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IRS Not Concerned About Likes & Followers

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The IRS is still intent on growing its social media presence.  Yesterday it unveiled a Tumblr account, even though it has actually been quietly sitting around for about six months.  I’m not sure why the IRS waited until now to formally introduce it.  According to Mashable, nobody has paid much attention to IRS Tumblr, so maybe the Service was hoping to see some more activity first, but it never came.  I’m still not sure there’s much of a place for the IRS in social media, or mobile apps, or the like.  I think it’s hard for people to socialize, even virtually, about something so boring or loathesome (loathesome for those who have a tax debt, boring for those who don’t).

Isn’t all social media supposed to be a venue for sharing and discussion?  That’s the goal, right?  I don’t know, maybe I’m missing the point.  Maybe the IRS has different goals when it comes to social media:

 The new Tumblr platform is part of a larger effort at the IRS to get information to taxpayers when and where they want it.

~ Terry Lemons, IRS Communications Director

If their objective is to “spread the word” and make tax information available, I suppose they’re doing a decent job at it.  So, while the IRS has only 33,274 Twitter followers*, its Facebook page has only about 9,600 likes (probably a vast majority are tax attorneys, accountants, and the like), and it’s had a rather dismal Tumblr debut, I think the stated goal of getting information to people “when and where they want it” is being achieved.  The IRS seems pretty content with their 3.1 million YouTube video views.

The bottom line, I think, is that you can’t measure the success of IRS’ social media campaign by counting likes and followers.  Not many people “like” the IRS so why would they care to follow them?  What visitors probably do is they get what they need and move along.  No committment, no lasting relationship, and very little actual socializing.  I suppose it’s no surprise people would want to keep their distance virtually, much like they do in real life; normally the less of a role the IRS has in your life, the better.

*33,274 Twitter followers is pretty crappy considering the IRS, in one way or another, impacts pretty much every household in the country.  Compare this to the 380,666 San Francisco Giants followers on Twitter, a team that nobody pays much attention to outside of California.  And never mind the 33.6 million people around the world who hang on every word produced by Justin Bieber’s two thumbs.

"Where’s My Refund?" v. 2.0

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Even with all the shenanigans this year* the IRS decided to upgrade the “Where’s My Refund?” tool that taxpayers often use to track the status of their federal income tax refund and promised that refund processing times will not be adversely affected.  In previous years Where’s My Refund? (“WMR?”) generated an estimated refund receipt date for you based on the fact that 90% of all refunds are processed and delivered within 21 days of the date that you file (assuming you file electronically, which almost everybody does these days).

This year, the IRS claims that “WMR?” will be able to ascertain an “actual personalized refund date.”  Now I’m not sure exactly what this means.  Is it personalized in the sense that it records the date that your return was processed and then adds 21 days, or is the tool more sophisticated than that?

The new version of “WMR?” breaks your refund progress down into three stages (available as soon as 24 hours after you e-file your return):

  1. Return Received
  2. Refund Approved
  3. Refund Sent

There is no information from the IRS about what happens when they encounter problems in the processing of a return.  For instance, if mistakes are found on the return and a refund is not approved, will “WMR?” inform the taxpayer of the hiccup, will it remain stuck on the “Return Received” stage, or will the tool simply stop working?

Here are some “WMR?” tips from the IRS:

  • Don’t try using it before January 30th, even if you’ve already filed.  It won’t work until the 30th.
  • Don’t call.  The IRS claims “WMR?” provides the most complete and up-to-date information about your refund claim and if you call to ask a customer service rep, they will be able to tell you no more than what you already know.  As a tax attorney who is on the phone with the IRS every day, I can certainly vouch for that!
  • Don’t check more than once a day.  Information in the “WMR?” tool is updated overnight and only once every 24 hours, so checking in every couple hours will only slow things down for everyone else.

*It is bold of the IRS to promise more precise refund tracking given the fact that (1) they have spent so much effort integrating the “fiscal cliff” legislation that recently passed and things could still be “buggy;” (2) they have been beefing up security filters that are meant to minimize refund fraud and admit that this will cause some refunds to be delayed; and (3) hundreds of thousands of taxpayers will potentially hire incompetent, unregistered (*Gasp*) return preparers this year due to their return preparer registration program being shot to pieces by a federal judge in D.C.

