Blytheville: Meet the IRS

photo via adam-ross.com

Blytheville – a small town in Mississippi County, Arkansas.  Population 15,620.

Definition of blythe:

  1. of a happy lighthearted character or disposition
  2. lacking due thought or consideration

Blytheville appears to have been appropriately named, at least with regard to it’s tax obligations.  But the city still deserves to be treated fairly and still deserves IRS’ best efforts.

The city owes an undisclosed amount (somewhere in the millions of dollars) in back payroll taxes, and its tax attorneys are working with the IRS, trying to establish an installment agreement. The city put into place a temporary local sales tax to raise revenue for the back IRS tax debt, but the IRS will not accept the money directly.  For now, according to the IRS, funds must go through Blytheville bank account first.  Also, the IRS has not accepted the city’s installment agreement proposal.  City officials are beyond frustrated by how difficult the IRS is making things for them:

This seems to make no sense and is contrary to their own best interest….It’s amazing to see how something so simple is being made so complicated….[T]he IRS has even made receiving money complicated.

~ Blytheville Mayor, James Sanders

I love the innocence and honesty of this quote.  This is obviously a “first impression” situation.  I am also appalled by how the IRS tends to make things more complicated than necessary, I just no longer find it surprising.

SEC Whistleblower Standards are Higher than IRS

Like the IRS, the SEC also has a whistleblower program.  However, the SEC whistleblower program, initiated just over a year ago, would not have paid out an award to the likes of Mr. Birkenfeld.  Birkenfeld withheld important information from federal prosecutors in the case, which led to a felony conviction and two and a half years in prison.

What do you think?  Should the IRS have paid Birkenfeld even though he had “dirty hands”?

$104 Million Award: Big Win for Whistleblower, Bigger Win for IRS

image via nydailynews.com

The IRS Whistleblower Office, in its June 20th memorandum, promised to make some long-overdue changes to the whistleblower program, one of which would be to follow through on paying out awards to those who come forward with valuable intel.  When I saw this memo back in June, I wondered how long it would take for the Whistleblower Office to make good on its promise.  Well, the time has come.

The tax attorneys for former Swiss banker, Bradley Birkenfeld, announced yesterday that the IRS paid their client an award of $104 million for revealing information that resulted in the highly publicized exposure of UBS.  Why would the IRS pay out such a huge award in these miserable financial times?  Because the benefits far outweigh the cost.  Here’s what the IRS got out of the deal:

  • $780 million fine against UBS
  • strong message sent to tax cheats and financial institutions around the world that the IRS is serious about enforcement and collection of tax debts
  • strong message sent to potential whistleblowers around the world that the IRS is serious about compensating those who take risks and come forward
  • billions of dollars in taxes that otherwise would not have been collected

In the words of the IRS:

[T]he information provided by the whistleblower formed the basis for unprecedented  actions against UBS AG, with collateral impact on other enforcement activities and a continuing impact on future compliance by UBS AG.

This was a huge case for Mr. Birkenfeld and his tax attorney.  But for the IRS, the magnitude and value of this case really cannot even be measured at this point.  Full story here.

"Americans United" Asks IRS to Investigate El Paso Church

Americans United (AU) is a watchdog group based in Washington D.C. that seeks to protect religious freedoms and educate the American people about the separation of church and state.  Yesterday AU (under the direction of its tax attorneys no doubt) wrote to the Internal Revenue Service — specifically the Director of the Exempt Organizations Division — asking for an investigation of a Catholic Church in Del Paso, TX.  AU claims that the St. Raphael Catholic Church violated the restrictions of Revenue Code section 501(c)(3) that prohibits exempt organizations from “directly or indirectly participating in, or intervening in, any political campaign on behalf of (or in opposition to) any candidate for elective public office.”  The IRS has authority to revoke an organization’s tax exempt status, forcing them to find tax relief outside the parameters of 501(c)(3).  See the full letter here.

