IRS Gives Payroll Tax Extension for Business in Sandy's Path

photo via ibtimes.com

Filing and paying your taxes is a serious obligation that cannot easily be avoided or postponed.  If you fail to file and/or pay on time, you will be responsible for penalties and interest that can make your tax debt add up quickly.  Penalties and interest can sometimes be avoided by showing you had reasonable cause for filing and/or paying late.  For example, if you were incapacitated by serious injury or illness, or if there was some act of God occuring in your locality that prevented you from filing or paying on time, the IRS would likely abate the penalties and interest that would have accrued during that time.

Sometimes the IRS automatically grants penalty relief when there are major storms and disasters.  Reasonable cause is presumed in these situations and the taxpayer need not provide any individual proof.  FEMA has designated certain areas affected by Hurricane Sandy and related storms as official disaster areas and the IRS followed suit by granting limited tax relief.  The IRS is giving businesses an extra seven days to make their quarterly tax deposits — 3rd Quarter deposits that are normally due on October 31st, will not be late as long as they are made by November 7th.

Sandy & Obamacare

Just a couple random observations today:

1. Hurricane Sandy – Have you ever seen the looting that goes on when there are major storms and disasters?  Well, there is a distinct probability that we will see internet “looters” who don’t actually go and affirmatively steal things, but who lure victims to send them payments.  Beware of websites that purport to be charities raising money for victims of Hurricane Sandy — they could be a scam.  You can check on the tax-exempt status of the organization to determine how much you’re going to trust them.  Do this BEFORE you donate!  No need to run it by your tax attorney; just follow this link to the Exempt Organizations Select Check on the IRS website.

2. Obamacare Form – Americans for Tax Reform has prepared a “projected” tax form to assist taxpayers with their obligations under Obamacare.  This is so bizarre to me.  What a strange gimmick.  First of all, who has time to put together a complete form along with instructions based on what they think the IRS is going to require?  Second, who is really going to use this form when the individual mandate does not take effect until 2014?  Tax relief may be a top priority these days, but people just don’t plan that far in the future.  Props for style though;  it looks just like an actual IRS form.

The Giants celebrate their World Series win at Comerica Park on Sunday, Oct. 28, 2012 in Detroit, MI. Photo: Michael Macor, The Chronicle / SF

Perseverance Pays Off

It’s difficult to write about tax relief today after witnessing our beloved San Francisco Giants defeat the Detroit Tigers in a four-game World Series sweeeeeep!  What a dramatic series, and what an amazing season!  One of my favorite stories is that of Barry Zito, who didn’t even make the roster in the club’s 2010 World Series appearance.  He never gave up and battled back to become one of the KEY players in the Giants’ postseason.

Anyone who files a whistleblower claim must have similar tenacity and perseverance.  First it was Bradley Birkenfeld — who for his efforts and patience was awarded an unprecedented $104 million.  And now we hear of another whistleblower getting a cool $38 million from the IRS Whistleblower Office.  Only this time we don’t know the guy’s name and we don’t know the name of the firm with the illegal (or overly-aggressive) tax relief plots.  It is IRS policy to keep these details private so the individual may continue to work and maintain a somewhat normal life.  We only know about Birkenfeld because he agreed to allow the details to be publicized.

We have, however, heard from the whistleblower’s attorney who has expressed how pleased he is that the IRS has been able to keep things on the down low.  He gives the Whistleblower Office brownie points (1) for actually following through on a whistleblower payout, and (2) for doing so in a professional manner.

Axl Rose on Punctuality

photo via usmagazine.com

Guns N’ Roses was notorious for starting their shows late.  I always believed it was a standard side effect of the rock n’ roll lifestyle; the drugs, the revelry, the general irresponsibility.  But Axl Rose, GNR frontman, recently addressed the issue of punctuality in a rare television interview with Jimmy Kimmel.  Ironically, his explanation came a couple decades too late.

In his first live TV appearance in 20 years, Axl Rose talked about some of his puzzling behavior, such as his ridiculous corn rows, his disappearing back stage in the middle of shows, and his chronic tardiness that had a tendency of alienating fans.  Axl apparently lives by the mantra “punctuality is the thief of time” (a famous Oscar Wilde quote from the book The Picture of Dorian Gray).  In other words, if he showed up on time, then chances are he would just have to wait, thereby wasting his own time.  And why should a rock star have to wait for anybody?!

My sincere hope is you will not follow Axl Rose’s example when it comes to your taxes.  It’s only October, but it’s not too early to start thinking about next filing season.  Get your paperwork in order now so you’re not scrambling in April.  If you’re going to need an accountant or tax attorney, save yourself some trouble and begin making plans now; it could mean the difference between tax relief and tax disaster.

