KD-This Taxpayer came to our Firm as a Referral for owing the IRS $138,426.86 for tax years 2000-2009. She was very upset that her ex-husband, a professional film maker in CA, and self-employed did not pay in his taxes to the Federal Government during the time they were married. He claimed that he was paying his self-employment taxes in estimated tax payments, while his wife, KD was a W-2 Wage Earner having Federal Taxes withheld on her paycheck. It wasn’t until years later, that she had her taxes prepared and came to our Firm, at which time the IRS had issued Wage Garnishments on her paycheck, that she learned her ex did not pay his share of taxes. When the Wage Garnishment hit, she was divorced, a single wage earner with two young minor children living at home. There was no child support coming in from her ex-husband to help her support her minor children and there was not enough money left over at the end of the money to pay the IRS. She was barely getting by. Our Firm, Redd & Greaves, P.C., analyzed her monthly financial situation and it was determined that KD qualified as Status 53 or “Currently not Collectible”. After carefully reviewing the facts of her case, our Firm advised KD that she qualified for Innocent Spouse Treatment. She provided a history time line and facts that supported us filing a Form 8867, Request for Innocent Souse Relief, for the TP. The Firm just received a letter last week that her Innocent Spouse Relief has just been granted by the IRS for all tax periods. The TP is relieved that now she can finish raising her children without fear of the IRS taking any money she needs to put food on the table for her kids or keep a roof over their heads.  

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LKW-These Taxpayer(s) came to our Firm as a Referral for owing the IRS $126,153.87 for tax years 1999-2011. They were confused and overwhelmed over the amount owed as to what they should do. Also, they wanted to make sure that Mr. W could continue to work without fear of wage garnishments every two years. He felt like even though he was good at his trade, it was embarrassing that he had to quit his job every two years and he was tired of running from the IRS. He was ready to deal with the situation and needed a logical answer to what he could do. Redd & Greaves, P.C. gathered all Mr. and Mrs. W’s tax data and reviewed their situation and advised that it would be in their best interest to file bankruptcy. Ms. W was not so comfortable with that advice and asked for a meeting with our Firm to discuss their options and to go over the results of our computer generated profile for their case. She finally went along with the plan but was still leery of bankruptcy. After Mr. and Mrs. W met with us again, Mr. Redd told Mr. and Mrs. W that “life would get better for your after bankruptcy”, they took his advice and sought out a Bankruptcy Attorney referred by our Firm. Mr. and Mrs. W kept us informed through the whole process and a year later reported to us that they were so happy they took our advice and indeed, “life did get better for them”.  They later sent a thank you card and expressed that finding Redd & Greaves, P.C. was a blessing and that they could not have made that decision without our Firm. Our Firm now prepares tax returns for Mr. and Mrs. W and they truly value our services and friendship. They feel our Firm, Redd & Greaves, P.C., has changed their lives and are grateful.

 

  • Issue 2015-29 IRS Makes it Easier for Small Businesses to Apply Repair Regulations to 2014 and Future Years WASHINGTON-
    The Internal Revenue Service today made it easier for small business owners to comply with the final tangible property regulations. Requested by many small businesses and tax professionals, the simplified procedure is available beginning with the 2014 return taxpayers are filling out this tax season. The new procedure allows small businesses to change a method of accounting under the final tangible property regulations on a prospective basis for the first taxable year beginning on or after Jan. 1, 2014. Also, the IRS is waiving the requirement to complete and file a Form 3115 for small business taxpayers that choose to use this simplified procedure for 2014. “We are pleased to be able to offer this relief to small business owners and their tax preparers in time for them to take advantage of it on their 2014 return,” said IRS Commissioner John Koskinen. “We carefully reviewed the comments we received and especially appreciate the valuable feedback provided by the professional tax community on this issue.” The new simplified procedure is generally available to small businesses, including sole proprietors, with assets totaling less than $10 million or average annual gross receipts totaling $10 million or less. Details are in Revenue Procedure 2015-20, posted today on IRS.gov. The revenue procedure also requests comment on whether the $500 safe-harbor threshold should be raised for businesses that choose to deduct, rather than capitalize, certain capital expenses.

