PCA Version 3.0

PCA Version 3.0

Are you ready for PCA version 3.0? For the third time in the history of the Internal Revenue Service, the government approved (and in certain instances mandated) the usage of private collection agencies (PCAs) for the purpose of assisting with the collection of federal taxes. The provision is part of some new highway funding legislation called the FAST Act (Fixing America’s Surface Transportation).

The use of PCAs in the collection of tax revenue is controversial. First, and perhaps foremost, the IRS has not been able to show that it actually works — that is, they have not shown that it is cost effective to hire these outside private collection firms. The last time the IRS integrated PCA firms into their collection processes was in 2006/2007. Some will argue that the IRS was able to collect billions of dollars that they otherwise would not have collected with their limited resources. Some contend that the fees charged by the PCA firms cancel out most of the revenue they collected. I don’t know who is right, but one fact cannot be ignored: the IRS discontinued the program after only a couple years. If it were such a wild success, I am certain the government would have found a way to make it last.

Another argument against PCAs is the risk that they will engage in abusive collection tactics. I think this is a legitimate concern, but I personally do not have this fear. I remember PCA version 2.0 back in 2007 and the private collectors that I dealt with were much more civil than the IRS ever was.

There are some tax professionals (and probably even more concerned taxpayers) who really dislike the idea of giving sensitive information to PCA firms. We have seen how the IRS has struggled with safeguarding sensitive taxpayer data, and they’ve had 100 years to try to get it right. So the thought of the IRS turning over social security numbers to a less-experienced private collection firm is rather disconcerting.

Besides these well-documented concerns, what I experienced first-hand in 2007 was that the PCA firms were not given authority to fully resolve certain tax accounts, which caused unnecessary delays and heightened taxpayer frustration. Imagine getting a letter from a PCA firm and then calling them only to find out that your case will have to be referred back to the IRS. The IRS is already notorious for red tape and delays, and if its anything like 2007, I fear this new legislation will only makes things worse.

Could the Latest IRS Data Breach have been Prevented?

The head of the Treasury Inspector General for Tax Administration (TIGTA), J. Russell George, testified before Congress today concerning the latest data breach at the IRS involving the “Get Transcript” application.  At this point we have some preliminary estimates on the damage done by this cyberattack: $39 million in fraudulent refunds.  And while George stopped short of saying that it all could have been prevented, he clearly did place some blame on the IRS.  Every year for the past several years, TIGTA has identified weaknesses in IRS security systems and makes “recommendations” for improving them.  As of March 2015, there were around 50 problem areas that still required attention.

The problem is that most of the time these “recommendations” are simply acknowledged by the IRS and taken into consideration, and nothing further.  In other words, the IRS will agree with the recommendation but not take the additional steps necessary to correct the problems.  I have been frustrated by this pattern for years and wished TIGTA somehow had the authority to require action, rather than kindly make recommendations.

IRS Commissioner, John Koskinen, was also present during George’s Congressional testimony and you can probably guess his response: budget cuts have hampered the IRS’ ability to combat cyber criminals and has kept the IRS from upgrading their computers and cybersecurity technology.  But after realizing that he had painted himself into a corner, he quickly tempered his remarks:

Not every problem is a budget problem, so I don’t want to wander around town every time we have a challenge saying, “Ah, if we had more money, we’d fix it,” … [t]his is a technology issue, not a budget [issue]…

The other part of his response was that implementing TIGTA’s recommendations would not have prevented this particular cyberattack.  It’s apples and oranges.  There was apparently something different about this data breach; it was very sophisticated and was orchestrated by multiple groups located in foreign countries.  According to Koskinen, it was a “sophisticated international syndicate” that was responsible for this latest data breach.  In other words, this was a tricky group of criminals and nothing could have stopped them.

