IRS Launches New ACA Website

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The IRS’ new Affordable Care Act website is up and running.  Most of the new content is organized into three main parts: (1) Individuals & Families, (2) Employers, and (3) Other Organizations.

The Individuals & Families page is further broken down into two subtopics designed to educate the public on what they need to consider immediately (in 2013) and what they should look forward to in 2014.  Individuals should explore and begin planning for open enrollment in the Health Insurance Marketplace, which opens October 1, 2013.

The Employers page has a separate set of instructions for small employers (fewer than 50 full-time employees) and large employers (50 or more full-time employees).  It helps to educate employers on their specific coverage and reporting requirements and also explains what employer credits might be available.

Some organizations will be subject to special rules under the Affordable Care Act.  These “other organizations” include insurers, miscellaneous business types, non-profits, and government agencies.

The ACA website features a nifty news bar so we can always stay informed of new developments related to the Affordable Care Act.  It also very neatly lists all the various tax provisions, both in layman’s terms and in the form of news releases, notices, regulations, revenue procedures, revenue rulings, and Treasury decisions for the tax lawyer and studious type.  Lastly, the new ACA website includes links to related federal government websites like the Department of Health & Human Services, the Small Business Administration, and the Department of Labor.

Did Lerner Mishandle Official Emails?

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These days I think few employers would have a problem with their employees using a company email account for personal matters.  As long as they are not goofing off while on the clock, it doesn’t cost the employer anything.  Although I am sure it is often listed as a prohibited activity in employee handbooks, I do not imagine it to be the type of rule that is strictly enforced.

But using a personal email account for business purposes is a bigger problem.  It would be unprofessional to send an official email from a personal account or to accept business emails on a personal account.  Sending internal documents from work to your own personal email account is an even bigger problem.  The House Oversight and Government Reform Committee apparently has been informed that Lois Lerner did just this.

Lois Lerner is the lady at the center of the IRS Tea Party targeting scandal.  She was thrust into the spotlight back in May when she invoked her 5th Amendment rights, refusing to testify before Congress.  Presently, the Committee is asking Lerner to produce “all documents and communications housed in [her] msn.com account.”  She has until August 27th to comply, after which I would imagine she will be subpoenaed, after which I imagine her lawyers will dispute it as being overbroad.

What makes this behavior especially repugnant is that THIS IS THE IRS we’re talking about, not a private company!  This is a branch of the US Treasury that we trust will be able to play fairly and keep information safe and secure.  Let’s hope we find out that Lerner was actually only emailing herself an innocent meme or something…

Changes to Innocent Spouse Program may Become Permanent

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Married couples who file jointly have “joint and severable” liability for any resulting tax debts (i.e., the IRS can come after both, or either of them individually, for the entire tax liability).  But if one spouse is successful with his/her innocent spouse claim, then the IRS ceases collection of the tax debt as to that spouse. 

Historically the IRS innocent spouse program was not available to spouses who failed to file their claim for innocent spouse relief within two years from the date of the return.  However, the IRS has not enforced the two-year deadline at least since 2011.  And this week a proposal has been set in motion that would eliminate the two-year statute of limitation altogether.  Instead, an innocent spouse would have the full 10 years on the collection statute to file for tax relief.

Many of the taxpayers who are granted innocent spouse relief are victims of physical and/or emotional abuse.  These are people who probably did not do their due diligence in knowing what was on the return when they signed, but who were not in the best position to question what was on the return either.  They are people (usually women) who probably should have confirmed that the taxes were being paid, but who feared the repercussions of asking about it.  One thing that innocent spouses all have in common is that they were left in the dark about important financial information and decisions, including taxes.  So, later, when they get a bill or a collection notice, they are caught completely off guard.  The IRS recognizes that it isn’t fair to enforce the standard “joint & several” liability in these situations, and they appear to be moving in the direction of opening the innocent spouse program up to a lot more people.  Also, under the proposed rules, the IRS would not be permitted to take enforced collection actions while an innocent spouse application is pending.

No IRS Furlough in August

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The IRS had originally planned on five furlough days (unpaid days off) this year.  The first three went on as scheduled, the July 22nd furlough day was canceled somewhat at the last minute and turned into an optional work day, and now the final furlough day of the year (August 30th) is going to be postponed.  According to IRS Acting Commissioner, Danny Werfel, the IRS recently found ways to save money and was able to cancel the July 22nd agency-wide furlough day.  And the IRS hopes to be able to cancel the August 30th furlough too, but cannot make that determination at this time:

We have made substantial progress in cutting costs. … Our progress is such that we have decided to postpone the furlough day scheduled for Aug. 30. We still have more work to do on the budget and cost-savings, so we will reevaluate in early September and make a final determination as to whether we will need another furlough day in September.

Hopefully the IRS will continue to find ways to cut costs.  Furloughs are not good for taxpayers because they make it very difficult for taxpayers to obtain the information they seek.  Even if they are not calling on the exact date of the furlough, the backlog it creates  on the other days is somewhat of a burden.  Furloughs are obviously not good for IRS employees either.  Even if they are ultimately canceled or postponed, the mere announcement of a furlough day tends to disturb the morale and confidence of employees.