The alleged violation took the form of a printed church bulletin, and this is what was written:

I am asking all of you to go to the polls and be united in replacing our present president with a president that will respect the Catholic Church in this country.  Please pass this on to all of your Catholic friends.

I find it odd that whoever was responsible for including this language in the bulletin appears to have been at least somewhat up to speed on the applicable law.  I say that because the message seems purposely vague, in that it does not come out and name any names.  It appears that an attempt is being made to imply a vote for Romney without coming out and saying it directly. 

However, as we know, the law also prohibits any communications or activities that have the effect of supporting or opposing a political candidate.  Whether this is a message directly opposing Obama or indirectly supporting Romney, it doesn’t matter.  Either one would be a violation.

This church is going to have an uphill battle with this tax problem, assuming it even has a leg to stand on.  I believe the fatal error was that the statement appeared in print because (1) there is physical evidence of the violation, and (2) there is little doubt that the statement was made in some kind of official capacity on behalf of the church.

IRS First Impressions

image via boscofullerton.blogspot.com

I always like to read about first-time IRS experiences.  The taxpayer usually expresses surprise — either that the IRS is “nicer” or “meaner” than previously thought.  Of course, the IRS is neither nice nor mean.  It is a massive agency run by thousands of employees, any one of whom may be nice or mean, polite or rude, skilled or utterly incompetent.  And, for better or worse, impressions of the IRS as a whole are often formed based on interactions with one or two of its representatives.

IRS first impressions are also colored by the nature of the contact: is the taxpayer calling to request account transcripts, to report identity theft, to check the status of a refund, to try to resolve a back tax debt, or to check on the status of an Offer in Compromise?  Even thought IRS personnel are trained to be cordial regardless of the circumstances, when taxes are owed or tax returns are missing, it’s naturally harder to be “nice.”

Here are a couple first impression stories that you might like:

1. Micki Bare mostly has a hard time finding her local IRS walk-in office

2. Rev. James Snyder talks affectionately about his first IRS love letter

 

 

The Victims of Identity Theft and Refund Fraud

Tampa, Florida criminals are still fixated on tax return fraud, a local trend that has held the attention of the IRS and law enforcement for the past several months.  I have blogged before about the criminals, but what about the victims of these schemes?  The victims are those whose social security numbers have been used to obtain false refunds and are who are blindsided by major tax problems.  When these innocent folks file their own legitimate returns and seek refunds, the IRS often denies them what is rightfully theirs.

It is reasonable for the IRS to carefully investigate these cases; they don’t want to give multiple refunds to the same taxpayer.  But the whole process for rectifying identity theft situations is flawed.

It is clear that the first step for the victim is to prepare and file a Form 14039 “Identity Theft Affidavit,” but what happens next is a mixed bag.  Most of the complaints about the process have to do with the fact that there is no process, no consistency.  This has led one Tampa-area attorney to use a rather unconventional tactict for providing tax help to victims of identity theft.  Attorney Jim Staack has been filing class action lawsuits against the IRS on behalf of aggrieved identity theft victims.  Coincidentally (or not), the class members have received their refunds, without fail, just days after being added in the case.

Isaac-related Tax Relief

photo via egotvonline.com

Hurricane Isaac has caused an estimated $2 billion worth of damage with at least 13,000 homes and countless other structures damaged in Louisiana alone.  The devastation was enough for the IRS to announce special tax relief for the following affected counties:

  • In Louisiana: Ascension, Jefferson, Lafourche, Livingston, Orleans, Plaquemines, St. Bernard, St. Charles, St. John the Baptist and St. Tammany parishes.
  • In Mississippi: Hancock, Harrison, Jackson and Pearl counties.

What kind of tax relief, you ask?  The IRS basically gives taxpayers and businesses in the affected areas extensions on filing and paying certain taxes that were due on or after August 26, 2012.  For example, somebody living in Jefferson Co., Louisiana who requested a filing extension for their 2011 taxes will no longer have to file by October 15th.  Instead, the new deadline will be January 11, 2013.  And this is regardless of individual circumstances; everyone in the affected counties will be allowed to postpone filing and/or payment.  The other benefit is that the IRS will abate both penalties and interest that would otherwise accrue during the period leading up to January 11th.