Now that it’s Tax Time, many small businesses are just now being educated on the recently implemented Tangible Property Regulations by the Internal Revenue Service. This regulation requires every business and rental property owner with materials, supplies, equipment and real estate to change their accounting method and file an eight page Form 3115, Change in Accounting Method and more often than not, multiple Form 3115’s.

This change by the IRS makes it more restrictive to take current tax deductions for materials and supplies that are not used in the year purchased and certain changes to how repairs and similar items were previously deducted. Although Congress gave the authority to the IRS to write these regulations and set limits on Taxpayers, with financial guidelines, the expressed concern was the adoption of the changes regulated by the IRS.

The instructions for the Form 3115 is 20 pages long and is required to be attached to the tax return filed, as well as a separate copy of the form to the IRS in Ogden, Utah. The Tangible Property Regulations are far too complex and burdensome on America’s Small Business and the IRS is requiring the Form 3115 be filed out on every Taxpayer with depreciable property, repairs and maintenance costs or materials and supplies. Compliance to this new regulation will cost the American Taxpayers a great deal more in preparation fees this year and better seek a good professional such as an Enrolled Agent who is knowledgeable about this new law.

A less complex approach would be to attach a statement or election to each tax return that the Taxpayer has adopted the Tangible Property Regulations but we all know the IRS’s motive with this new law is not to simplify anything!

Commissioner Koskinen and every member of Congress needs to hear your voice now before it is too late. Go to http://www.contactingthecongress.org and click on your state to find your Representatives. You can email the IRS Commissioner at John.A.Koskinen@irs.gov.

While a pair of Senators may have been instrumental in ending the Social Security Administration’s policy of seizing taxpayer’s refunds for decades of SSA errors that led to overpayment of benefits, even to the parents of the taxpayer’s, the law allowing the seizures still remains as a law.

These seizures are possible because of a provision in the 2008 Farm Bill, which allowed the SSA to pursue claims owed to it for overpayments beyond what had previously been a ten (10) year statute of limitations on collections for debts owed to the government for debts, even IRS debts, that were ten (10) or more years old. However, it appears that the wording in the 2008 Farm Bill has effectively repealed the Statute of Limitations on Collections or the Collection Statute Expiration Date (CSED).

Every taxpayer who is under the impression that their decade old debt to the IRS is no longer enforceable, is in for a rude awakening. While the IRS may not hunt the taxpayer down to collect the old debt, the taxpayer’s refund on the current year tax return is fair game and will most likely be taken before the taxpayer even has a chance to touch the IRS check. So, do not spend that refund before you have it in your hands.

The 2008 Farm Bill was over 500 pages in length and the provision repealing the Statute of Limitations on Collections was most likely slipped in and over looked by the Congressmen and Senators voting this Bill into law. Who would think that a Farm Bill about farm animals would contain such a sweeping provision that would allow government collectors to run amok collecting decade’s old debts, even if the taxpayer did not owe the debt?

Every taxpayer in America should contact their Congressmen and Senators to ask for a Technical Correction to the 2008 Farm Bill Act removing the language in the Bill that would allow for the seizing of refunds for any debt which is ten (10) years old of older. Do it today, before a refund that you are expecting is seized by the IRS.

The IRS Commissioner, John Koskinen, announced that refunds totaling almost $760 Million for an estimated 981,600 Taxpayers is about to go away if they did not file a Federal Income Tax Return for the tax year 2010. In order to collect the money, the IRS requires an individual to file a 2010 Tax Return by April 15, 2014.

Taxpayers need to be aware that even if they file their 2010 Income Tax Return, their refund checks may be held up if they have not filed their 2011 and 2012 Income Tax Returns. The reason is that some or all of these refunds may need to be applied to the tax liability of the newer tax years such as 2011 and 2012. A good tax preparer, such an Enrolled Agent (EA) will always advise you to file all back tax returns to stay compliant with the filing requirements of the tax code. In this instance, Taxpayers may think their refund checks are one their way for 2010 only to be disappointed to learn they can be held up by not filing their 2011 and 2012 tax returns at the same time.

Taxpayers who are missing Forms W-2, 1098, 1099 or 5498 for 2010, 2011 and 2012 can get a free transcript showing all the documents or file a Form 4506-T to request a transcript. Even if you have to wait for 2011 and 2012 transcripts, get your 2010 Tax Return filed by April 15, 2014.

