Isaac-related Tax Relief

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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

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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

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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

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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

 

 

IRS’ Plain Language Notices

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As I was looking around on the redesigned IRS website today, I came across the “Understanding your IRS Notice of Letter” page and was reminded how much I like it.  It features a table of IRS notices organized by notice number, and including a short description of the notice content in plain language.  This is a good resource for taxpayers who have no idea what they received in the mail and who just need a tax relief starting point.  And it’s nice that the IRS is making changes to its notices and letters so they are easier to understand, even though the most common phrase on these notices is:

You owe money on your taxes as a result of these changes.

Coincidentally, I did come across a couple notices that seem to suggest that the IRS is looking out for the taxpayer by pointing out tax advantages that were not claimed:

CP08 – You may qualify for the Additional Child Tax Credit and be entitled to some additional money.

CP09 – We’ve sent you this notice because our records indicate you may be eligible for the Earned Income Credit (EIC), but didn’t claim it on your tax return.

But somehow I doubt anybody ever gets this kind of notice!

IRS Onboarding Process Under Fire

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When I saw today that TIGTA had audited the IRS new-hire integration process (something the IRS calls “onboarding”) and concluded that the IRS is not always making new employees feel welcome and not always making it a positive experience, I immediately imagined that there is some kind of mild hazing going on at the Service.  Maybe the stapler set in a jello mold trick, or the cell phone in the A/C duct trick, or the gift-wrapped work station prank, or any other form of office shenanigans.

I guess I was slightly disappointed to learn that the onboarding deficiencies that TIGTA identified were far less interesting; things like not being assigned a mentor or not being helped to reach their full potential.  Maybe they need to lighten up a little at the IRS, cut the taxpayer a little slack, think twice before issuing a wage garnishment or a bank levy just before Christmas.  Office pranks at least show some creativity.  But IRS personnel are trained to work like robots; they aren’t allowed to be creative.

To be fair, there are some IRS employees who think outside the box but its almost always those who have several years of experience.  The IRS needs to improve its onboarding if only to reduce turnover.

Continue reading “IRS Onboarding Process Under Fire” →

The IRS' Daily Routine

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What are some of the things you do on a daily basis?  Brush your teeth, check your email, read a favorite book?  Even though it may not be apparent to most of us, the IRS actually has a daily routine too: processing tax returns.

But this wasn’t always so.  Before 2005 the IRS operated on a weekly processing schedule.  In other words, what showed up in IRS computer systems could be out of synch with what was sitting on somebody’s desk for up to a week at a time.

TIGTA recently audited the IRS’ daily return processing performance with favorable results.  However, it is still a work in progress; there are certain tax returns with “qualifiers” (or codes) that prevent daily processing.  Some of the qualifiers include:

  •  identity theft
  • bankruptcy
  • pending litigation
  • Offer in Compromise pending
  • Currently Not Collectible status
  • underreporter issues
  • tax return adjustments

Coincidentally, the presence of some of these same disqualifying factors are also what tend to hold things up on the collections side of things when seeking tax relief.

Upcoming IRS Webinar

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The IRS has gradually revealed some important changes to its tax collection procedures over the last several months under the “Fresh Start” program.  What began as a patchwork of provisions scattered here and there, has now been organized under its own tab on the homepage of the IRS website.   Most of the changes are now in effect, even though they have not made their way into the Internal Revenue Manual yet (see Interim Guidance Memo on changes to Offer in Compromise process).

In an effort to provide further guidance regarding the IRS Fresh Start program, the IRS is offering a free webinar on September 12th.  The webinar is entitled “Payment Alternatives – When You Owe the IRS,” so it is not 100% focused on Fresh Start.  It is supposed to cover Installment Agreements, Currently Not Collectible Status, and Offers in Compromise, hopefully presented through the lense of the Fresh Start program.  One of the bullet points is “Fresh Start enhancements.”

The presenter for this webinar will be Traci Suiter, Lead Public Affairs Specialist of the Small Business / Self-Employed division of the IRS.  Other IRS representatives will participate in a Q&A segment.

Another Fresh Start Gem: State Tax Installment Payments

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Filing an Offer in Compromise (OIC) can be quite an ordeal if you’re not prepared.  If the IRS decides your offer is worth considering, then they will look very carefully at every aspect of your finances, including assets, income, and expenses.   The result of this analysis is your “reasonable collection potential” (RCP) — the single most important factor in determining whether or not your offer is accepted.

When the IRS looks at expenses, they determine which ones can be allowed, and of the expenses that can be allowed, how much can be allowed.  Generally speaking, more/greater expenses result in a lower RCP and a lower offer. 

Formerly:  The IRS did not allow payments made pursuant to a state or local tax installment agreement (IA) in the RCP analysis.  The underlying reasoning for this was that the laws of the federal government trump the laws of state and local governments when it comes to collection of revenue.  The IRS simply ignored the practical realities of the situation.

Currently:  Under the Fresh Start program, the IRS will allow state or local tax installment agreement payments — not all of them all of the time, but compared to the way the IRS used to treat them, this is a step in the right direction and very good news for those in need of tax relief.

Dissipated Asset No Longer the Barrier it Once Was

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Thanks to the IRS’ Fresh Start program, more people meet the criteria for an Offer in Compromise these days than quite possibly ever before. Many of the requirements have been modified in determining a taxpayer’s reasonable collection potential (RCP), one of them being the way the IRS deals with dissipated assets.

Formerly:  A dissipated asset usually consisted of property that was sold or distributions that were taken, sometimes years before the OIC filing date.  If the transaction occured after the tax was assessed and the money was used for anything other than paying down the back tax debt, then an amount equal to what was received would be automatically added to the taxpayer’s reasonable collection potential, even if the money was long gone.  The burden was on the taxpayer to avoid inclusion of a dissipated asset by showing that the funds were spent on the necessities of life and not on a ski boat.

Currently:  Inclusion of dissipated assets in RCP is no longer applicable, unless it can be shown (presumably by the IRS) that the funds were spent on a ski boat or other unnecessary items, or that the funds were intentionally pissed away in an effort to avoid having to pay the IRS.  It now appears that the burden is on the IRS to substantiate their hunches whereas before there was a presumption that the taxpayer was purposefully avoiding payment to the IRS.