IRS Downplays Latest Data Breach

The IRS recently announced the unauthorized access into 100,000 tax accounts by cyber-criminals through the “Get Transcript” application on the IRS website.  Virtually every word in Commissioner Koskinen’s statement is calculated to either downplay the seriousness of the breach, deflect the blame, or put a Band-Aid on it, almost to the point that it causes increased suspicion.  It’s like when someone begins a statement with the words, “to be honest,” and you can’t help but wonder if they really are.  I will list everything the Commissioner said that could be taken that way and, of course, let you read between the lines:

  1. The information that allowed the criminals access was obtained from an outside source
  2. The crime was very sophisticated
  3. Access to “Get Transcript” is only obtained through a multi-layer authentication process
  4. The matter is under review by TIGTA and IRS’ Criminal Investigation division (CI)
  5. IRS main computer systems were not affected & remain secure
  6. Although there were 100,000 successful data breach attempts, there were another 100,000 that were unsuccessful
  7. All 200,000 affected taxpayer accounts will get letters from the IRS explaining what has happened
  8. IRS is offering free credit monitoring to those whose accounts were successfully accessed
  9. “Get Transcript” application has been shut down temporarily

And then there was the obligatory and generic “make-them-feel-good” statement:

[T]he IRS takes the security of taxpayer data extremely seriously, and we are working aggressively to protect affected taxpayers and continue to strengthen our protocols.

I totally understand the need to keep the comments positive in this kind of situation.  Any corporation would do the same sort of damage control in the form of some similar carefully worded, lawyer-drafted statement.  We definitely don’t want panic spreading across the nation in response to something like this.  But we are not stupid either.  If this data breach were really as benign as they want us to believe then why did they take the application down?  As much as the IRS has tried to deflect the blame for the data breach, I think they know that there are ways to tighten up security.  Nothing spells this out more clearly than the fact that the IRS immediately deactivated the application to fix it and make it more secure.

Clinton Foundation Under Fire for Tax Errors

Filing an amended tax return is normally not that big of a deal.  It is not uncommon for folks to make mistakes or leave out information on their Form 1040 personal income tax filing.  To amend a previously filed Form 1040, you need to complete a “1040x.”  If you want to make corrections on multiple tax years, you need a separate 1040x for each year and you need to mail them in separate envelopes to ensure they are processed correctly.  The basic structure of a 1040x is pretty straightforward: Column A shows the figures as reported on your original 1040, Column B shows the corrected figures, and Column C shows the difference between the two.  Furthermore, barring other relevant facts, the filing of a 1040x does not automatically put you into a high audit risk group.

The problem with Hillary Clinton and her foundation is there are a few “other relevant factors” that have placed their actions in the spotlight (catch up on the story here).  For one, we’re talking about million dollar mistakes, meaning they put “zero,” when the correct number was something in the tens of millions of dollars range.  Kind of hard to swallow, right?  And similar “mistakes” were made three years in a row.  In the words of charity law experts:

It [is] not remarkable for a charity to refile an erroneous return once in a while, but for a large, global charity to refile three or four years in a row [is] highly unusual.

Now House republicans are calling for an IRS investigation.  Most letters to Commissioner John Koskinen would probably be ignored or referred out to a different IRS department in typical IRS style, but I’m guessing this one will get adequate attention.

Board of Equalization is not of fan of Denny’s in California’s central valley

Have you been to one of the Denny’s operated by Abdul Halim? He operates three Denny’s restaurants located in Lathrop, Manteca, and Stockton. If you have a craving for a Moons Over My Hammy and live in the California’s central valley, you may soon be out of luck.

California’s Board of Equalization recently publicized its version of a perp walk. Abdul Halim, of Tracy, California will serve 10 years formal probation, perform 3,500 hours of community service, and pay $790,428 in restitution for pleading guilty to two felony and one misdemeanor count of sales tax evasion. The ordered restitution includes the sales tax, penalties, and interest owed to the BOE.

California’s Board of Equalization is charged with the duty of collecting and enforcing payment of California sales tax. BOE Investigators determined that Mr. Halim failed to pay nearly $525,000 in sales tax collected from Denny’s customers between 2007 and 2011.

If you need help fighting the BOE in California’s central valley or in the greater Sacramento area, call our law firm for a free consultation. We may be able to help save your business and keep you from being the next “perp” publicized by the BOE.

California Underpayment Penalty: Obscure FTB Penalities

If you’re familiar with the way the California Franchise Tax Board (FTB) operates in the process of collecting delinquent taxes, then you know that they impose a bunch of different penalties.  There are some common sense penalties, like the penalty for filing late, the penalty for paying late, and the California tax underpayment penalty. But there are some other more obscure FTB penalties that may surprise you:

1. Cost Recovery Fees

If the FTB has to do anything to collect the tax due (besides sending you a bill), then they are likely going to charge some sort of collection fee.  And when I say “anything,” I mean anything, such as filing a tax lien, seizing and selling property, intercepting a federal tax refund, filing enforcement, and even simply assigning your case to the collections department.  The fee is supposed to cover the theoretical costs of these revenue collection efforts and I’m sure are rarely commensurate with the actual collection costs.

2. Dishonored Payment Penalty

If your check bounces, or your FTB payment is otherwise rejected due to insufficient funds, then FTB will impose a $25 penalty.  If your payment is $1,250 or more, then the penalty is 2 percent of the payment amount.

3. Mandatory e-Pay Penalty

Certain large payments over $20,000, or payments made where the total tax liability exceeds $80,000, must be made electronically according to California law.  The California tax underpayment penalty imposed by the FTB is 1 percent penalty for failure to comply.

4. Demand to File Penalty

If you don’t file your tax return by the filing deadline, then FTB charges a 25 percent late filing penalty.  If you still do not file after FTB demands that you file, then they will impose a 25 percent penalty on top of the initial failure to file penalty.  This is particularly brutal because they can actually impose penalties and interest even if your tax return shows that a refund is due!

5. Estimated Tax Penalty

This is the penalty imposed  for failure to pay an estimated tax installment.  It also applies when you pay late or underpay.

6. Post-Amnesty Penalty

Taxpayers who have been granted amnesty for any particular tax year must not subsequently owe any new or additional tax, otherwise… you guessed it, another penalty.

Contact us today for more information or a free consultation!