Wednesday, July 3, 2013

IRS Closed on July 5, 2013, Furlough Day



The Internal Revenue Service today reminded taxpayers that due to the current budget situation, including the sequester, the agency will be shut down on Friday, July 5.
As was the case on May 24 and June 14, the first two furlough days, all IRS operations will again be closed on July 5. This means that all IRS offices, including all toll-free hotlines, the Taxpayer Advocate Service and the agency’s nearly 400 taxpayer assistance centers nationwide, will be closed.
IRS employees will be furloughed without pay. No tax returns will be processed and no compliance-related activities will take place. The IRS noted that taxpayers should continue to file their returns and pay any taxes due as usual. This includes the special July 15 filing and payment deadline for those affected by the Boston Marathon explosions. Taxpayers needing to contact the IRS about this or other upcoming returns or payments should be sure to take this Friday’s closure into account.
Because none of the furlough days are considered federal holidays, the shutdown will have no impact on any tax-filing or tax-payment deadlines. The IRS will be unable to accept or acknowledge receipt of electronically-filed returns on any day the agency is shut down.
The only tax-payment deadlines coinciding with any of the furlough days relate to employment and excise tax deposits made by business taxpayers. These deposits must be made through the Treasury Department’s Electronic Federal Tax Payment System (EFTPS), which will operate as usual.
On the other hand, the agency will give taxpayers extra time to comply with a request to provide documents to the IRS. This includes administrative summonses, requests for records in connection with a return examination, review or compliance check, or document requests related to a collection matter. No additional time is given to respond to other agencies or the courts.
Where the last day for responding to an IRS request falls on July 5, the taxpayer will have until Monday, July 8--the next business day.
Some web-based online tools and phone-based automated services will continue to function this Friday, while others will be shut down. Available services include Withholding Calculator, Order A Transcript, EITC Assistant, Interactive Tax Assistant, Tele-Tax and the Online Look-up Tool for those needing to repay the first-time homebuyer credit. Services not available this Friday include Where’s My Refund?, the Online Payment Agreement and the online preparer tax identification number PTIN system for tax professionals. Visit online tools on IRS.gov to learn more about these tools.
The remaining scheduled furlough days are July 22 and Aug. 30, 2013. If necessary, the IRS may announce one or two additional furlough days.

Tax Tips if You’re Starting a Business




If you plan to start a new business, or you’ve just opened your doors, it is important for you to know your federal tax responsibilities. Here are five basic tips from the IRS that can help you get started.
1. Type of Business.  Early on, you will need to decide the type of business you are going to establish. The most common types are sole proprietorship, partnership, corporation, S corporation and Limited Liability Company. Each type reports its business activity on a different federal tax form.
2. Types of Taxes.  The type of business you run usually determines the type of taxes you pay. The four general types of business taxes are income tax, self-employment tax, employment tax and excise tax.
3. Employer Identification Number.  A business often needs to get a federal EIN for tax purposes. Check IRS.gov to find out whether you need this number. If you do, you can apply for an EIN online.
4. Recordkeeping.  Keeping good records will help you when it’s time to file your business tax forms at the end of the year. They help track deductible expenses and support all the items you report on your tax return. Good records will also help you monitor your business’ progress and prepare your financial statements. You may choose any recordkeeping system that clearly shows your income and expenses.
5. Accounting Method.  Each taxpayer must also use a consistent accounting method, which is a set of rules that determine when to report income and expenses. The most common are the cash method and accrual method. Under the cash method, you normally report income in the year you receive it and deduct expenses in the year you pay them. Under the accrual method, you generally report income in the year you earn it and deduct expenses in the year you incur them. This is true even if you receive the income or pay the expenses in a future year.

