript by phone, call 800-829-1040 and follow the prompts in the recorded message.

To request a tax return transcript through the mail, individual taxpayers should complete IRS Form 4506T-EZ, Short Form Request for Individual Tax Return Transcript. Form 4506T-EZ is only for individuals who filed a Form 1040 series return. Businesses, partnerships and individuals who need transcript information from other forms or need a tax account transcript must use the Form 4506T, Request for Transcript of Tax Return.

You should receive your tax return transcript within 10 working days from the time the IRS receives your request. Allow 30 calendar days for delivery of a tax account transcript.

If you still need an actual copy of a previously processed tax return, it will cost $57 per tax year and take much longer. Complete Form 4506, Request for Copy of Tax Form, and mail it to the IRS address listed on the form for your area. Please allow 60 days for actual copies of your return. Copies are generally available for the current year as well as the past six years.
Visit the IRS Web site, IRS.gov, to determine which form will meet your needs. Forms 4506, 4506T and 4506T-EZ can be found at IRS.gov or by calling the IRS forms and publications order line at 800-TAX-FORM (800-829-3676).

Links:
Form 4506-T, Request for Transcript of Tax Return (PDF 45.3K)
Form 4506, Request for Copy of Tax Form (PDF 42.3K)

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