 

 

WASHINGTON, DC, (February 10, 2014) The IRS has announced a new, simplified method for determining the in-home office deduction that doesn’t require extensive record keeping, and a lot of people are looking forward to giving it a try. Sure, it’s easier than using the time-consuming “actual expense method” to determine the amount you can deduct for the business use of your home, but is it right for you?

Qualified business use of a portion of the home generally means:
• Exclusive and regular use as the main place where you conduct your business, or meet with customers, clients or patients.
• Regular use as a storage area for merchandise you sell, or product samples, if your home is the only place you conduct your business.
• Regular use in providing daycare services for children, the elderly or disabled persons.

The new optional deduction is a simple $5 per square foot of business use up to 300 square feet, for a maximum deduction of $1500. Period. If you choose to use the new simpler option, you can still deduct the full amount of your mortgage interest and property taxes as itemized deductions, without worrying about calculating the percentage based on the business use portion of the home. You won’t have to be concerned with tallying up the direct or indirect costs of utilities, repairs or maintenance expenses, either.

But, don’t be too quick to throw away the calculator until you determine if the simpler deduction is the best one for your situation. Cynthia Jeanguenat, EA, a federally licensed enrolled agent and tax specialist with Horizons Unlimited Tax and Business Services in Virginia Beach, VA is not touting the simplified method to her longtime clients. “We don’t want them to stop keeping track of their expenses! I compare this simplified office-in-home deduction to business vehicle expenses. If a taxpayer keeps good records, and uses their vehicle more than 50 percent for business, then it’s possible the actual vehicle expenses will exceed the standard mileage deduction; but if a taxpayer does not keep records for the maintenance, gas, repairs and insurance, but does record the business miles driven during the year, then they can take the standard cents-per-mile deduction. That may not be the better deduction, but if they don’t keep records, then that may be all they can qualify for.”

Jeanguenat feels the same about the office-in-home deduction of $1500. “If a taxpayer keeps good records, chances are they will get a better deduction using their percentage of actual expenses. If they keep few records, then the $5 per square foot may be their best choice.”

The simplified method took effect January 1, 2013. Taxpayers can elect to use the simplified method or standard method for any tax year. However, once you have elected a method for a tax year, you cannot later change to the other method for that same year. You may, however, use the simplified method for one taxable year and the standard method for a later taxable year. The simplified method doesn’t require you to file the form 8829 needed for the standard deduction. More information on the new home office rules is available on IRS.gov, search for Home Office FAQs.

About Enrolled Agents
Enrolled agents (EAs) are America’s tax experts. They are the only federally-licensed tax practitioners who specialize in taxation and also have unlimited rights to represent taxpayers before the IRS. While attorneys and certified public accountants are also licensed, only enrolled agents specialize exclusively in taxes. Enrolled agents are required to complete many hours of continuing education each year to ensure they are up-to-date on the constantly changing tax code and must abide by a code of ethics.

Tax Predictions for 2014

March 16, 2014

WASHINGTON, DC, (February 19, 2014) With Senate Finance Committee Chairman Max Baucus (D-MT) moving on to become US Ambassador to China, last year’s expectations for tax reform are out the window. The National Association of Enrolled Agents (NAEA), the association that represents the federally licensed tax practitioners who hold the highest credential awarded by the IRS, has released some prognostications for 2014.

1) The budget cuts Congress imposed on the IRS mean bad news for taxpayers. Levels of service at IRS, which weren’t that great anyway, will continue to deteriorate for taxpayers seeking answers and for tax professionals seeking assistance in representing clients in audits and collection actions. As National Taxpayer Advocate Nina Olson said in her Annual Report to Congress, “If you are a tax professional trying to resolve a problem for a client, you have a 20-minute wait on the line inaptly named ‘Practitioner Priority Service.’”

2) Largely as a result of 1), the number of taxpayers paying to have their returns prepared will hit an all-time record high. Taxpayers are smart – they’re going to HIRE someone to spend the afternoon on hold with the IRS.

3) Identity theft losses will continue to grow: fraudulent filers will file early and walk away with other people’s refunds and phony emails from IRS will lure naïve taxpayers to sites where they will disclose personal and financial information. The agency will continue to siphon staff from other areas to assist affected taxpayers, yet any taxpayer hit with an ID theft related problem will face long delays in resolving the issue (see 1)).