Monday, July 1, 2013

Tax Tips for Newlyweds



Late spring and early summer are popular times for weddings. Whatever the season, a change in your marital status can affect your taxes. Here are several tips from the IRS for newlyweds.
  • It’s important that the names and Social Security numbers that you put on your tax return match your Social Security Administration records. If you’ve changed your name, report the change to the SSA. To do that, file Form SS-5, Application for a Social Security Card. You can get this form on their website at SSA.gov, by calling 800-772-1213 or by visiting your local SSA office.
  • If your address has changed, file Form 8822, Change of Address to notify the IRS. You should also notify the U.S. Postal Service if your address has changed. You can ask to have your mail forwarded online at USPS.com or report the change at your local post office.
  • If you work, report your name or address change to your employer. This will help to ensure that you receive your Form W-2, Wage and Tax Statement, after the end of the year.
  • If you and your spouse both work, you should check the amount of federal income tax withheld from your pay. Your combined incomes may move you into a higher tax bracket. Use the IRS Withholding Calculator tool at IRS.gov to help you complete a new Form W-4, Employee's Withholding Allowance Certificate. See Publication 505, Tax Withholding and Estimated Tax, for more information.
  • If you didn’t qualify to itemize deductions before you were married, that may have changed. You and your spouse may save money by itemizing rather than taking the standard deduction on your tax return. You’ll need to use Form 1040 with Schedule A, Itemized Deductions. You can’t use Form 1040A or 1040EZ when you itemize.
  • If you are married as of Dec. 31, that’s your marital status for the entire year for tax purposes. You and your spouse usually may choose to file your federal income tax return either jointly or separately in any given year. You may want to figure the tax both ways to determine which filing status results in the lowest tax. In most cases, it’s beneficial to file jointly.

Friday, June 28, 2013

July 1 - FBAR Deadline, Report of Foreign Bank and Financial Accounts

If you have a financial interest in or signature authority over a foreign financial account, including a bank account, brokerage account, mutual fund, trust, or other type of foreign financial account, the Bank Secrecy Act may require you to report the account yearly to the Internal Revenue Service by filing Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR).
The FBAR is required because foreign financial institutions may not be subject to the same reporting requirements as domestic financial institutions. The FBAR is a tool to help the United States government identify persons who may be using foreign financial accounts to circumvent United States law. Investigators use FBARs to help identify or trace funds used for illicit purposes or to identify unreported income maintained or generated abroad.

Recent FBAR Guidance

On February 24, 2011, the Treasury Department published final regulations amending the FBAR regulations. These regulations became effective March 28, 2011, and apply to FBARs required to be filed with respect to foreign financial accounts maintained in calendar year 2010, and for FBARs required to be filed with respect to all subsequent calendar years. The FBAR form and instructions (PDF) have been revised to reflect the amendments made by the final regulations.
On May 31, 2011, the Financial Crimes Enforcement Network (FinCEN) issued FinCEN Notice 2011-1 (PDF), revised June 6, 2011, to provide filing deferral to certain individuals with signature authority over, but no financial interest in, foreign financial accounts of their employer or a closely related entity. The filing deadline for employees and officers to report signature authority over these accounts was extended to June 30, 2012, for the following individuals:
  • An employee or officer of an entity under 31 CFR § 1010.350(f)(2)(i)-(v) who has signature or other authority over and no financial interest in a foreign financial account of a controlled person of the entity; or
  • An employee or officer of a controlled person of an entity under 31 CFR § 1010.350(f)(2)(i)-(v) who has signature or other authority over and no financial interest in a foreign financial account of the entity, the controlled person, or another controlled person of the entity.
For purposes of FinCEN Notice 2011-1, a controlled person is a United States or foreign entity more than 50 percent owned (directly or indirectly) by an entity under 31 CFR § 1010.350(f)(2)(i)-(v).
On June 17, 2011, FinCEN issued Notice 2011-2  (PDF) to provide filing deferral for certain officers or employees of investment advisors registered with the Securities and Exchange Commission who have signature authority over, but no financial interest in, foreign financial accounts of their employer. The filing deadline for employees and officers to report signature authority over these accounts was similarly extended to June 30, 2012.
Due to additional questions and concerns regarding the signature authority filing exceptions within Notice 2011-1 and Notice 2011-2, FinCEN twice extended the revised filing deadlines imposed by those two notices. On February 14, 2012, FinCEN issued FinCEN Notice 2012-1 (PDF), extending the reporting deadline to June 30, 2013, for signature authority reporting of the employees and officers identified in Notice 2011-1 and Notice 2011-2, to the same extent of reporting as originally set forth in those notices. More recently, on December 26, 2012, FinCEN issued Notice 2012-2, further extending this same filing deferral to June 30, 2014.
All other U.S. persons required to file an FBAR this year are required to meet the June 30, 2013 filing date.
On Jan 9, 2012, the IRS reopened the Offshore Voluntary Disclosure Program following continued interest from taxpayers and tax practitioners after the closure of the 2011 and 2009 programs. This program will be open for an indefinite period until otherwise announced.

