Tag Archive for IRS

It has been QUITE a tax season! A Review of IRS Activity

April 18, 2013 IRS Appeal, IRS Audit, IRS Centralized Insolvency, IRS Collections, IRS Criminal Enforcement, IRS Enforcement, IRS Examination, IRS Levy, IRS Lien, IRS Mediation, IRS Penalties, IRS Penalty and Interest Abatement, Tax Court, Tax Fraud, Tax Guidance & Preparation

According to the newly released 2012 IRS Data Book, the IRS collected almost $2.5 trillion in federal revenue and processed 237 million returns, of which almost 145 million were filed electronically. Out of the 146 million individual income tax returns filed, almost 81 percent were e-filed. More than 120 million individual income tax return filers received a tax refund, which totaled almost $322.7 billion. On average, the IRS spent 48 cents to collect $100 in tax revenue during the fiscal year, the lowest cost since 2008.

The IRS examined just under one percent of all tax returns filed and about one percent of all individual income tax returns during fiscal year 2012.  Of the 1.5 million individual tax returns examined, nearly 54,000 resulted in additional refunds.

An electronic version of the 2012 IRS Data Book can also be found on the Tax Stats and the following are some highlights worth noting.

In FY 2012, IRS initiated 5,125 criminal investigations.

In FY 2012, the IRS closed 60,793 applications for tax-exempt status and other determinations. Of those, the IRS approved tax-exempt status for 52,615 organizations. In FY 2012, the IRS recognized more than 1.6 million tax-exempt organizations and nonexempt charitable trusts.

In Fiscal Year 2012, General Counsel received 31,295 Tax Court cases involving a taxpayer contesting an IRS determination that he or she owed additional tax.

IRS workforce and the resources that the IRS spends to collect taxes and assist taxpayers. In Fiscal Year (FY) 2012, the IRS collected more than $2.5 trillion, incurring a cost of 48 cents, on average, to collect $100.

IRS’s actual expenditures in FY 2012 was less than $12.1 billion, which was used to meet the requirements of its three core operating appropriation budget activities.

In FY 2012, the IRS employed a total workforce of 97,941, including part-time and seasonal employees.

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IRS Expanding Audits to Unrelated Tax Years and Tax Matters

September 29, 2011 Appeals & Audit Resolution, Audit Reconsideration, IRS Audit, IRS Collections, IRS Enforcement, IRS Examination, IRS Mediation

According to the Treasury Inspector General for Tax Administration (TIGTA) the IRS needs to expand audits to other tax years and tax matters when large dollar amounts are involved in a preexisting audit making it all the more important to know exactly what you are doing when communicating with the IRS. A couple of general rules of conduct are in order.  First you want to create the perception that you are working to help the Revenue Agent or Officer ‘close’ your file which is manifested in timely responses and general communication.  Second you want to answer the SPECIFIC QUESTION ASKED and nothing more.  If the Revenue Officer or Agent asks you what time it is, don’t tell them how to build a watch. This only invites opportunity for further inquiry and probing.

Here’s what the TIGTA Report concluded verbatim and how the IRS responded:

“TIGTA identified three factors that likely contributed to our concerns with expanding audits. First, the IRS strives to keep its audit inventories free of old tax year returns. As a result, tax compliance officers seldom expand an audit to a taxpayer’s prior year return. Second, case file documentation does not indicate that tax compliance officers are taking full advantage of the IRS’s internal sources of information when conducting required filing checks. Third, the IRS’s performance feedback mechanisms are not always taken advantage of to hold tax compliance officers accountable for the quality of their filing checks.

TIGTA recommended that the Director, Exam Policy, Small Business/Self-Employed Division, provide: 1) detailed examples to tax compliance officers on when it would be appropriate to expand audits to prior and/or subsequent year returns, 2) information to tax compliance officers that focuses on using the IRS’s automated information systems to enhance the quality of required filing checks, and 3) additional guidance to first-line managers to improve the feedback provided to tax compliance officers on the quality of required filing checks.