Court Shoots Down IRS Return Preparer Certification Program

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If you follow current events in the world of tax relief and tax preparation, you probably heard about the federal district court decision permanently enjoining the IRS from enforcing its 2011 tax return preparer regulations.  The U.S. District Court for the District of Columbia ruled that the IRS lacked authority to regulate tax return preparer certification programs — 
such authority would have to be granted by Congress.

The IRS Return Preparer Initiative would have required thousands of non-professional return preparers across the country to pass minimum competency exams, pay a fee, and complete minimum education requirements.  In fact, many return preparers did take the exam and pay the fee, all for naught apparently.  The initiative did not seek to regulate the CPA, tax attorney, or enrolled agent.

Large tax prep companies like Intuit (TurboTax), Jackson Hewitt, and H&R Block disapprove of the decision; you can probably guess why.  They will tell you that it hurts taxpayers who unwarily hire incompetent return preparers, but we know their only concern is the bottom line and weeding out as much competition as possible.  Of course, the “mom & pop” tax prep firms see this court decision as a big victory.

Some believe that voluntary certification is a better solution.  Voluntary certification would still raise the bar for tax preparers and the industry in general, but in a more “free market” sort of way.  Tax preparers would decide on their own to certify, or not to certify.  And individuals seeking tax help would decide on their own to hire a certified preparer, or take their chances with someone else.

At this point it is not clear whether the IRS will appeal the decision.  Read the IRS official statement here.

Extension for Farmers & Fishermen

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This year the IRS was not ready to begin receiving and processing 2012 tax returns when they normally do so.  In fact, they’re still not ready.  The IRS has been making last minute changes stemming from the American Taxpayer Relief Act which, by the way, has such a nifty name.  Where exactly is the tax relief in this legislation?

The IRS doesn’t appear to be ready for forms commonly filed by fishermen and farmers either.  Form 4562 and the processing systems involved need “extensive programming and testing” according to the IRS.  Another unintended consequence of the American Taxpayer Relief Act.

And the estimated tax normally required by March 1st can be paid up until April 15th without incurring a penalty this year.  It does not look like merit-based penalty relief; all you have to do is “ask.”  However, it is important for farmers and fishermen to know that this penalty relief does not come automatically.  They will need to submit a penalty waiver (Form 2210-F) with their tax return.

Business Use of the Home: New Option for 2013

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photo via mybadpad.com

Many self-employed taxpayers work from home.  But not all of them can deduct expenses for the “business use of their home.”  The tax worksheet (Form 8829) may be only one page long, but it’s 43 lines of mind-numbing detail (at least for one more year) that you are better off skipping if you see that you don’t meet the threshhold requirements.

In order to qualify for the “business use of the home” deduction, there must be a section (or sections) of your home which you use exclusively and regularly as your principle place of business.  The deduction amount is based on square footage dedicated to this purpose. Therefore, no matter how often you find yourself on your laptop in that 3′ x 3′ area of your mancave occupied by the Lazyboy, if you ocassionally flip on the TV from that same spot, or host superbowl parties or such, you cannot satisfy the “exclusivity” prong of the test.

The good news is the IRS recently announced a new simplified option for “business use of the home” that will apply to 2013 taxes (during the 2014 filing season).  Taxpayers will be able to opt for a straight $5.00 per square food deduction (capped at $1,500 per year) instead of stressing over dreaded Form 8829.  It is believed that more taxapayers will take advantage of the tax relief afforded by this deduction and will save taxpayers something like 1.6 million hours of work and recordkeeping annually.  However, the basic exclusivity requirments explained above will remain in place.

IRS Inflation Adjustments

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This blog post lists some of the Annual Inflation Adjustments published by the IRS today that are interesting not only  to CPAs and tax attorneys. It may be helpful to understand that the 2012 “tax year” was last year (for taxes filed in 2013). But the 2012 tax season is right now (well, actually between January 30th and April 15th 2013). So, we will not be required to file for tax year 2013 until the 2014 tax season. The terminology gets a little confusing.

Adjustments for Tax Year 2012:

  • standard deduction increased to $6,100 (was $5,950)
  • personal exemption increased to $3,900 (was $3,800)
  • maximum Earned Income Credit amount increased to $6,044 (was $5,891)

Adjustments for Tax Year 2013:

  • new tax rate of 39.6 percent added for individuals whose income exceeds $400,000
  • personal exemption subject to a phase-out that begins with adjusted gross incomes of $150,000
  • the Alternative Minimum Tax exemption amount for tax year 2013 is $51,900 (was $50,600)

Make note of these changes because lawmakers may one day be purging the tax code of all deductions, exemptions, credits, and anything else that resembles tax relief.

