IRS Waste

Maybe Big Brother should conduct an audit on IRS year-end activities because I think they would identify some areas of concern.

I already blogged about contacting the IRS in December, and how it should be avoided if possible. But what about the last business day of the year (today)? Don’t even bother.

Today we discovered that the IRS has personnel on hand to answer the phones when they ring, but the computer systems are down so they can’t help with specific account-related issues. In other words, today the IRS is paying staff to sit around at their potluck parties, ro-sham-bo-ing whenever the phone rings. I’m certain there is an automated greeting that could be set informing callers that the computers are down. Why are we paying them to be at work today?

I know, it is kind of grumpy of me to be complaining about this. After all, its only one day. Where’s my holiday spirit? But think of the number of IRS representatives and the amount of money that could be saved if the IRS would send people home when they are unable to do their jobs.

IRS Claims Erroneous Refund Issued to Hal Steinbrenner

No doubt the Steinbrenners can still stir up controversy. This time it’s tax problems.

The Justice Department has sued Harold “Hal” Steinbrenner, co-owner of the New York Yankees and son of the late George Steinbrenner, over a $670,000 refund that they say was issued to him in error two years ago.  In 2009 Hal filed an amended 2001 return, seeking a refund because of a $6.8 million net operating loss carried back from 2002. The IRS paid out the refund but then determined that the amendment was filed 5 months too late. Full story here.

Hal Steinbrenner’s representatives had no knowledge of the lawsuit and had received no prior notices regarding this matter from the IRS or any other governmental agency.

~ Alice McGillion, a family spokeswoman

The IRS is notorious for dropping bombs on people without prior notice, but even I am a little surprised by this one. It seems like the IRS would have initially sent letters to the taxpayer informing him of the erroneous refund and requesting he pay it back. I can’t imagine they would have referred the case out to legal and then to the Justice Department unless they were up against some filing deadline and they needed to preserve their rights by filing suit.

Does the IRS Celebrate Christmas?

IRS employees are given a paid day or two off around Christmastime, so we know that the IRS observes Christmas in that manner.  The US Office of Personnel Management ( is the official source for federal holidays, and this year, for most federal government agencies, Christmas will be observed on Monday, December 26th.  But what about any other official IRS references to Christmas?

I was curious, so I searched for the term on the IRS website and there were 119 search results.  Here’s what I found:

  1. references to Christmas Island, a territory of Australia in the Indian Ocean
  2. references to the deduction of expenses related to Christmas Tree cultivation in the Farmer’s Tax Guide (Publication 225)
  3. references to an oil industry term (“Christmas Tree“) used to describe “an assembly of valves mounted on the casinghead through which a well is produced”
  4. old references to “Christmas in April” foundations that had lost their non-profit status
  5. references to various business names that include the word “Christmas”
  6. various references to the service’s observation of the federal holiday

So, there are no substantive references or discussions of Christmas on the IRS website.  I suppose that is as it should be.

Avoid Calling the IRS in December

December is by far the worst time to try to communicate with the IRS about your tax debt.

The Second-Stringers

I have not noticed that the telephone wait times are much different in December. Perhaps there are more IRS representatives taking vacation in December, but many practitioners and taxpayers do the same — so increased phone traffic is not normally an issue. The IRS does a fairly good job replacing the vacationers, but I have usually found the quality of their replacements to be lacking.  If you call the IRS in December (especially late December) then there is a good chance you will be dealing with a new, inexperienced IRS agent (a “second-stringer”). Of course, a tax relief attorney will know how to use that inexperience to the taxpayer’s advantage.

IRS Computer Maintenance

The IRS information technology staff takes advantage of the holidays to do routine maintenance on IRS computer systems. And they like to get a jump on things. So, if they tell you that everything is going to be shut down on Friday in observance of Christmas, then chances are they will be up and down all day on Wednesday and completely offline by early afternoon on Thursday.

If you get through to a representative who tells you their computers have been up and down, then it might be best to put off the call for another day if possible. The problem is that you will get partway through your call and everything the representative did will be lost when the computer goes down, and you’ll have to start over again.

If you have a tax issue that can’t wait until after the holidays, it is best to enlist the help of a qualified and experienced tax professional.