In their response to the report, IRS officials agreed with the recommendations and plan to: 1) provide examples in internal publications that show when it is appropriate to expand audits, 2) conduct a workshop on using IRS automated systems, and 3) improve the feedback provided to tax compliance officers on the quality of their filings checks. Although IRS officials agreed with all three recommendations, they did not agree with the potential monetary benefits associated with the recommendations.

To view the report, including the scope, methodology, and full IRS response, go to:

http://www.treas.gov/tigta/auditreports/2011reports/201130084fr.html.

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How to Get a ‘Fresh Start’ with the IRS

June 1, 2011 Alternative Minimum Tax (AMT), Amended Tax Return, Appeals & Audit Resolution, Back Taxes Owed, Business Expense, Colorado Department of Revenue, Disallowed Expenses, Intent To Levy, Intent To Lien, IRS Appeal, IRS Audit, IRS Collections, IRS Enforcement, IRS Examination, IRS Levy, IRS Lien, IRS Mediation, IRS Penalties, IRS Penalty and Interest Abatement, Non-filed Tax Returns, Paying Taxes, Payroll Tax Problems, Rental Real Estate, Self Employ, Small Business, Tax Problems & Requests, Tax Relief

According to IR-2011-20 published on Feb. 24, 2011, in its latest effort to help struggling taxpayers, the Internal Revenue Service announced a series of new steps to help people get a fresh start with their tax liabilities. The goal is to help individuals and small businesses meet their tax obligations, without adding unnecessary burden to taxpayers. Specifically, the IRS is announcing new policies and programs to help taxpayers pay back taxes and avoid tax liens. The changes include:

  • Significantly increasing the dollar threshold when liens are generally issued, resulting in fewer tax liens.

  • Making it easier for taxpayers to obtain lien withdrawals after paying a tax bill.

  • Withdrawing liens in most cases where a taxpayer enters into a Direct Debit Installment Agreement.

  • Creating easier access to Installment Agreements for more struggling small businesses.

  • Expanding a streamlined Offer in Compromise program to cover more taxpayers.

Tax Lien Thresholds

The IRS will significantly increase the dollar thresholds when liens are generally filed. The new dollar amount is in keeping with inflationary changes since the number was last revised. Currently, liens are automatically filed at certain dollar levels for people with past-due balances.

The IRS plans to review the results and impact of the lien threshold change in about a year.

A federal tax lien gives the IRS a legal claim to a taxpayer’s property for the amount of an unpaid tax debt. Filing a Notice of Federal Tax Lien is necessary to establish priority rights against certain other creditors. Usually the government is not the only creditor to whom the taxpayer owes money.

A lien informs the public that the U.S. government has a claim against all property, and any rights to property, of the taxpayer. This includes property owned at the time the notice of lien is filed and any acquired thereafter. A lien can affect a taxpayer’s credit rating, so it is critical to arrange the payment of taxes as quickly as possible.

Tax Lien Withdrawals

The IRS will also modify procedures that will make it easier for taxpayers to obtain lien withdrawals.

Liens will now be withdrawn once full payment of taxes is made if the taxpayer requests it. The IRS has determined that this approach is in the best interest of the government.

In order to speed the withdrawal process, the IRS will also streamline its internal procedures to allow collection personnel to withdraw the liens.

Direct Debit Installment Agreements and Liens

The IRS is making other fundamental changes to liens in cases where taxpayers enter into a Direct Debit Installment Agreement (DDIA). For taxpayers with unpaid assessments of $25,000 or less, the IRS will now allow lien withdrawals under several scenarios:

  • Lien withdrawals for taxpayers entering into a Direct Debit Installment Agreement.

  • The IRS will withdraw a lien if a taxpayer on a regular Installment Agreement converts to a Direct Debit Installment Agreement.

  • The IRS will also withdraw liens on existing Direct Debit Installment greements upon taxpayer request.

Liens will be withdrawn after a probationary period demonstrating that direct debit payments will be honored.

Installment Agreements and Small Businesses

The IRS will also make streamlined Installment Agreements available to more small businesses. The payment program will raise the dollar limit to allow additional small businesses to participate.

Small businesses with $25,000 or less in unpaid tax can participate. Currently, only small businesses with under $10,000 in liabilities can participate. Small businesses will have 24 months to pay.

