IRS Getting Push-back on Return Preparer Regs

Most people are pleased with the IRS’ new tax return preparer regulations and are hopeful that they will help to purge the system of incompetent preparers.  But Elmer Kilian, an 80-year-old tax preparer from Eagle, WI, doesn’t want the government meddling in his business.  He and two other return preparers are filing a lawsuit seeking an injunction that bars the regulation from taking effect.  The lawsuit is being filed by the Institute of Justice in Arlington, Virginia.

The return preparer regulations include registration, testing, and continuing education elements — each element, of course, includes some costs that must be born by the preparer.  However, most of what I’m seeing in opposition to these regs has less to do with the costs than it does with pride and independence.  Some people just don’t want the IRS influencing their private businesses choices; they don’t like what they think is excessive government regulation.  Some folks have been preparing returns the old-fashioned way (maybe even with a quill pen) for decades without any egregious errors, and they would rather close up shop than change their ways.

Kilian and others also like to gripe about the injustice of exempting the CPA and tax attorney from testing and continuing education requirements.  I don’t know about CPAs but, trust me, if attorneys were subject to any more regulation they wouldn’t be able to get dressed in the morning without some regulatory authority telling them which tie they have to wear.

IRS Whistleblower Payouts Often Take Seven Years

Deciding to expose the criminal activities of your colleagues is not easy.  Whistleblowers probably grapple with the pros and cons over a period of weeks or months.  Will I lose all respect in my community?  Will I get fired?  Will they deny it?  Will it completely ruin my career?  Will I be implicated if I don’t speak up?  How could I live with myself if I were to keep quiet.

In 2006, Congress passed a law which allows the IRS to reward whistleblowers who expose tax cheats.  Therefore, in the context of tax fraud and tax crimes, there is another layer of questions to consider: will the reward help to offset the negative consequences?  Six years later many whistleblowers are still waiting for an answer to this question because of the IRS’ inaction.  I suppose it should come as no surprise that the IRS is really good at collecting money, but very bad at paying it out.

Such is the case of Joseph Insigna, former executive at Rabobank Group, who exposed his employer for helping several U.S. companies avoid paying taxes.  Insigna filed his whistleblower claim in 2007 and to this date there is still no word from the IRS about whether or not he has a compensable claim.  His patience has finally run thin and he has, with the help of a tax attorney, filed a lawsuit against the IRS to see if he can finally get a determination.

Tax Gap Widening in California

I’m posting this video partly for the rare glimpse inside the California Franchise Tax Board.  Can somebody who works at FTB help me to understand what all those aqua colored contraptions are for?  It looks like they may be used to sort mail, but for all I know, they are the machines that actually assist in processing our state returns.

The actual story reported in this video clip is that more and more Californians are not paying their taxes and that this impacts all residents of the state either directly or indirectly.  The tax gap in California has nearly doubled in the past few years, according to the report.  Jerome Horton, spokesperson for FTB, is quoted saying that the state sees people who fail to pay their taxes as criminals.  The report naively lumps honest taxpayers with unpaid tax debt into the same category as tax evaders.  I would like to say that this the reporter’s error, but it definitely appears that Horton shares this view.

Romney on Tax Reform

Mitt Romney has written an op-ed piece for the Wall Street Journal describing his vision for tax reform and tax relief.  He identifies problems with the tax code as one of our countries top problems:

  • record-breaking unemployment
  • deficit spending
  • big inefficient government & lack of leadership
  • screwed up tax code

I believe we must make the tax code simpler and fairer. We must reduce tax rates for job creators to promote economic growth. And we must still raise enough revenue to stop the endless borrowing that threatens American prosperity.

Romney lists 5 specific changes he would implement if he were elected the next US president:

  1. across-the-board 20% reduction in marginal individual tax rates
  2. reduce the corporate tax rate to 25%, transition from a world-wide taxation system to a territorial one, and make the R&D tax credit permanent
  3. maintain the low 15% rate on capital gains & eliminate it entirely for those earning below $200,000
  4. get rid of the AMT and the death tax
  5. bring stability to the tax code by making these changes permanent

Read the full op-ed piece here.  I’m not sure how he would achieve #5, although it sounds great.  So would that mean the Turbo Tax software I purchase in 2012 would also work for tax years 2013, 2014, 2015 . . . ?!

Offer in Compromise

The Offer in Compromise (OIC) is often considered the ultimate form of tax relief. If you are considering an OIC to address your outstanding IRS tax debt, there are a few things you should know.

First, not everyone with a tax debt should attempt an OIC. The OIC is a special program generally reserved for low-income taxpayers with few assets. The OIC filing fee is $150 and the IRS also requires that you pay 20% of your offer amount up front when the offer is filed. Unless you are confident that the offer is going to be accepted, you may be better off saving yourself these fees.

