Today the IRS announced that it is providing tax relief to individuals and businesses affected by Hurricane Irene. So far the IRS is extending relief to certain counties and municipalities in New Jersey, New York, North Carolina, and Puerto Rico. You can visit the IRS website to see if your specific location is on the list. And keep checking back because FEMA will continue its damage assessments, and the IRS will most likely add to this list. If you live in one of the affected counties, then you will be able to postpone filing and paying certain taxes. Also, if you receive a penalty notice, you may call the IRS and they will abate the penalties and interest. If your tax preparer lives in one of the affected areas but you do not, you may be granted an extension as well.
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IRS Extends OVDI Deadline Due to Hurricane Irene
The deadline for disclosing your offshore accounts under the IRS’ amnesty program has been extended from August 31st to September 9th. Interestingly, the extension applies to everybody, not just those who may be affected by the destruction of Irene. Various forms of tax relief are typically offered to disaster victims and details are typically postedhere. The IRS has not yet updated this page to reflect the recent activity of Hurricane Irene, but keep checking back because information is sure to come. The IRS normally has to assess the situation and determine who should qualify for relief.
Don’t Miss August 31st IRS Webinar
On February 24, 2011, the IRS announced its “Fresh Start Initiative” which consists of changes that are supposed to soften some of the collection practices, and provide at least some tax relief to Americans who are struggling to pay their taxes. So far we know that the IRS has made adjustments to their lien filing procedures, which is supposed to result in fewer lien filings. The IRS is making it easier for small businesses to pay back what they owe through Installment Agreements. And the Streamlined Offer in Compromise should be in full swing by now.
However, several ambiguities are present in the Fresh Start Initiative. And while these changes are supposed to help the struggling taxpayer in theory, we have yet to see the real life impact.
But the IRS speaks again on the matter next week by webinar. Maybe we’ll get a few more details, or examples, or something. If you want to participate, you need to register online here: IRS Live presents: “The Fresh Start Initiative — Help for Struggling Taxpayers.” The webinar will take place Wednesday, August 31st at 2:00pm EST. There will be a panel of speakers, so hopefully that means it’s not a rehash of what the IRS has already revealed about the program.
Taxpayer Burden Reduction
Today I was pondering the burdens placed on taxpayers and wondering, “what if there was a convenient way for taxpayers to voice their concerns and offer their opinions to the IRS about the burdens of filing & paying taxes?” Then I came across Form 13285A and the Office of Taxpayer Burden Reduction. That’s right, tax relief from those who are handing out the tax bills?
For all I know this “office” is down in the basement of an IRS office building in Lanham, MD manned by a single IRS employee who can be seen clutching his favorite red stapler from time to time. But the form looks legit. You just need to provide (1) your contact information, (2) a description of the problem, (3) a description of who the problem affects, and (4) your proposed solution to the problem.
You may submit the form anonymously, but the instructions to the form state that the IRS may need to get in contact with you to obtain more details regarding the problem and/or solution and that “[n]ot providing any or all of the contact information may delay or impede the IRS review process if there is inadequate information to analyze the issue.”
The IRS will do a cost-benefit analysis in determining which ideas it will implement. But if your suggestion is that the tax laws should be changed, don’t bother with this form; the IRS can’t do anything about that. You would need to reach out to the legislators if your gripe is with the underlying tax laws.
IRS Tax Liens up 74 Percent
The IRS is addicted to filing liens — even in an era when the American people need tax reliefthe most. The use of tax liens has increased an astounding 74% since 2006. A report released this week by the Treasury Inspector General for Tax Administration (TIGTA) shows that the use of all available IRS collection tools are on the rise. But when it comes to liens, the IRS clings to them like a chain smoker does to his pack of Camels.
Both obviously do more harm than good. Liens have been shown to destroy one’s credit and ability to earn a living, thereby making it even more difficult to pay back what is owed. I’m not sure why lien filings have increased. Perhaps it is an old habit for the IRS who sees it as an easy way to do something on an account where other options are not apparent. Whatever it is, the IRS needs to get a little more creative.