IRS Phishing Hits New Low

image via cupcakeproject.com

By now we are used to reports of phony IRS emails spamming computers around the nation. We know that identify theft scams can result in loss of privacy, loss of property, tax problems, and countless hours of work trying to straighten things out with the IRS and other government agencies. The IRS has made it abundantly clear that they do not communicate to taxpayers via email, and if ever we were to receive an email that purported to be from the IRS, we can rest assured that it is a phony. We know to leave suspicious-looking emails alone (not open them) and immediately report them to phishing@irs.gov.

But now there are reports of phony IRS websites too (See IRS Special Edition Tax Tip 2012-13).  The phony IRS websites look much like the IRS e-services website, but don’t have the all-important .gov designation. There’s a fool-proof way of steering clear of phony IRS websites. If you find yourself on a website that begins with www.irs.gov then you know you are on the official IRS website. If it begins with anything else, it shouldn’t take a tax attorney to tell you that it’s not the IRS!

TIGTA Finds Problems with IRS Hardship Program

Due to our nation’s economic downturn, the number of taxpayers who come to the IRS with a documented inability to pay their back taxes has tripled from calendar year 2011 to 2012.  The IRS typically places these accounts into Currently Not Collectible (CNC) status where they remain, protected from IRS enforced collection activity, until the taxpayer’s financial situation improves.

Closing taxpayers’ balance due accounts as currently not collectible is a high-risk action because the balances due from the taxpayers may never be collected.

~ TIGTA 2012-40-108

A recent TIGTA study shows that IRS personnel are approving cases for CNC status incorrectly and without managerial approval.  What this means for the IRS is there are enormous tax collection opportunities being missed.

But this report also has implications on the taxpayer.  Managers often check the numbers and check for documentation to support claimed expenses.  When a case is slipped into CNC status without managerial approval, these details can easily be missed.  And if the oversight is caught at a later date, the IRS has a bad habit of pulling cases out of CNC status without explanation or warning.  Furthermore, if the case is not coded correctly (also a manager function), it will not be protected from enforced collection activity such as wage garnishment, bank levy, and asset seizure.

Don't Tip the Tax Collector

image via tipsfortips.wordpress.com

The law is very tough on tax assessors and collectors who extend tax relief in situations where it is not warranted.  It is obviously illegal to bribe a property tax assessor or an IRS agent for reducing a tax bill.  Illegal to accept a bribe and illegal to do the bribing.

L.A. County Tax Assessor, John Noguez, has been charged with accepting huge bribes in exchange for reduced tax assessments.  Other charges include perjury, conspiracy and misappropriation — 24 felony counts in all.  Noguez was arrested and taken into custody last week.  If convicted, he will spend up to 30 years behind bars.

What about the guy who paid him off?  He’ll get his too, if found guilty.  Ramin Salari was charged with 23 felony counts including bribing public officials and conspiracy.  Salari appears to be pleading not guilty.  It is unclear how Noguez will plead.

Remember: bribes are expensive and risky.  Hire a good tax attorney instead.

IRS Doc Requests

image via instyle.com

If you are working with the IRS in an effort to resolve a back tax debt, chances are you will have to divulge to them some, if not most, of your financial information.  You may also be required to submit documentation to substantiate (or prove) that the information you have provided is accurate.  And it’s not just out of curiosity; the IRS requires certain documents to verify that what you have told them is correct.

The most common types of documentation have to do with proving your income and expenses.  Income is typically substantiated by submitting one or more paycheck stubs, and expenses are typically substantiated by providing bank statements, receipts, or other proof of payment.  It is also common for the IRS to require you to demonstrate the absence of something.  For example, proof that you do not have access to a 401(k) or proof that you were unable to obtain a home equity loan, etc.

If you are working with a tax attorney or other representative, they will advise you on what information will have to be provided to the IRS.  And if it must be divulged, a tax attorney has the skills to present your case in a favorable light to help you obtain the best possible deal.

Bullet Tax?

photo via tumblr.com

If Cook County board president, Toni Preckwinkle, has her way, it’s going to be more expensive to buy bullets in Chicago.  She is pushing for a $.05 per bullet tax to take effect as a means of curbing violent crime in a city that has tallied 409 homicides so far this year.  And there’s also the bonus of raising about $1 million per year for county coffers.  Yet our governments continue to burden citizens with additional tax responsibilities when the need for tax relief is greater than ever.

We’ve discussed sin taxes before: the cigarette tax, Denmark’s short-lived tax on fatty foods (the so-called “fat tax“), the soda tax controversy in New York and the bay area of Northern California.  The problem is these taxes typically cause an unfair burden on those who use these things responsibly (although I’m not sure it’s possible to smoke cigarettes responsibly) and they fail to really control the “bad behavior.”

And this is not just the tax attorney talking; the same problems have been identified by opponents of the bullet tax.  Won’t people go to neighboring counties to buy their ammo?  Won’t this infringe on the rights of lawful gun owners?  Why should law abiding citizens have to pay for the county’s budget shortcomings?