Second, not everybody who meets the criteria for the OIC should file an OIC. Basically, it just has to make good sense. For example, the offer amount must be low enough in comparison to the overall tax debt. Also, if the balances you owe are old and about to expire, you may be in a situation where it would make more sense to “wait out” the statute of limitations rather than make an offer to the IRS.

Third, a tax attorney can maximize your chances of filing a successful Offer in Compromise. An experienced tax attorney will help you determine if the OIC is right for you and if it makes sense to file. An experienced tax attorney has the skills needed to present your financial information in a manner that is most advantageous to you.

Who Can Improve the IRS’ Image?

Clearly there are few firms, organizations, or government agencies that pose a greater PR challenge than the IRS.  That’s why the Service is soliciting pitches from 12 full service communications and marketing companies to replace the current $17.5 million contract it awarded to PR firm Porter Novelli four years ago.  The IRS needs to convince Americans who are only interested in tax relief that filing and paying your taxes is not that bad.

The IRS is in dire need of some PR assistance.

~ Captain Obvious

The Novelli contract is over, and many would ask, “What did they do?”  I suppose they did spruce up the IRS website with some new smiling faces.  And they tried to change the face of the IRS to make it seem younger and more in-touch with technology . . . emphasis on “tried.”

The new contract is worth $15 million and with that kind of incentive, many PR specialists are going to be up for the challenge.  And I’m sure each will have their individual spin on what should be done.  For instance, David Bauman would try to turn things around for the IRS by first changing their name.  That’s how he gradually repaired Ron Artest’s image — by changing his name to Metta World Peace.  See WSJ article for the full story.

What would you chose as the IRS’ new moniker?

Another Round of Fake IRS Emails

Don’t be fooled by scam emails purporting to be from the IRS. The IRS does not communicate with taxpayers by email, so you can be sure that anything appearing to be from the IRS is a scam. IRS scam emails often contain links which, if opened, can damage your computer or compromise your private information.

The latest scam email originated in Saudi Arabia, contains the subject line “Tax refund important information,” and the following content:

After the last annual calculations of your financial activity we have concluded that you are eligible to get a tax refund of $464.
You may submit the tax refund application and give us 3-9 days in order to process it.

A refund can be hindered for many different reasons.
E.g., submitting invalid records or not meeting a deadline.

To get information about your tax refund please open this link.

Sincerely,
Tax Refund Department
Internal Revenue Service

 Thanks to the Taxgirl, Kelly Philips Erb, for spreading the word about these nefarious emails.

Tax Relief Available for the 2012 Tax Season!

Montgomery & Wetenkamp are ready to help you this tax season!  See 2012 Tax Season press release.

The tax attorneys at Montgomery & Wetenkamp, personally handle all aspects of their tax relief cases. Unlike other tax relief firms, the tax attorneys at Montgomery & Wetenkamp do not employee a sales force, legal assistants, or other intermediaries which may increase client fees and diminish the client experience. From the first time a client calls Montgomery & Wetenkamp, they will be speaking directly to one of the tax attorneys who will personally resolve their IRS tax debt.

“The IRS is a very powerful and unforgiving collection machine. This tax season, it is now easy and affordable to be prepared and have an organized and systematic plan for tax relief rather than getting stuck in the bowels of the IRS collection machine. The IRS has several tax relief options available for taxpayers who cannot pay their taxes. Such options vary from allowing additional time to pay a tax debt to reducing the total amount of the tax bill to an affordable amount

~ Christian Montgomery, Tax Attorney

Most tax relief options are driven by a taxpayer’s unique facts and circumstances, and how well and organized those facts and circumstances are advocated to the IRS. The tax attorneys at Montgomery & Wetenkamp are experienced in tax relief matters and will design and implement a systematic resolution to their client’s IRS tax problems.

Contact Montgomery & Wetenkamp now for your free consultation.

Tax Reform? Probably Not in our Lifetime.

Geithner’s comments on the tax reform timeline:

We’re going to begin to think about laying the groundwork for a series of meetings to be held in the very near future wherein we will lay the framework for a discussion regarding when and how we will start to seriously think about how we are going to make informal suggestions in preparation for real tax reform.

Ok, obviously I’m paraphrasing here.  But it went something like this.  Read his actual statement here.

Tax Preparation Franchise Comparison

New York Times business writer, Tim Gray, with the help of his dog, recently conducted an experiment involving the tax prep software from three leading companies: H&R Block, TurboTax, and TaxAct. He tried to claim his dog as one would claim their child, just to see if the software would allow it. The unstated hypothesis is that tax prep software companies should steer taxpayers away from errors that may result in an audit and potential tax debt.

The H&R Block and TurboTax software did not allow him to claim his dog because no social security number was entered. The TaxAct software allowed him to claim the dog, but warned him that there was a problem.

He seemed to like the Block software for the customer support, but preferred TurboTax for most other reasons. Interesting tax preparation franchise comparison article.