MW Attorneys brings taxpayers the latest and most important tax news coming from the IRS. Stay up to date with all our IRS related posts.

Obama Staffers are Human: They Owe $834k in Back Taxes

Posted by Montgomery on with 0 Comment

The IRS released data showing the tax debt statistics of federal employees, and it has created just a little buzz. I realize that most of the stories circulating around the web these past few days carry the more impressive headline of “3.4 billion owed,” but that includes ALL federal employees, even retirees. There are a lot of federal employees around the nation. I think it is more impressive to focus on those closer to the president.

36 of the approximate 1,800 Obama staffers owe a combined $834,000, which equates to roughly 2% of all executive office employees. Of course this wouldn’t be nearly as big a deal if President Obama had not been focusing so much on tax equality and the need to fix the tax code so that everybody is required to pay their fair share. Many news sources are seeing this as an opportunity to find flaws with Obama and his administration.

However, for me, more than anything, this story is a reminder of how pervasive tax problems are in this country. Literally anyone can find themselves in a situation where they cannot afford to pay what they owe when they owe it. It is not uncommon for ordinary folks to incur a little tax debt at some point in their lives, and factors like race, gender, economic status, and education do not accurately predict who will owe. If an employee of the US Senate can owe back taxes (and according to the report, 217 of them do), then you could owe too.

IRS Seeks to Cut Spending with Employee Buyouts

Posted by Montgomery on with 0 Comment

The National Taxpayer Advocate released its annual report to Congress earlier this week. Their top complaint is that the IRS is severely underfunded, which is causing a number of problems, including an erosion of customer service and a dwindling of taxpayer rights.

One way the IRS is dealing with a smaller budget is by offering early retirements and employee buyouts. This practice really illustrates the IRS’ dilemma. The more seasoned, higher-paid IRS employees are the only ones being offered buyouts because they are the only ones that qualify for early retirement, and the IRS can make a bigger dent in their payroll by shedding tenured employees. So the IRS will be losing some of their best people and filling empty spots with new employees. I know that the TAS is of the opinion that the problems at the IRS are primarily due to them being understaffed, but I have to believe that part of it is due to a large number of new employees who are still learning their job duties.

It seems like a lose-lose situation for the IRS. Under current budget constraints, if they keep their seasoned employees then they can’t afford to hire enough staff. But if they allow them to retire early then they would be, in effect, trading their MVPs for rookies.

The Taxpayer Advocate Has Spoken – Is Anybody Listening?

Posted by Montgomery on with 0 Comment

Today the Taxpayer Advocate Service (TAS) released its annual report to Congress and, once again, the tone of the report is one of alarm.

Nina Olson, head of TAS, is particularly concerned about the lack of funding at the IRS. Fewer employees are being asked to do more and more work, and services that should be handled by live bodies are often done by IRS automated systems. The result is that individuals can’t get their tax problems resolved. It’s a tax administration that may be on the brink of failure.

“We’ve had a number of years where the trending of taxpayer service funding has gone down and down in contrast to the increase of enforcement funding.  And then when you layer on the budget constraints, what you see is that taxpayer service is going to decline even more . . . I’m trying to give a warning to everybody, if we continue down this road, bad things are going to happen to taxpayers and it will be very difficult to reverse.

~ Nina Olson, National Taxpayer Advocate

The relationship between the TAS and the IRS is a strange one. The IRS posts the annual report on its website consistently every year and notifies interested parties by way of the IRS Newswire. But it seems obvious from the official IRS statements that the IRS is not happy with the strong comments from the TAS.

“While today’s report includes a number of helpful suggestions, the link described in the report between a challenging budget environment and alleged erosions in taxpayer rights is inaccurate and without basis in fact.

~ Michelle Eldridge, IRS spokesperson

The adversarial/independent nature of the IRS and the TAS perhaps should not be questioned these days. These certainly do not sound like unified voices.

The IRS Counts to Three: Opens up Another OVDI

Posted by Montgomery on with 0 Comment

If you have kids, do you count to three when you want to get a certain behavior out of them?  You know what I’m talking about: “Mikey, take your sister’s phone out of your mouth right now!  Don’t make me come over there!  One . . . Two . . .”  I’m not a big fan of counting to three.  The problem is I don’t know what happens after “three.”  And what if you don’t get the desired conduct?  Do you keep counting?  How high do you count before you dole out the consequence?

Today the IRS announced that it will be offering another Offshore Voluntary Disclosure Initiative (OVDI), this just months after we thought it was over for good.

“It’s unlikely the IRS will offer another program because that would undermine the agency’s credibility. When they say, ‘Now we really mean it,’ it’ll be like the boy who cried ‘wolf.’

~ Scott Michel, Caplin & Drysdale

The first OVDI was back in 2009, then the IRS reopened the program (with slight modifications) in 2011, giving a deadline of September 9th.  This time around there is no filing deadline, at least not one that we’re aware of yet.  The IRS says this time they reserve the right to change the terms at any time, such as when the program ends and what kinds of penalties apply.

I guess the IRS is trying to show it’s still in charge.

Newest Tax Gap Figures are Astounding

Posted by Montgomery on with 0 Comment

On Friday the IRS released its “tax gap” figures for tax year 2006. The previous measurement was five years earlier in 2001.

The tax gap is the difference between what taxpayers should be paying and what is actually paid.  And while the newest figures may make you choke, they are not too much worse than 2001.

The gross tax gap in 2006: $450 billion.

The gross tax gap in 2001: $345 billion.

What contributes to the tax gap is failing to file, failing to report all income, and simply failing to pay. The biggest contributing factor is the underreporting of income.

A comprehensive explanation of the 2006 tax gap can be found on the IRS website.