The streamlined Installment Agreements will be available for small businesses that file either as an individual or as a business. Small businesses with an unpaid assessment balance greater than $25,000 would qualify for the streamlined Installment Agreement if they pay down the balance to $25,000 or less.

Small businesses will need to enroll in a Direct Debit Installment Agreement to participate.

Offers in Compromise

The IRS is also expanding a new streamlined Offer in Compromise (OIC) program to cover a larger group of struggling taxpayers.

This streamlined OIC is being expanded to allow taxpayers with annual incomes up to $100,000 to participate. In addition, participants must have tax liability of less than $50,000, doubling the current limit of $25,000 or less.

OICs are subject to acceptance based on legal requirements. An offer-in-compromise is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed. Generally, an offer will not be accepted if the IRS believes that the liability can be paid in full as a lump sum or through a payment agreement. The IRS looks at the taxpayer’s income and assets to make a determination regarding the taxpayer’s ability to pay.

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If you owe the IRS money, here are some tips …

August 9, 2010 Amended Tax Return, Appeals & Audit Resolution, Audit Reconsideration, Back Taxes Owed, Debt, Disallowed Expenses, Estate Tax, Intent To Levy, Intent To Lien, IRS Audit, IRS Collections, IRS Enforcement, IRS Examination, IRS Penalties, IRS Penalty and Interest Abatement, Paying Taxes, Statutory Notice of Deficiency, Tax Guidance & Preparation, Tax Problems & Requests, Tax Relief, Taxable Income

  1. If you get a bill this summer for late taxes, you are expected by the IRS to promptly pay the tax owed including any penalties and interest. First you should consider appealing the determination based on merit and evidence. For more information on appeals feel welcome to contact me directly at 720-234-1177 or at jddundon@comcast.net

  2. If you are unable to pay the amount due and have no basis for appeal, it is often in your best interest to get a loan to pay the bill in full rather than to make installment payments to the IRS.

  3. You can also pay the bill with your credit card. The interest rate on a credit card or bank loan may be lower than the combination of interest and penalties imposed by the Internal Revenue Code. To pay by credit card contact one of the following processing companies: Official Payments Corporation at 888-UPAY-TAX (also www.officialpayments.com/fed) or Link2Gov at 888-PAY-1040 (also www.pay1040.com) or RBS WorldPay, Inc at 888-9PAY-TAX (also www.payUSAtax.com).

  4. You can pay the balance owed by electronic funds transfer, check, money order, cashier’s check or cash. To pay using electronic funds transfer you can take advantage of the Electronic Federal Tax Payment System by calling 800-555-4477 or online at www.eftps.gov.

  5. An installment agreement may be requested if you cannot pay the liability in full. This is an agreement between you and the IRS to pay the amount due in monthly installment payments. You must first file all returns that are required and be current with estimated tax payments.

  6. If you owe $25,000 or less in combined tax, penalties and interest, you can request an installment agreement using the Online Payment Agreement application at IRS.gov.

    You can also complete and mail an IRS Form 9465, Installment Agreement Request, along with your bill in the envelope that you have received from the IRS. The IRS will inform you usually within 30 days whether your request is approved, denied, or if additional information is needed. If the amount you owe is $25,000 or less, provide the highest monthly amount you can pay with your request.

  7. You may still qualify for an installment agreement if you owe more than $25,000, but a Form 433F, Collection Information Statement, is required to be completed before an installment agreement can be considered. If your balance is over $25,000, consider your financial situation and propose the highest amount possible, as that is how the IRS will arrive at your payment amount based upon your financial information.

  8. If an agreement is approved, a one-time user fee will be charged. The user fee for a new agreement is $105 or $52 for agreements where payments are deducted directly from your bank account. For eligible individuals with incomes at or below certain levels, a reduced fee of $43 will be charged.

  9. Taxpayers who have a balance due, may want to consider changing their W-4, Employee’s Withholding Allowance Certificate, with their employer. There is a withholding calculator available on IRS.gov to help taxpayers determine the amount that should be withheld.