Don’t believe it.  We know the IRS’ track record and they make a lot of mistakes.  There is a reason why they immediately took that part of their website down following last week’s announcement.  I am also very skeptical of the statement I keep seeing that the main IRS computer systems were not compromised in this cyberattack.  Remember when top IRS officials were certain that Lois Lerner’s emails were not recoverable?  There are times (and I see this on a daily basis in my communications with IRS rank & file) when the IRS does not appear to be all that familiar with its own systems.  We’ll have to keep a close eye on this story.  I would not be surprised if more information is discovered in the coming weeks that calls into question this statement about IRS’s main computer system.  I hope I am wrong.

Best IRS phone scam – 844-271-8465

I recently received an email from a tax client with a very serious tax problem that my tax law firm has been handling. My tax client was very concerned that the Internal Revenue Service left him a threating message on his home telephone number. The telephone number that my client was to call back to speak with the IRS was 844-271-8465. Since my client actually has a serious tax problem, and since he was smart enough to hire a tax attorney to fight for IRS tax relief, he rightfully contacted me. Based on the stage of his tax problem, he wouldn’t be receiving any calls from IRS collections.

I told him that it was likely a scam. He was adamant that it was not. He said that he called the number and it was definitely IRS collections and he hung up immediately. Out of curiosity I called the number. When calling, the number did sound like the IRS collection line to the untrained ear. The call started with a “welcome to the IRS” prompt. “Push one for a business issue, two for a personal issue” or something of the like. The recording sounded like it was actually recorded from a phone calling the Internal Revenue Service. Then, the phone went immediately to a person without me needing to push a button. Because I didn’t have to wait an hour or two to speak with anyone, this was a huge red flag that this was not an IRS number.

The person who answered my call had a very thick accent, didn’t introduce themselves or provide me with a federal identification number. The person who answered the phone instantly raised his voice and told me that I owed the IRS and I had to pay him. I found this laughable because I was calling from a blocked telephone number and I didn’t tell him who I was. I asked him for his name, identification number and what Internal Revenue Service collection unit he was in. He fumbled a bit and said, “um … you can call me ‘Jack’”. He also told me that he didn’t have to provide me with his identification number and again demanded a payment.

Based on the absurdity of this joker, I’m surprised that anyone would be duped by this scam. But, apparently some people are indeed being scammed. According to the Treasury Inspector General for Tax Administration, they are aware of nearly 3,000 victims who have collectively paid over $14 million as a result of this type of IRS scam.

The IRS has been warning of such scams for the past couple years now. I think I have had a call or two myself, between other scams to update my computer, or lend money to a Nigerian prince. But this is the first scam that I’ve experienced where the voice prompts for the number imitates the actual Internal Revenue Service collection number voice prompt. I’m sure it’s been going on for a while as the IRS reports that the caller identification for these numbers also reveal that the number belongs to the Internal Revenue Service or other law enforcement.

These scammers may be scary and persuasive if you, like my tax client, actually have a legitimate IRS tax matter you are trying to resolve. However, if you know that you don’t have tax issues you should not be swayed by these scammer’s tactics. If you’re not sure if you have tax problems, this may be the time to confirm whether you have any lingering tax issues. Our tax attorneys are located in Modesto, California and Sacramento, California. We can help you determine if you have a real tax issue or help you get the tax relief appropriate for your situation. Please call us at (800) 454-7043 for your free consultation.

IRS closed – technical difficulties or government shutdown?

Because our elected representatives can’t do their job, the government has shutdown. The Internal Revenue Service (IRS) is not immune from the shutdown … but you are still responsible to make payments and meet IRS deadlines.

Curious as to how the government shutdown would impact the IRS collection officers I face off against on a daily basis; I started to make my normal phone calls to the IRS today. The IRS practitioner’s line has a pre-recorded message acknowledging that it is closed due to the government shutdown. The standard collections phone number used by the public at large has a pre-recorded message that it is having technical difficulties. I called a small sample of Revenue Officers that I know and got their voice messages (no surprise there). I also called a couple of the duty lines at my local IRS office. The duty lines were not staffed. One had a rather funny message recorded either yesterday or today, acknowledging the government shutdown and then the person recording the message was either yanked off the phone or spat a profanity into the message.