Who Must File an FBAR

United States persons are required to file an FBAR if:
  1. The United States person had a financial interest in or signature authority over at least one financial account located outside of the United States; and
  2. The aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year to be reported.
United States person means United States citizens; United States residents; entities, including but not limited to, corporations, partnerships, or limited liability companies created or organized in the United States or under the laws of the United States; and trusts or estates formed under the laws of the United States.

Exceptions to the Reporting Requirement

Exceptions to the FBAR reporting requirements can be found in the FBAR instructions. There are filing exceptions for the following United States persons or foreign financial accounts:
  1. Certain foreign financial accounts jointly owned by spouses;
  2. United States persons included in a consolidated FBAR;
  3. Correspondent/nostro accounts;
  4. Foreign financial accounts owned by a governmental entity;
  5. Foreign financial accounts owned by an international financial institution;
  6. IRA owners and beneficiaries;
  7. Participants in and beneficiaries of tax-qualified retirement plans;
  8. Certain individuals with signature authority over but no financial interest in a foreign financial account;
  9. Trust beneficiaries; and
  10. 0.  Foreign financial accounts maintained on a United States military banking facility.
Look to the form’s instructions to determine eligibility for an exception and to review exception requirements.

Reporting and Filing Information

A person who holds a foreign financial account may have a reporting obligation even though the account produces no taxable income. Checking the appropriate block on FBAR-related federal tax return or information return questions (for example, on Schedule B of Form 1040, the "Other Information" section of Form 1041, Schedule B of Form 1065, and Schedule N of Form 1120) and filing the FBAR, satisfies the account holder's reporting obligation.
The FBAR is not filed with the filer's federal income tax return. The granting, by the IRS, of an extension to file federal income tax returns does not extend the due date for filing an FBAR. You may not request an extension for filing the FBAR. The FBAR is an annual report and must be received by the Department of the Treasury in Detroit, MI, on or before June 30th of the year following the calendar year being reported. While FinCEN strongly encourages individuals to electronically file FBARs, the form can be mailed to one of the two addresses below, provided that the mailing is received by June 30, 2013:
File by mailing the FBAR to:
United States Department of the Treasury
P.O. Box 32621
Detroit, MI 48232-0621
If an express delivery service is required for a timely filed FBAR, address the parcel to:
IRS Enterprise Computing Center
ATTN: CTR Operations Mailroom, 4th Floor
985 Michigan Avenue
Detroit, MI 48226
Delivery messenger service contact telephone number: (313) 234-1062.
Account holders who do not comply with the FBAR reporting requirements may be subject to civil penalties, criminal penalties, or both.

Electronic Filing for FBAR Forms – MANDATORY Beginning July 1, 2013

On June 29, 2011, FinCEN announced that all FinCEN forms must be filed electronically with certain exceptions. The FBAR was granted a general exemption from mandatory electronic filing through June 30, 2013. E-filing is a quick and secure way for individuals to file FBARs. Filers will receive an acknowledgement of each submission. For more information about FBAR e-filing, read the FinCEN news release.

New Reporting Requirements by U.S. Taxpayers Holding Foreign Financial Assets (Form 8938)

Taxpayers with specified foreign financial assets that exceed certain thresholds must report those assets to the IRS on Form 8938, Statement of Specified Foreign Financial Assets. The new Form 8938 filing requirement does not replace or otherwise affect a taxpayers requirement to file FBAR. A chart providing a comparison of Form 8938 and FBAR requirements, and other information to help taxpayers determine if they are required to file Form 8938, may be accessed from the IRS Foreign Account Tax Compliance Act Web page.

Thursday, June 27, 2013

Taxpayer Advocate Releases Priority Issues for Next Year to Changes to IRS

National Taxpayer Advocate Nina E. Olson today released her statutorily mandated mid-year report to Congress that identifies the priority issues the Taxpayer Advocate Service (TAS) will address during the upcoming fiscal year. The report expresses particular concern about the impact of budget cuts on the IRS’s ability to meet taxpayer needs, the IRS’s unwillingness to issue full refunds to victims of tax return preparer fraud and shortcomings in IRS procedures for assisting victims of tax-related identity theft.
In addition, Olson released a special report examining the IRS’s use of questionable criteria to screen applicants for tax-exempt status. The special report analyzes the sources of the problem and makes preliminary recommendations to address them.
“Today, the IRS is an institution in crisis,” Olson wrote. “In my view, however, the real crisis is not the one generating headlines. The real crisis facing the IRS — and therefore taxpayers — is a radically transformed mission coupled with inadequate funding to accomplish that mission. As a consequence of this crisis, the IRS gives limited consideration to taxpayer rights or fundamental tax administration principles as it struggles to get its job done.”