  10. Helpful Links:

    Publication 594, The IRS Collection Process ( PDF)

    Publication 966, Electronic Choices to Pay All Your Federal Taxes ( PDF)

    Form 9465, Installment Agreement ( PDF)

John R. Dundon, EA – 720-234-1177 – www.1040.com/jd – jddundon@comcast.net – Enrolled with the United States Department of Treasury to Practice before the IRS – Enrolled Agent # 85353. Under contract with the IRS as a Certified Individual Taxpayer Identification Number (ITIN) Acceptance Agent – I am a Federally Authorized Tax Practitioner (USC 31 Section 330 + IRC 7525a.3.A) regulated under US Treasury Cir. 230.

http://prep.1040.com/jd

http://johndundon.taxtutor.com

jddundon@comcast.net
720-234-1177

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The NCAA, the IRS, and the ‘New Amateurism’

January 25, 2010 Tax Guidance & Preparation, Taxable Income

Virginia A. Fitt (J.D. 2010, Duke) has published Note, The NCAA’s Lost Cause and the Legal Ease of Redefining Amateurism, 59 Duke L.J. 555 (2009). Here is the abstract:

The recent resolution of the Andrew Oliver case may mark the death throes of the NCAA’s no-agent rule, prohibiting college athletes from retaining agents in professional contract negotiations, and perhaps the traditional paradigm of amateurism in sport. In light of the trial court’s ruling, as well as continuing calls for the revocation of the NCAA’s tax-exempt status, the time is ripe for a reexamination of amateurism and the law.

This Note argues that the NCAA has developed a complicated web of largely unenforceable rules and regulations that are unnecessary to maintain tax-exempt status in light of the regulatory environment. This Note examines the antitrust, labor, and tax consequences of changing definitions of amateurism. Focusing on the IRS interpretations of amateurism, this Note concludes that a less restrictive amateurism regime would still achieve many of the legal benefits sought by the NCAA. This analysis has broader implications for tax policy and the culture of sport.

Calling for a shift to a “new amateurism,” this Note contributes a novel redefinition of amateurism that reflects the current environment of intercollegiate sport. Modern amateurism should recognize the profit motive of the student-athlete. Under a less restrictive NCAA rule-making regime, the remaining rules are enforceable and fair. In substituting protections for student-athletes in place of the current paternalism, the NCAA will reduce the likelihood that future rules will be overturned by court challenges.

My personal opinion is that the NCAA is evil and corrupt and should be dissolved.

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IRS starts special unit targeting the wealthy

October 28, 2009 Appeals & Audit Resolution, Tax Abuse, Tax Fraud, Tax Guidance & Preparation, Uncategorized

The IRS is setting up a special unit that will take a more skeptical look at the various strategies used by the wealthy to reduce their tax burden (see Shulman Has ‘Some Sympathy’ for CPA Concerns). That includes trusts, real estate investments, royalty and licensing agreements, private foundations and flow-through entities of various kinds. The agency is hiring extra agents and specialists for the new unit, including flow-through specialists and international examiners, to scrutinize high-wealth individuals and their related enterprises.

Not only that, but the IRS is also expanding its international enforcement efforts, going after tax evaders and affiliated businesses in Central America, Asia and the Caribbean, while opening new IRS offices in Beijing, Panama City, and Sydney, Australia. Shulman noted that other countries are also creating high-wealth groups, including the United Kingdom, Japan, Germany, Canada and Australia. The IRS will likely be working with those agencies and sharing information with them.

CPAs and their clients should be prepared for the increased scrutiny and enforcement efforts. A major concern for many tax preparers is the regulatory overhaul that Shulman has been working on since June. Shulman plans to send his recommendations by the end of the year to Treasury Secretary Tim Geithner and the White House.

He has been hearing from the AICPA in the public forums the IRS has been holding that CPAs are already subject to stiff Circular 230 requirements (as are enrolled agents and tax attorneys). Shulman said he had some sympathy with CPAs’ concerns about having new testing requirements imposed on them. But testing requirements may be beside the point. CPAs will need to be extra careful about signing off on the kinds of complex tax strategies used by high-income individuals, and having a hand in devising such plans. Otherwise the IRS’s new unit could make them a target as well as their clients.

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