According to the IRS website, they softly acknowledge the government shutdown as follows:

“Due to the current lapse in appropriations, IRS operations are limited. However, the underlying tax law remains in effect, and all taxpayers should continue to meet their tax obligations as normal.”

Individuals and businesses should keep filing their tax returns and making deposits with the IRS, as they are required to do so by law. The IRS will accept and process all tax returns with payments, but will be unable to issue refunds during this time. Taxpayers are urged to file electronically, because most of these returns will be processed automatically.

If you have an upcoming appointment scheduled with the IRS, you should assume that the appointment is cancelled and will be rescheduled. The IRS will also continue to send its scary collection notices; however, correspondences received will not be reviewed (again, not a real surprise announcement).

I suppose what I’m really waiting for is for a prospective client to contact me with a stack of IRS levy notices that were issued at the eleventh hour on September 30, 2013 by an IRS official knowing they were going on a forced holiday for an undetermined amount of time.

Be Charitable Today … Tax Relief in April

Get your check in the mail today! Charitable contributions are deductible in the year made, make you feel good immediately, and may give you some IRS Tax Relief in April. Therefore, donations paid by check still count for tax 2012 as long as they are mailed by today, the last day of 2012. Donations charged to a credit card before the end of 2012 count for 2012, even if the credit card bill isn’t paid until year 2013.

To deduct any charitable donation of money, regardless of amount, a taxpayer must have a bank record or a written communication from the charity showing the name of the charity and the date and amount of the contribution. Bank records include canceled checks, bank or credit union statements, and credit card statements. Bank or credit union statements should show the name of the charity, the date, and the amount paid. Credit card statements should show the name of the charity, the date, and the transaction posting date.

To be deductible, clothing and household items donated to a charity generally must be in good used condition or better. A clothing or household item for which a taxpayer claims a deduction of over $500 does not have to meet this standard if the taxpayer includes a qualified appraisal of the item with the return. Household items include furniture, furnishings, electronics, appliances and linens.

But remember, only donations to qualified organizations are tax-deductible. A searchable online database listing most organizations that are qualified to receive deductible contributions is available here on IRS.gov. Additionally, churches, synagogues, temples, mosques and government agencies are usually eligible to receive deductible donations, even if they are not listed in the database.

Happy Veterans Day

image via wunderground.com

Technically Sunday was Veterans Day, but most of us have today off, including the IRS. I paid my first visit to the Department of Veterans Affairs website today and here are some of the things I found:

  • VA has guanteed 20 million home loans for veterans since 1944, including 540,000 in 2012 alone
  • VA recognizes award-winning and influential veterans around the country on its website
  • VA supports health care and health education for our nation’s military heroes through some top-rated medical facilities
  • There are 152 VA hospitals and 817 outpatient clinics located throughout the country
  • Every possible type of VA application or form is available with the click of a mouse
  • The “projected veteran population” is over 22 million, most having served in Vietnam
  • The IRS offers free basic tax help for veterans

I like the way we take care of our country’s veterans. Although I have not had ocassion to test the theory, I would venture to guess that the IRS would give some due consideration to veteran status in their collection / tax relief cases as well.

Colorado Can't Tax Pot Sales Without Voter Approval

image via dailycamera.com

On November 6th, Colorado voters approved a constitutional amendment (Amendment 64) legalizing recreational marijuana.  Over 54 percent of voters were in favor of the constitutional amendment, but it would be interesting to know how many of those people are “non-smokers.”  I would guess that a majority of those who voted in favor of legalization were more interested in the “fringe benefits” than they were in getting high with their friends.  For example, now the state’s law enforcement personnel will be able to spend more time on violent crimes rather than small-time drug possession.  Also, now the state will be able to collect an estimated $40 million per year from a 15% tax on marijuana sales.  Or will it?