TAS AREAS OF FOCUS

The report identifies the priority issues on which the Office of the Taxpayer Advocate will focus during the upcoming fiscal year. The report describes numerous challenges facing the IRS, including:
  • Relieving the financial harm suffered by victims of tax return preparer fraud.
  • Conducting adequate oversight of the tax return preparer industry.
  • Providing effective, timely and taxpayer-centric relief to victims of identity theft.
  • Utilizing effective and timely collection alternatives to minimize taxpayer burden while reducing the number and dollar amount of balance-due accounts.
  • Conducting education and outreach to taxpayers about their responsibilities under the Affordable Care Act.
  • Resolving erroneous revocations of the tax-exempt status of small § 501(c)(3) organizations and failing to provide them with a pre-revocation administrative appeal.
  • Establishing less draconian and more reasonable “settlement initiatives” for the millions of taxpayers who have legitimate reasons for overseas bank and financial accounts and whose failure to file reports was merely negligent.
Olson expresses particular concern about the impact of cuts to the IRS budget on taxpayer services, taxpayer rights and revenue collection. She recommends that Congress provide sufficient funding for the IRS to meet taxpayer needs. Notably, she recommends that funding be restored for employee training, which has been cut by 83 percent since FY 2010, so IRS employees obtain the education and professional skills they require to administer the tax system in a manner that respects taxpayers’ rights. “The last thing a financially struggling taxpayer should have to face is an under-trained IRS collection apparatus,” she wrote.

SPECIAL REPORT ON EXEMPT ORGANIZATION REVIEW CONCERNS

In addressing the exempt organization (EO) issues, the Advocate’s office does not have investigative authority and did not seek to duplicate other ongoing investigations. The report takes a broad look at factors that contributed to the use of questionable screening criteria and processing delays and offers 16 recommendations to address them. The report groups the contributing factors into four categories: (1) lack of guidance and transparency; (2) absence of adequate checks and balances; (3) management and administrative failures; and (4) EO’s “cultural difficulty” with TAS.
Among other things (and as noted below), Olson recommends that Congress enact a Taxpayer Bill of Rights. In her preface to the report, she details how the EO review processing delays violated 8 of those 10 taxpayer rights.
LACK OF GUIDANCE AND TRANSPARENCY
The Legal Standard “Primarily” Is Vague and Undeveloped. Section 501(c)(4) of the tax code provides that an organization may qualify for tax-exempt status if it is “operated exclusively for the promotion of social welfare” (emphasis added). Treasury regulations provide that an “organization is operated exclusively for the promotion of social welfare if it is primarily engaged in promoting in some way the common good and general welfare of the people of the community” (emphasis added).
Leaving aside the question how “exclusively” came to be defined as “primarily” (which is viewed by some commentators as merely 51%), there is very little guidance to guide IRS employees in determining whether an organization is operating “primarily” for social welfare purposes or what level of political campaign activity is permissible. Among the open questions:
  • Is there a fixed percentage that should be used to measure whether an entity is “primarily” engaged in social welfare activities (e.g., 51 percent)?

  • What factor or factors are controlling? In seeking to measure whether an entity is “primarily” engaged in social welfare activities, one could focus on the percentage of the entity’s expenditures, the percentage of the entity’s time, the percentage of the entity’s email blasts or advertisements or other factors.