4) Silver lining: the IRS back office will deliver the filing season. The agency will make its projected refund turnaround time (90 percent of refunds issued within 21 days of filing) and returns will be processed free of software troubles.

Meeting the Tax Deadline

March 16, 2014

How to Forge Ahead without the Documents You’ve Been Waiting For

Washington, DC (March 10, 2014)—Penalties for late filing of tax returns can be harsh, but what can you do if you haven’t received the information you need from your employer or others? If you are waiting for your Form W-2, mortgage interest statement, 1099 DIV or other documents that are necessary to complete your tax forms, it’s in your best interest to take action. IRS does not accept “failure to receive documents” as an excuse for failure to file.

 

If you haven’t received your W-2 form by January 31, it’s time to contact your employer. If it’s still not in your hands by February 14, you can turn to Uncle Sam for assistance. The IRS will be standing by to assist you at 800.829.1040 on that date and beyond. Before you make the call, be sure you have the following information at the ready: your Social Security number, dates of employment and your employer’s name, address and phone number. IRS will not only contact your employer, but it will also send you a Form 4852 (a substitute Form W-2) to fill out in case you don’t receive the Form W-2 in time to make the tax deadline.

 

In the old days, when the necessary tax documents didn’t arrive there was no choice but to call your financial institution and spend what seemed like an eternity waiting on hold to speak to a customer service representative about retrieving the missing document. The Internet has changed all that by allowing banks and mortgage lenders to post this information online. After you’ve established an online user name and password, most banks and mortgage lenders make the tax information you need available to you on their websites. Even if you accidentally tossed out some important tax documents along with the junk mail, you can easily access the numbers you need for your tax return.

 

If you find you just can’t get the documentation together in time, another option is filing an extension. This will delay your filing deadline until October 15, 2014. With the penalty for not filing a tax return or an extension a stiff five percent per month up to a maximum of 25 percent of the amount of tax due on the late-filed return, filing an extension is well worth the effort. Keep in mind that you’ll also need to file an extension for your state tax return.

 

Please note: taxpayers should not confuse the extra six months the extension provides for filing with a postponement on paying. You’ll still need to estimate the taxes you may owe and submit that amount prior to April 15, 2014 along with Form 4868. To avoid paying a penalty, you must pay at least 90 percent of what you estimate you owe, or 100 percent of your 2013 tax liability. If you don’t pay in full, you’ll wind up owing annual interest on the liability not covered.

 

Filing a tax return can be daunting and stressful without the advice and guidance of a tax expert. Enrolled agents are the only federally licensed tax practitioners with unlimited rights of representation before the IRS.

TIGTA’S JOB IS TO REVIEW ALL AREAS OF THE IRS TAX ADMINISTRATION AND PROVIDE SUGGESTIONS FOR IMPROVEMENT TO AVOID WASTE. 

DUE TO FINANCIAL RESTRAINTS, THE IRS IS STRUGGLING TO ANSWER TAXPAYER PHONE CALLS, WHICH IS THE PRIMARY RESOURCE MOST TAXPAYERS USE TO CONTACT THE IRS TO RESOLVE THEIR TAX ISSUES. THE IRS ANNOUNCED PLANS TO IMPROVE THE WAIT TIME FROM 14 MINUTES TO 12 MINUTES IN 2014.

 

THE CORRESPONDENCE INVENTORY OF THE IRS INCREASED BY 330 PERCENT FROM FY 2010 TO FY 2014, WHICH MEANS ALL THE LETTERS TAXPAYER’S SENT TO THE IRS WERE NOT ANSWERED OR TOOK MONTHS AND MONTHS OR EVEN YEARS TO GET A RESPONSE.

 

IN 2014, THE IRS DECIDED TO NO LONGER PREPARE TAX RETURNS, PROVIDE TRANSCRIPTS OR PROVIDE TAXPAYER’S WITH THE STATUS OF THEIR TAX REFUNDS. ONLY BASIC QUESTIONS ARE NOW BEING ANSWERED BY TELEPHONE ASSISTORS.