IRS Procedure Gives Consideration to Spousal Abuse

Posted by Montgomery on with 0 Comment

The IRS released a proposed revenue procedure (Notice 2012-8) that would loosen up some of the rules related to Innocent Spouse relief under Revenue Code section 6015(f).

Normally if a married couple files a return jointly then they are both equally liable (jointly and severally) for any outstanding balance on that tax year. However, if one spouse can show that he/she had no knowledge and had no reason to know that the other spouse was underreporting income or that the funds intended for payment of the tax were taken by the other spouse, then the IRS may impart tax relief to the innocent spouse.

One of the most significant changes has to do with the criteria that the IRS considers when reviewing an Innocent Spouse case. The IRS will now take into consideration all the facts and circumstances in Innocent Spouse cases, with no one factor or majority of factors necessarily controlling their determination. Also, some factors may weigh against the requesting spouse and some factors may weigh in his/her favor. But if the requesting spouse can prove marital abuse or lack of financial control, then it may, under the proposed procedures, mitigate those otherwise negative factors.

In layman’s terms:

Somebody in an abusive relationship does not need tax problems heaped on top of everything else going on in their life. If the requesting spouse was abused or prevented from participating in family finances, then Innocent Spouse relief may still be granted even if the requesting spouse had actual knowledge that there were problems with the tax return or that the taxes were going to go unpaid.

Interestingly, because the new revenue procedure expands equitable relief available to innocent spouses, it will be applied by the IRS immediately even before it is finalized.

TIGTA – Office of Investigations

Posted by Montgomery on with 0 Comment

If you are familiar with this blog then you know that one of the roles of the Treasury Inspector General for Tax Administration (TIGTA) is to audit IRS programs and operations to ensure they are functioning properly.  And while it is certainly not their objective to extend tax relief to the masses, they must administer taxes fairly and competently.

Most of my TIGTA blog posts have to do with the TIGTA Office of Audit and their dreadfully boring reports.  But did you know that there is a separate Office within TIGTA — the Office of Investigations — that investigates and reports on much juicier topics?

According to the Office of Investigations (OI), their role is to address “threats arising from (1) lapses in IRS employee integrity, (2) violence directed against the IRS, and (3) external attempts to corruptly interfere with federal tax administration.”  In other words, the OI is responsible for nailing obstinate or potentially dangerous taxpayers and corrupt IRS employees.

Every week the OI highlights a couple new investigations complete with names, dates, dollar amounts, and all the gory details.  They keep an archive of investigation highlights going back to 2004, and updates are available by email so you can be the first to know.

Your Tax Preparer Might be an Inmate

Posted by Montgomery on with 0 Comment

It’s 10:00pm; do you know where your children are right now?  What about your tax preparer?

According to a recent TIGTA audit, the IRS approved 331 tax preparer identification numbers to individuals serving prison terms.

  • How did they do it?  In most cases the prisoners lied on their applications by not disclosing their convictions.
  • Why do they do it?  To try to defraud the IRS.  They use false or fraudulent tax returns in hopes of obtaining refunds.  Prisoners have a history of trying to defraud the government, particularly the IRS.  They have enough time on their hands and not much to lose if their scheme is unproductive.
  • What is the IRS doing about it?  The IRS has vowed to suspend tax preparer identification numbers already issued to prisoners and deny any future applications from inmates.

Chances are that these inmate preparers are not actually preparing returns for the average American consumer.  Maybe they’re doing returns for their fellow inmates.  Maybe their laying the groundwork for after their prison terms are over.  Or, even more likely, they are just seeing where this new credential will take them.  Whatever the case may be, it is usually a good idea to actually meet your tax preparer in a face-to-face meeting . . . even if just to confirm they’re working out of an office and not a prison cell.

IRS Waste

Posted by Wetenkamp on with 0 Comment

Maybe Big Brother should conduct an audit on IRS year-end activities because I think they would identify some areas of concern.

I already blogged about contacting the IRS in December, and how it should be avoided if possible. But what about the last business day of the year (today)? Don’t even bother.

Today we discovered that the IRS has personnel on hand to answer the phones when they ring, but the computer systems are down so they can’t help with specific account-related issues. In other words, today the IRS is paying staff to sit around at their potluck parties, ro-sham-bo-ing whenever the phone rings. I’m certain there is an automated greeting that could be set informing callers that the computers are down. Why are we paying them to be at work today?

I know, it is kind of grumpy of me to be complaining about this. After all, its only one day. Where’s my holiday spirit? But think of the number of IRS representatives and the amount of money that could be saved if the IRS would send people home when they are unable to do their jobs.

Does the IRS Celebrate Christmas?

Posted by Wetenkamp on with 0 Comment

IRS employees are given a paid day or two off around Christmastime, so we know that the IRS observes Christmas in that manner.  The US Office of Personnel Management (www.opm.gov) is the official source for federal holidays, and this year, for most federal government agencies, Christmas will be observed on Monday, December 26th.  But what about any other official IRS references to Christmas?

I was curious, so I searched for the term on the IRS website and there were 119 search results.  Here’s what I found:

  1. references to Christmas Island, a territory of Australia in the Indian Ocean
  2. references to the deduction of expenses related to Christmas Tree cultivation in the Farmer’s Tax Guide (Publication 225)
  3. references to an oil industry term (“Christmas Tree“) used to describe “an assembly of valves mounted on the casinghead through which a well is produced”
  4. old references to “Christmas in April” foundations that had lost their non-profit status
  5. references to various business names that include the word “Christmas”
  6. various references to the service’s observation of the federal holiday

So, there are no substantive references or discussions of Christmas on the IRS website.  I suppose that is as it should be.

www.mwattorneys.com