The TAS Approach to Tax Reform

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image via realage.com

If you recently read (or re-read) the unabridged English version of Les Misérables in anticipation of the movie that came out on Christmas day, your eyes consumed approximately 531,000 words.  This is slightly less than the word count in the Bible, which is somewhere between 800,000 – 900,000 depending on who you ask.  And if you can even imagine it, the US Tax Code contains about 4 million words!  That is almost 4 times the length of the entire Harry Potter series!

Practically everyone agrees that our tax code is too complicated, too detailed, and too long.  Tax reform and simplification was the top concern expressed by Nina Olson, National Taxpayer Advocate, in her annual report to Congress.  The complexity of the tax code breeds a number of negative consequences, including uncertainty for those with tax questions and unfair results for those seeking tax relief.

The strategy that the Taxpayer Advocate Service (TAS) recommends is to start with a clean slate by wiping out all “tax expenditures” such as exclusions, exemptions, deductions, and credits.  Then lawmakers would need to methodically decide what is absolutely necessary before bringing it back.  TAS calls this a “zero-based budgeting” approach.

I would call this the “messy closet” approach, and I like it.  Sometimes a closet gets to the point where the only way you can regain order is by taking everything out and starting over.

IRS Hopes to Answer 63% of Calls in 2013

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image via thewashingtonnote.com

The Taxpayer Advocate Service (TAS) released its annual report to Congress today which focuses on a few main themes: tax code simplification/reform, increased funding for the IRS, greater safeguards against identity theft, and improved taxpayer service.

For anyone working in the field of tax relief, and for taxpayers who contact the IRS seeking to address their back tax debt, some of the most interesting statistics are related to taxpayer service.  The IRS has a notoriously poor customer service record, especially with regard to the phones:

  • IRS received over 100 million calls in fiscal year 2012 and 30% went unanswered
  • Average wait time was almost 17 minutes in FY 2012
  • IRS goal is to answer 63% of incoming calls in FY 2013, down seven percent from 2012

And these numbers tend to get worse year after year.  Obviously the decline in customer service is closely related to the reduction in funding to the IRS.  However, I don’t know how they can seriously set a goal of answering only 63% of calls.  What an embarassment!

IRS Delays Start of 2013 Tax Season

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The IRS has delayed the official start of tax season by a whole 8 days this year, announcing today that they will begin accepting tax returns on January 30th.  The delay is a result of the fiscal cliff legislation and the necessary tweaking, updating, and testing of IRS processing systems.  No change to the filing deadline as of yet…

Eight days doesn’t seem like a lot, but when you consider the millions of early filers that normally file during those first eight days, we can expect a pretty big bottleneck this year.  If you do expect a tax refund, don’t be surprised if it takes the IRS a little longer than normal to send you the check or wire you the money.  You can speed up the process if you file electronically and opt for direct deposit, but you’ll still need to be extra patient this year.

Meanwhile here at the California Franchise Tax Board, state tax season begins TODAY.

Truncated Tax ID Numbers

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image via ssa.gov

Many people wait with some anxiety for their income tax refund check around this time of year.  If you get a big refund then you, in essence, have given the government an interest free loan all year.  Still, many taxpayers overpay throughout the year because they have grown accustomed to receiving a refund check, which they see as a form of tax relief.

So what if that check never came?  It happens sometimes, and all too often it is the result of identity theft.  The IRS has taken numerous steps to prevent identity theft, but it still pays out billions of dollars in erroneous refunds.  One of the newest proposals in the fight against identity theft is the Truncated Taxpayer Identification Number, or TTIN.

The TTIN is basically the last four digits of a Social Security Number (SSN) and looks something like this: xxx-xx-4777 or this ***-**-4777.  The IRS has issued proposed regulations that would allow certain information return filers to use a TTIN instead of a SSN on their tax documents.  The IRS has run a successful TTIN pilot program in the past and it is believed that this will help curb identity theft.  Even if the regulations are approved, a full 9-digit SSN will still be required for 1040 income tax returns.  The proposed regulation has to do with information returns such as forms 1099, 1098, and 5498.