The Taxpayer Bill of Rights in Colorado prohibits any kind of new tax burden without voter approval.  According to Colorado Attorney General John Suthers, the tax must first be approved by the state legislature and then the voting public.  Perhaps the best way to avoid this tax problem would have been to include precise tax language directly in the pot legalization bill, but for whatever reason, that didn’t happen.

IRS Will Have to Get Creative in Enforcement of Obamacare

image via powells.com

According to the Treasury Inspector General for Tax Administration (TIGTA), Obamacare will result in the most expansive set of tax law changes this nation has seen in 20 years.  But from a collections standpoint, is it anything more than a bunch of new words?

Obama’s health care reform law charges the IRS with enforcement, but makes them do so with their “bare hands.”  The IRS normally has a vast array of collection tools, or “weapons” at their disposal to enforce this nation’s tax laws.  If we don’t pay, the IRS begins with threatening letters, then imposes penalties and interest on unpaid balances.  Next, the IRS moves on to levies, liens, and wage garnishment.  And if this doesn’t result in full payment of what is owed, the IRS will pull out the heavy artillery such as the civil suit or seizure of personal and real property.  It is the threat of these weapons that convinces many taxpayers to seek professional help from a tax relief attorney or, if circumstances warrant, to just to find a way to pay it.

But the new health care law does not endow the IRS with the same collection tools they have always relied on.  In fact, the only way the IRS is permitted to collect the individual mandate “tax” is by capturing a taxpayer’s refund, and even that will lose its effect once people figure out how to adjust their withholdings and avoid a big refund.  I guess the pen will have to be the IRS’ new weapon — after all, they can always send those threatening letters.

IRS Still Not Giving Proper Notice of Liens

Three years ago the Treasury Inspector General for Tax Administration (TIGTA) recommended that the IRS change its practices regarding tax lien notices, and from the looks of this year’s lien notice audit, it does not appear that the IRS has any intentions of doing so.

Today TIGTA released its 2012 lien notice audit to the public and some of the same problems they identified in 2009 still linger. The issue that the IRS has swept under the rug and ignored for the past 3 years has to do with notifying taxpayers’ representatives of a lien filing.  Specifically, they’re not consistently doing it.  The IRS promptly notifies taxpayers by mail when it registers a lien against them, and it is supposed to send the same notice to their attorney, CPA, or other representative with a Form 2848 Power of Attorney on file.

 [A]s noted in previous audits, the IRS did not always follow its own internal guidelines for notifying taxpayer representatives of the filing of the NFTL.  Therefore, the rights of some taxpayers may have been violated when the IRS did not notify their representatives of lien filings.

~ J. Russell George, TIGTA

Furthermore, the IRS does not always send lien notices to the taxpayers’ last known address.  According to the report, there are instances in which returned lien notices with bad addresses could be resent to the correct addresses, but nothing is done about it.  Just another instance of TIGTA needing more teeth to actually enforce rather than recommend.

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IRS Promises to Start Showing Whistleblowers Some Love

photo courtesy of blogs.courant.com

The IRS appreciates getting tips that help them catch people who seek tax relief illegally, but they haven’t done a very good job of showing it over the years.  The relationship between the IRS and whistleblowers has been strained, to say the least.

The IRS Whistleblower Office was established in 2007, and for all we know it was set up in an empty warehouse staffed by crickets.  The Whistleblower Office is notorious for dragging out cases far too long, failing to communicate with whistleblowers to obtain key information, not reaching the correct decision on cases, and not paying out when the decision is favorable for the whistleblower.

However, in a June 20th memorandum, the IRS declared that it would make some concrete improvements to the Whistleblower Program (outlined below).

“Let’s Kiss & Make up”:

  1. Improve communication with whistleblowers by debriefing in most cases
  2. Act on cases in a timely manner
  3. Comprehensive review of Whistleblower Office procedures
  4. Established interim guidelines imposing 90-day deadlines at key stages of the review process

AND, if you happen to be an “external stakeholder,” (whoever that might be) then the IRS says it will be working with you to establish more permanent guidelines.

www.mwattorneys.com