It’s actually FEMA that goes out and assesses the damage, and IRS designates disaster areas based on FEMA reports.  There are 14 disaster areas now, but will that list continue to grow?  It may be too early to kiss Isaac goodbye.  A remnant of Isaac is lurking in the Gulf of Mexico that experts say could regenerate into another hurricane if conditions are just right.  Apparently this is what happened with Katrina in 2005.

 

Churches: Avoid Mentioning Romney or Obama

photo via flickr.com

It is common for some churches and religious leaders to integrate current events and circumstances into their sermons.  Currently the hottest topics around the nation happen to be political, as the Republicans and Democrats work around the clock to impress voters.  However, if they care to avoid tax problems, churches have to be very careful not to come out in support of one candidate over another.  Out of an abundance of caution, churches (and those who speak on their behalf) should not mention specific candidates this election year.  In fact, they should do little more than encourage their congregations to vote, and maybe provide non-partisan voter education information.

Under the Internal Revenue Code, all section 501(c)(3) organizations are absolutely prohibited from directly or indirectly participating in, or intervening in, any political campaign on behalf of (or in opposition to) any candidate for elective public office. Contributions to political campaign funds or public statements of position (verbal or written) made on behalf of the organization in favor of or in opposition to any candidate for public office clearly violate the prohibition against political campaign activity.  Violating this prohibition may result in denial or revocation of tax-exempt status and the imposition of certain excise taxes.

~ www.irs.gov

Ordinary people are going to talk about politics at church; this is not the kind of activity that is prohibited by 501(c)(3).  But if you hear anything (or read anything) coming from those with authority to speak for your church that favors one candidate over another, or has the effect of favoring one of the candidates, you can be sure that this is a violation of the Internal Revenue Code.  Consult a tax attorney for more information.

 

Singing the Tax Code

image via zitogallery.com

Chan Marshall (the voice behind Cat Power) has released a new album called Sun, temporarily available via full-length stream on the NPR Music website.  Marshall has been quiet for 6 years and Sun is quite different from the Cat Power of years past, but NPR is obviously in love with it:

 [Marshall] could sing random figures from her tax returns and convey more heartache and angst than many other artists could match in their deepest moments.

Thanks a lot NPR.  Yet another jab at taxes and the tax industry.  Tax returns, tax problems, tax relief: it’s beyond boring to most people, we get it!  I believe the saying used to be something like “she could sing the phone book,” but I guess now that the phonebook is pretty much obsolete, and the next most boring thing to read (or sing) would be somebody’s taxes, the colloquialism is beginning to undergo a gradual change.  Personally, I think “singing the tax code” sounds better.

Meanwhile, several months after the first inquiry, Democrats still wish Mitt Romney would reveal the figures on his tax returns whether they be sung, spoken, posted on Facebook, or any other method of delivery.

New CAF Unit Fax Numbers

Practitioners who represent taxpayers before the Internal Revenue Service must have a valid Power of Attorney form (Form 2848) on file in order to access their clients’ confidential tax account information.  You can always mail a F2848, but the quickest and easiest way to file is by fax.  Since tax relief is typically an urgent matter, I always file by fax.  Once the POA has been filed and processed at one of the three IRS “CAF Units,” it can be accessed by various IRS employees throughout the nation.

After October 1, 2012 the old fax numbers at the Ogden and Memphis centers will no longer be functional.

Ogden, UT CAF Unit

  • For all states west of the Mississippi
  • New fax number: (855) 214-7522

Memphis, TN CAF Unit

  • For Louisiana, Arkansas, and all states east of the Mississippi
  • New fax number: (855) 214-7519

Philadelphia, PA CAF Unit

  • For taxpayers residing abroad
  • Fax number remains the same: (267) 941-1017