  • If the IRS considers multiple factors, should all factors receive equal weight, and if not, how should the relative weighting be determined?
The law provides no direct guidance to answer these questions. To enable the IRS’s EO function to evaluate applicants for Section 501(c)(4) status in a consistent manner, the Advocate recommends that Congress or the Treasury Department provide clearer standards.
No Judicial Review Is Available for Rejected or Unanswered Section 501(c)(4) Applicants. If an organization’s application for Section 501(c)(3) status is rejected or not answered after 270 days, the organization may go to court to request a declaratory judgment.  Applicants for Section 501(c)(4) status have no such right. The Advocate’s report recommends that Congress authorize judicial recourse for Section 501(c)(4) applicants.  Doing so would give organizations that believe they have been unfairly treated by the IRS the right to an independent review, and it would enable the courts to assist in developing guidelines that would help the IRS in applying the “primarily” standard.
The Application Form for Section 501(c)(4) Organizations Does Not Ask Key Questions. Applicants for tax-exempt status under Section 501(c)(4) must complete IRS Form 1024, Application for Recognition of Exemption Under Section 501(a). This form was last updated in 1998 — long before the IRS began to receive a significant number of applications from organizations that intend to engage in some political campaign activity. The Advocate recommends the IRS revise the questions on Form 1024 to elicit necessary information upon application. Doing so would reduce the need for the IRS to burden organizations with subsequent requests for information and would eliminate the appearance of partisanship, since the questions would be posed to all applicants engaging in any political campaign activity.
The IRS Rarely Audits the Operations of Section 501(c)(4) Organizations to Determine Whether They Are, In Fact, Operating “Primarily” for Permissible Purposes. If the IRS is expected to ensure that organizations granted Section 501(c)(4) status operate as they say they will, it must have the ability to conduct periodic audits. To ensure the IRS’s decisions about which organizations to audit are objective, the Advocate recommends the IRS conduct a small sample of reviews and then develop a risk model to use in compliance reviews of organizations after they have begun operations. The IRS can use the information developed in these audits to improve guidance and create outreach and education campaigns.
The EO Function Did Not Post Its Procedures on the Internet, Potentially Violating the Law and Contributing to the Problem. The IRS is required to post on its website all “instructions to staff that affect a member of the public,” unless an exemption applies. Even if an exemption applies, IRS functions should clear most guidance internally with affected program owners and “specialized reviewers” such as TAS. EO did not clear with TAS or post on the Internet, even in redacted form, relevant training materials, form letters used to request additional information, the screening checksheet used by EO employees in the determinations process and other key documents. EO’s failure to clear its procedures with TAS and other stakeholders bypassed an important safeguard of taxpayer rights.
Had these documents been vetted by TAS, TAS would have had an opportunity to raise concerns before implementation. Had these documents been posted on the Internet, members of the public would have had access to them, providing greater transparency and enabling them to raise concerns about improper practices. Key EO documents still are not posted to the Internet, and TAS has not been able to locate them on the IRS intranet. The Tax Exempt and Government Entities Division (TE/GE), of which EO is a part, has agreed to share its guidance with TAS. The Advocate recommends that the IRS adopt more expansive disclosure policies both in TE/GE and throughout the IRS.

ABSENCE OF ADEQUATE CHECKS AND BALANCES

The IRS’s Processing of Section 501(c)(4) Applications Violated Fundamental Taxpayer Rights. The National Taxpayer Advocate has long recommended that Congress enact a Taxpayer Bill of Rights (TBOR). Modeled after the U.S. Constitution’s Bill of Rights, they would include the following:  (1) the right to be informed; (2) the right to be assisted; (3) the right to be heard; (4) the right to pay no more than the correct amount of tax; (5) the right of appeal; (6) the right to certainty; (7) the right to privacy; (8) the right to confidentiality; (9) the right to representation; and (10) the right to a fair and just tax system. The intent of a Taxpayer Bill of Rights is not primarily to create new rights, but to group the dozens of existing taxpayer rights into categories that members of the public and IRS employees alike can understand and remember. In her preface to the report, Olson details how the IRS’s processing of Section 501(c)(4) applications violated 8 of these 10 rights. “If these rights were enacted and publicized . . . applicants for exemption may have complained more promptly and the violations might have been addressed more quickly,” the report says.
Applicants for Exempt Status (and Other Taxpayers) Have No Easily Available Remedy for the Violation of Their Rights. Several other countries, notably Australia and the United Kingdom, have authorized “apology payments” (or an equivalent) as a remedy for the violation of taxpayer rights. The National Taxpayer Advocate has previously proposed that Congress authorize the Advocate to make a payment of up to $1,000 to a taxpayer in cases where the action or inaction of the IRS caused excessive expense or undue burden and the taxpayer has experienced a “significant hardship” within the meaning of Section 7811 of the tax code. The total would be capped, perhaps at $1 million per year. Apology payments would serve as a symbolic gesture to show that the government recognizes its mistake and the taxpayer’s burden. The Advocate recommends that Congress enact this proposal.
Congress No Longer Holds Joint Annual Oversight Hearings to Review IRS Challenges and Performance. After Congress passed the IRS Restructuring and Reform Act of 1998, it held annual oversight hearings to review the IRS’s performance. Each hearing was conducted jointly by majority and minority members of the House Committees on Ways and Means, Appropriations, and Government Reform and Oversight and the Senate Committees on Finance, Appropriations, and Governmental Affairs. The last joint oversight hearing was held about 10 years ago. The Advocate recommends that Congress reinstate joint annual oversight hearings to help identify and address problem areas, with specific focus on how the IRS is meeting the needs of particular taxpayer segments, including individuals, small businesses and exempt organizations, and how it is protecting taxpayer rights.