 

TAXPAYER’S VICTIMIZED BY IDENTITY THEFT ARE ON THE RISE.  SAMPLING OF 100 CASES REVEIWED BY TIGTA, TOOK THE IRS AN AVERAGE OF 312 DAYS TO RESOLVE THE CASE AND AN AVERAGE OF 277 DAYS FOR WHERE NO WORK WAS PERFORMED AT ALL TO RESOLVE THE CASE.

 

ANOTHER AREA OF THE IRS IN DECLINE ARE IMPROPER PAYMENTS. ACCORDING TO “THE IMPROPER PAYMENTS INFORMATION ACT OF 2002”, THE IRS AND ALL FEDERAL AGENCIES WERE SUPPOSE TO ESTIMATE THE AMOUNT OF IMPROPER PAYMENTS WERE MADE EACH YEAR AND WHAT STEPS WERE TAKEN TO REDUCE IMPROPER PAYEMENTS. THE METHOD USED BY THE IRS FOR RISH ASSESSMENTS, WAS FLAWED. AS A RESULT THE ONLY AREA THE IRS HAS TRULY COMPARTMENTALIZED AS HIGH RISK IS THE EARNED INCOME TAX (EITC) PROGRAM. THERE HAS BEEN MORE PRESSURE ON TAX PREPARERS TO PROVE DUE DELIGENCE WITH REGARD TO RETURN REPORTING AND DOCUMENTS PROVING THE ELIGIBILITY OF DEPENDENTS FOR EITC.  EVEN WITH THE ADDED SAFEGUARDS IN PLACE, THE ESTIMATES REPORT IMPROPER PAYMENTS FOR EITC ROSE FROM $13 BILLION TO $15 BILLION IN FY 2013.

 

IN SEPTEMBER 2013, TIGTA REPORTED THAT IDENTITY THEFT HAD SIGNIFICANTLY RISEN AND THERE WAS AN INCREASE IN FILTERS TO PREVENT $2.5 BILLION IN FRAUDULENT TAX REFUNDS. EVEN WITH THOSE EFFORTS, THAT IS A 157 PERCENT INCREASE OVER THE NUMBER THE IRS LOCATED IN 2012.  THE IRS EXPANDED EFFORTS TO PUT LOCKS ON THE ACCOUNTS OF DECEASED TAXPAYER ACCOUNTS BY USING THE SS NUMBERS VERIFIED WITH THE SS ADMINISTRATION.

 

IN JANUARY 2O13, THE IRS STARTED A NEW PROGRAM WHERE BANKS WERE ALLOWED TO REJECT DIRECT DEPOSIT REFUNDS BASED ON MISMATCHES BETWEEN THE ACCOUNT NAME AND THE NAMES ON THE TAX RETURN. THAT HELD UP THE TAXPAYER’S REFUNDS WHILE BEING REROUTED BACK TO THE IRS FOR VERIFICATION.

 

TIGTA INVESTIGATED NUMEROUS IRS EMPLOYEES AS WELL AS TAX PREPARER’S WHO MISUSED THEIR POSITIONS OF PUBLIC TRUST AND COMMITED IDENITY THEFT RELATED REFUND FRAUD.  IN FEBRUARY 2013, THE DEPARTEMENT OF JUSTICE ANNOUNCED AN INVESTIGATION IN 32 STATES AND PUERTO RICO TO STOP IDENITY THEFT.  

 

IT IS BEST TO SEEK THE ADVICE OF A QUALIFIED TAX PROFESSIONAL LIKE AN ENROLLED AGENT, PARTICULARLY SPECIALIZING IN THE AREA OF TAX CONTROVERSY. WHEN YOU CAN’T GET AN ANSWER TO WHY YOU HAVE NOT RECEIVED YOUR TAX REFUND. IT IS REASONABLE TO ASSUME THAT YOU WILL HAVE A VERY DIFFICULT TIME GETTING AN ANSWER DIRECLTY FROM THE IRS, SINCE THEY ARE NOT ANSWERING THEIR MAIL QUICKLY AND PROPER TRAINING OF ASSISTORS IS ALSO DOWN. UNFORTUNATELY, THIS IS WHAT WE HAVE NOTICED AND WILL CONTINUE TO REAP FOR MANY MONTHS AND YEARS TO COME.