Although none are as impressive as the statistic on lien filings, the TIGTA report cites the following additional statistics:
- 4% increase in number of levies and seizures in 2010
- 4% increase in number of IRS employees between 2006 and 2010 (103,811 employees in 2006 compared to 107,622 employees in 2010, with a huge spike during fiscal year 2010)
- 19% increase in number of Collection & Exam function Enforcement personnel (not including management)
IRS Wants Quantity More Than Quality
The Taxpayer Advocate Service (TPS) reports that IRS employee performance measures focus too much on “cycle time.” In other words, the IRS performance rules encourage employees to take actions and close cases quickly, even at the expense of quality work. This results in IRS employees setting unrealistic deadlines for taxpayers who face audits or IRS collection activity.
Unrealistic deadlines. This is certainly a problem that any practitioner could confirm, but for me it doesn’t hold the #1 position on my list of IRS problems. If the IRS is setting unrealistic deadlines, then at least they’re being responsive. The situation where the IRS employee responds too slowly can be just as frustrating as one where the employee is acting too quickly. However, even worse than that is the lack of discretion given to IRS employees. Most of them do not have authority to deviate from their rules, even in situations where it makes no sense to follow them. Of course, I understand that additional discretion can only be given to employees who, by their exceptional training, education, and experience, are responsible enough to not abuse that discretion. I guess the quality vs. quantity problem really begins at the employment interview.
IRS Promotes its Spanish Language Website
The Spanish language section of the IRS website is slowly becoming more robust, but it still offers a very limited amount of information compared to the massive amount of content on the main website. Today the IRS highlighted 9 key features to be enjoyed by Spanish speakers on irs.gov/espanol:
1. Its a website, so its always accessible, 24/7
2. You can get tax forms and publications in Spanish
3. E-file is available with Spanish instructions
4. You can check the status of your refund
5. The Spanish site includes an Earned Income Tax Credit eligibility tool
6. There is information about assistance for those who are unemployed or who are otherwise suffering a hardship
7. Tax law updates are available in Spanish
8. The Multimedia Center has video and audio content in both English and Spanish
9. Twitter @IRSenEspanol
This seems like a healthy list of features, but this is pretty much everything the site has to offer. Even the “More Topics” link in the “Espanol Topics” menu just takes you to the same topics in the menu itself. Kind of goofy if you ask me, but its getting there.
OVDI Deadline Approaching
There is still time to obtain tax relief (and relief from criminal charges) for those with unreported foreign bank accounts.
The deadline for participating in the IRS’ Offshore Voluntary Disclosure Initiative (OVDI) is August 31, 2011. Under this program, the IRS is giving taxpayers an opportunity to report their foreign bank accounts without facing criminal sanctions. One thing we do know is that some people are simply too fearful and are not going to come forward because they are not willing to face the consequences. However, some tax professionals believe that the risks are multiplied for those that are not willing to participate in this initiative. The rationale is that the IRS must work even more aggressively to catch and prosecute the non-participants in order for the initiative to work. If not, then it will not seem that the participants received any benefit by disclosing their foreign bank accounts.
For information on obtaining an extension on submitting your FBAR filings, see Question 25.1 of the IRS’ Q&A page.
IRS’ Tips are Self-Serving this Time
Installment #14 in the IRS’ Summertime Tax Tips series is for people who owe money to the IRS.
Here is what the IRS recommends:
1. Get a loan and/or pay what is owed with a credit card. Fair enough. If the interest rate on the loan or the card is better than what will accrue in interest and penalties, sometimes it is best to just pay it off.
2. Request additional time to pay. Ok, but the most you will get is probably 90 days.
3. Pay it back in installments, pay it back through Electronic Funds Transfer, or pay it back online. Great tips IF you can afford to pay, but a lot of people owe the IRS because they can’t afford to pay.
4. Set up an installment agreement by mail (balances under $25k), or complete a Form 433F (balances over $25k).
5. Save money on the installment agreement processing fee allowing the IRS to automatically deduct payments from your bank account.
6. Change your withholdings so you don’t owe again.
Are you seeing a theme here? Almost all of these “tips” involve paying the IRS back in full, in one form or another. What is lacking from this set of tips is any guidance for taxpayers who really can’t pay what they owe. But I also understand that the IRS doesn’t want to advertise the other options; that would not be in their best interest.
Whats New with Circular 230?
The IRS made revisions to Circular 230 recently. Circular 230 is the Treasury Department’s collection of regulations governing tax practitioners. Apparently it now includes information relating to the new return preparer oversight program. It also includes “other changes.” Might have been nice if the IRS had highlighted the changes. Do I need to hire an intern to go line by line comparing the old version with the new one?