MANAGEMENT AND ADMINISTRATIVE FAILURES

EO Management Did Not Maintain an Adequate Inventory Management System. EO apparently did not have the meaningful performance measures required for effective management oversight, such as how long it takes, on average, to process applications that cannot be disposed of during initial screening and what percentage of inventory was over-aged. The Advocate recommends that EO adopt better metrics to enable management to identify problems more quickly.
EO Management Did Not Ensure that Requests for Guidance Received a Timely Response. The recent report by the Treasury Inspector General for Tax Administration (TIGTA) report found that “the Determinations Unit waited more than 20 months (from February 2010 to November 2011) to receive draft written guidance from the Technical Unit for processing potential political cases.” It appears EO management did not have a system to ensure management followed up on requests for guidance or assistance that were not timely fulfilled. The Advocate recommends that EO track requests for guidance or assistance from the EO Technical Unit so management can assess the timeliness and quality of the guidance and assistance it provides to both Determinations Unit employees and the public.

EO’S CULTURAL DIFFICULTY WITH TAS

EO Executives Resisted TAS’s Authority to Order Expedited Processing of Tax-Exemption Applications, and Thereby Isolated EO from TAS. Congress has given the National Taxpayer Advocate the authority to issue Taxpayer Assistance Orders (TAOs) directing the IRS to take an action or refrain from taking an action with respect to taxpayers who have experienced a “significant hardship” as defined by statute. When EO’s backlog of applications for exempt status grew around 2007, TAS issued TAOs directing EO to process certain “significant hardship” cases quickly. EO management pushed back, arguing that the Advocate’s authority to issue TAOs did not apply to EO cases. The attitude that EO does not have to be responsive to TAS has permeated EO and persists to this day, the report says.  The Advocate has recommended and the new TE/GE leadership has agreed that TAS provide training to EO employees regarding TAS’s authority to order expedited processing of exemption applications.
EO Employees Did Not Refer Over-Aged Cases to TAS. The tax code provides that the National Taxpayer Advocate shall “develop guidance to be distributed to all Internal Revenue Service officers and employees outlining the criteria for referral of taxpayer inquiries to local offices of taxpayer advocates.” One criterion is that “[t]he taxpayer has experienced a delay of more than 30 days [beyond the IRS’s normal processing time] to resolve a tax account problem.” Although other IRS divisions routinely refer cases to TAS and although every case identified by TIGTA was delayed much more than 30 days, EO did not refer any of these cases to TAS. The Advocate has recommended and the new TE/GE leadership has agreed that TAS provide guidance and training to EO employees regarding when to refer cases to TAS.
EO Employees Did Not Report the Systemic Delays in EO Processing to TAS. TAS maintains a system known as the Systemic Advocacy Management System (SAMS) through which IRS employees and members of the public can report systemic IRS problems. TAS receives hundreds of submissions each year, including many from IRS employees. However, no EO employee (or anyone else) alerted TAS to this issue while the cases were on hold.  Had TAS been alerted, it would likely have uncovered the significant delays and confusion in processing these applications during the pendency of the problem. The Advocate recommends that TAS provide guidance and training to EO employees regarding when to refer systemic issues to TAS.