Deal Finally Struck on Payroll Tax Cut Extension

It appears that Congress will be able to go home for Christmas after all. They finally struck a deal in Washington and narrowly avoided an automatic increase in the payroll tax rate.

House Republicans, under severe pressure from the White House, have agreed to the temporary two-month extension of the payroll tax cut that just days ago they killed, saying it was not good enough. Well, they are still saying it is not good enough, but they really had no choice but to pass this temporary measure.  The trade-off?  A conference committee will be appointed to convene in early January to work out a more permanent deal and the possibility of more permanent tax relief.

The stop-gap measure will still include the controversial Keystone pipeline project.

As part of this bill, unemployment benefits will also be extended for two months.

According to House Speaker John Boehner, the agreement should be voted on by unanimous consent before Christmas.

Hot off the Press: New IRS Publication 17

IRS Publication 17 contains a whole host of information on filing your 2011 individual federal income taxes. It is the number one source for basic tax filing information, especially handy for those who plan on filing their taxes themselves (without hiring professional help). This publication has been around for over 60 years, but was recently updated for the 2012 filing season.  In a nutshell, Pub 17 covers the topics of Income, figuring you income, deductions, and credits.  But there is also information on taxpayer rights and how to obtain tax relief if you cannot pay what you owe.

But wait, before you click on the link and hit “Print,” you should be aware that this is a lengthy document.  The index alone is over 20 pages long.  The total page count is just over 300, so you’d be better off just saving the link. Besides, if you print it then you lose some of its functionality — Pub 17, in its electronic form, is full of links that (1) help you navigate those 300 pages quickly, (2) help you find additional information on key topics, and (3) take you to other forms and publications you may need when preparing your 2011 taxes.

Preparing your taxes yourself is not always the right choice for everyone. But if you do, you should definitely consider reading Pub 17 or at least keep it on hand as a reference tool.

Time is Running Out on the Payroll Tax Extension

Further payroll tax relief may have to wait.  Most Americans who have been following the story probably thought a two-month extension of the payroll tax cut was the best that could be arranged for now and it was a done deal.  In fact, after the Senate approved the measure on Saturday, they left Washington for their holiday break.  But not so fast — it still had to get past the House in today’s vote . . . and it didn’t.

Today the House voted 229-193 in opposition to the two-month extension.  This has the effect of kicking the measure back to the Senate, but Senate Majority Leader, Harry Reid, refuses to continue negotiations on a long-term deal until the House approves the preliminary one.  Here is the way he spins it:

I have been trying to negotiate a yearlong extension with Republicans for weeks, and I am happy to continue doing so as soon as the House of Representatives passes the bipartisan compromise to protect middle-class families, but not before then.

~ Senate Majority leader Harry Reid, D-Nev

If something isn’t done before the end of the year, then the payroll taxes will go up by 2 percentage points in January and nearly 2 million people could lose unemployment benefits.

Another Co-conspirator in the Madoff Scheme

Today Enrica Cotellessa-Pitz, Bernie Madoff’s former controller, pleaded guilty to conspiracy, falsifying books and records, and making false filings with the Securities and Exchange Commission. She could spend up to 50 years in prison.

Cotellessa-Pitz said she started working at Bernard L. Madoff Investment Securities LLC in 1978 while she was studying economics in college. She was named controller in late 1998. She said Madoff and others within months were directing her to put false entries in the company’s books to make it appear profitable trades were being made and that losses were not incurred.

~ LARRY NEUMEISTER, The Associated Press

She also helped Madoff’s organization reduce its tax liabilities by underreporting income to the IRS. Madoff’s own 2004 tax return was audited when he underreported by millions of dollars. And then when faced with audits, Cotellessa-Pitz perpetuated the fraud by providing false information to the SEC and the IRS.

Long-term Payroll Tax Cut Decisions Postponed

The Senate approved a mere two-month extension of the payroll tax cut today, which still has to get through the House.

Senate approved a $33 billion package to extend unemployment benefits, extend a payroll tax holiday for millions of American workers and avoid cuts in payments to doctors who accept Medicare.  The measure is effective through February, when Congress will once again be locked in battle over whether and how to further extend those provisions.

~ Jennifer Steinhauer, New York Times

The agreement includes the Keystone XL legislation that Obama previously said he would veto. Today’s news is infuriating for many because it seems like despite all the battling and negotiating in Congress, nothing meaningful was accomplished.