TAS CASES

Following the release of the TIGTA report, TAS searched its databases for the period from January 1, 2010 through May 17, 2013. It identified 19 cases that may have involved the “Be on the Lookout” (BOLO) selection criteria out of over 915,000 total case receipts during that period. The 19 cases were received by ten TAS offices in nine states. Eleven organizations were granted exempt status, three withdrew their applications, three cases were closed because the applicants did not respond to requests for additional information, and two cases are still open in EO and are assigned to a reviewer.
The report says that faced with an average of more than 270,000 cases a year, it is difficult for TAS to identify systemic issues that arise in a small number of cases. However, the report says steps can be taken to increase the odds of earlier issue identification. As described above, EO leadership has agreed to allow TAS to train its employees regarding case referrals and SAMS submissions. If TAS had received a significant number of case referrals from EO or if the systemic processing delays had been reported on SAMS by any EO employee who was aware of the issue, TAS likely would have identified the problem sooner. In addition, the National Taxpayer Advocate will provide additional training to TAS employees regarding EO issues, and TAS will participate in a task force with TE/GE to identify and address systemic EO issues in the future.
*           *           *           *           *           *           *
The National Taxpayer Advocate is required by statute to submit two annual reports to the House Committee on Ways and Means and the Senate Committee on Finance. The statute requires these reports to be submitted directly to the Committees without any prior review or comment from the Commissioner of Internal Revenue, the Secretary of the Treasury, the IRS Oversight Board, any other officer or employee of the Department of the Treasury, or the Office of Management and Budget. The first report is due on June 30 of each year and must identify the objectives of the Office of the Taxpayer Advocate for the fiscal year beginning in that calendar year. The second report, due on December 31 of each year, must identify at least 20 of the most serious problems encountered by taxpayers, discuss the ten tax issues most frequently litigated in the courts and make administrative and legislative recommendations to resolve taxpayer problems.

Tuesday, May 21, 2013

Summer Job Tax Information for Students

When summer vacation begins, classroom learning ends for most students. Even so, summer doesn’t have to mean a complete break from learning. Students starting summer jobs have the opportunity to learn some important life lessons. Summer jobs offer students the opportunity to learn about the working world – and taxes.

Here are six things about summer jobs that students should know:

1. As a new employee, you’ll need to fill out a Form W-4, Employee’s Withholding Allowance Certificate. Employers use this form to figure how much federal income tax to withhold from workers’ paychecks. It is important to complete your W-4 form correctly so your employer withholds the right amount of taxes. You can use the IRS Withholding Calculator tool at IRS.gov to help you fill out the form.
2. If you’ll receive tips as part of your income, remember that all tips you receive are taxable. Keep a daily log to record your tips. If you receive $20 or more in cash tips in any one month, you must report your tips for that month to your employer.
3. Maybe you’ll earn money doing odd jobs this summer. If so, keep in mind that earnings you receive from self-employment are subject to income tax. Self-employment can include pay you get from jobs like baby-sitting and lawn mowing.
4. You may not earn enough money from your summer job to owe income tax, but you will probably have to pay Social Security and Medicare taxes. Your employer usually must withhold these taxes from your paycheck. Or, if you’re self-employed, you may have to pay self-employment taxes. Your payment of these taxes contributes to your coverage under the Social Security system.
5. If you’re in ROTC, your active duty pay, such as pay received during summer camp, is taxable. However, the food and lodging allowances you receive in advanced training are not.
6. If you’re a newspaper carrier or distributor, special rules apply to your income. Whatever your age, you are treated as self-employed for federal tax purposes if:
  • You are in the business of delivering newspapers.
  • Substantially all your pay for these services directly relates to sales rather than to the number of hours worked.
  • You work under a written contract that states the employer will not treat you as an employee for federal tax purposes.
If you do not meet these conditions and you are under age 18, then you are usually exempt from Social Security and Medicare tax.

Friday, May 17, 2013

Packey Law Corporation Can Assist Taxpayers with IRS Non Profit Application

The topic of IRS Form 1023, Applications for Non Profit Status, under section 501(c)(3) of the Internal Revenue Code, has recently been dominating the news.  The completion of this form or application is one of the first steps in forming a non profit business.  The filing fee for this form can range from $300.00 to $750.00.  In addition to the form, ofter statements and supporting documents are also required.  Ofter after submitting the form the IRS will ask additional questions or require additional supporting documents. A taxpayer must be prepared to fully explain all questions on the IRS Form 1023.