Deceptive FTL Mailers

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If you have an IRS tax debt, chances are the government has filed a Federal Tax Lien (FTL) against you to protect its interests, especially if the debt is greater than $10,000.  The FTL becomes public information and any number of non-attorney tax relief companies begins sending advertisements.  Many of our clients have come to us with a sizeable stack of mailers, and I am rather disgusted by the way these bottom-feeders try to trick taxpayers into calling them.  Often these mailers are designed to look like official government otices.

Tax relief firms are normally successful in obtaining the following information from the public record:

  • name of taxpayer
  • address of taxpayer
  • lien type (i.e., Federal / State)
  • lien amount
  • lien filing date

The hope is that the taxpayer will recognize the information, see that it is accurate, and then call to get some kind of government-sponsored reduction of the liability.  At least that is what they would have you believe.

It is easy to identify a deceptive tax lien mailer if you know what to look for.  One of the “red flags” is repetition of information.  The sample mailer that I included in this post repeats a United States Code section three times.  The “personal ID number” is also repeated three times.  Phrases like “please read carefully” and “final notice” are also repeated to add urgency.  It is also common to see a phone number repeated two or three times, but often no address.  And finally, maybe the biggest red flag is an “estimated settlement amount.”  There is no way anyone could estimate what the IRS might settle a case for based on the limited information contained in a Federal Tax Lien.

Paying the IRS

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Since the IRS exists to collect taxes, one would think that the process of paying them would be simple, but it’s not.  Follow these tips so that you get proper credit for your payment:

  • Send a check or money order.  Don’t send cash.  It is never a good idea to send cash through the US Mail.  Lost checks can be canceled, but if cash gets stolen or lost then you have no paper trail.
  • Make your check payable to the United States Treasury, not the Internal Revenue Service.
  • The IRS also suggests that taxpayers use all digits when writing out the check amount.  For instance, include the dollars and cents place even if it is a whole number (i.e., $100.00).
  • Do not staple, clip, glue, tape, or otherwise affix your payment to any other papers (such as a letter or a payment voucher) sent with your payment.
  • Be sure the following information appears on your check: name, address, daytime phone number, primary Social Security number (i.e., the SSN belonging to the first listed taxpayer on the return), tax period and tax form (i.e., 2004/1040).
  • If you were sent a payment coupon then you should mail your payment to the address on the payment coupon.  If you do not have a payment coupon, check here to look up the correct address.

As nitpicky as all this seems, the IRS is pretty forgiving when you are sending them money. I always recommend that payments be made according to the above guidelines, but I also know for a fact that many of these components can be missing and the IRS will still cash the check.  For instance, the IRS will have no problem cashing a check made out to the IRS, even though technically they prefer that it be payable to the US Treasury.  Also, a check without a phone number is usually fine.  Even if you happen to send your payment to the wrong IRS address, believe me, the check is going to get cashed.  It may take a bit longer if the service has to re-route the check, but it will get cashed.

Finally, for taxpayers who don’t use banks, the best option is a money order or cashier’s check.  But if you’re a “strictly cash” kind of person, you may be able to pay your tax bill or installment agreement payment in cash at your local IRS office.  Availability of this option will vary from office to office.

Obama Nominates John Koskinen as New IRS Commissioner

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The IRS has been without a permanent leader for some time now.  Acting Commissioner, Steven Miller, had replaced Douglas Shulman when his term came to an end in November 2012.  Then, when President Obama fired Miller in May of this year, the agency was being led by Danny Werfel, a White House budged official.

Today the White House announced the nomination of John Koskinen as the new IRS Commissioner.  Obama’s nomination is likely going to be approved by the Senate following their standard and very thorough hearings.  Obama likes Koskinen because he has vast experience helping large companies on the verge of collapse and fixing bad management and bad morale.

With decades of experience, in both the private and public sectors, John knows how to lead in difficult times, whether that means ensuring new management or implementing new checks and balances. Every part of our government must operate with absolute integrity and that is especially true for the IRS. I am confident that John will do whatever it takes to restore the public’s trust in the agency.

~ President Obama

74-year-old Koskinen has quite the resume and has often been called on to rescue organizations in crisis.  Here is some of his work experience:

  • Freddie Mac
  • Mutual Benefit Life
  • Penn Central Transportation Company
  • city administrator for District of Columbia
  •  president of the United States Soccer Foundation
  • US Office of Management and Budget
  • chair of the President’s Council on Year 2000 Conversion
  • executive board-member of AES Corp. and American Capital, Ltd
  • National Advisory Commission on Civil Disorders

So, Koskinen is certainly an old guy, but maybe the IRS needs more maturity in its leadership.  It is probably safe to say that he wouldn’t approve of Star Trek videos.

It will be interesting to see how Koskinen handles the task of cleaning up the IRS.  Will he fire a bunch of executives?  Will he try to clone himself by hiring like-minded replacements?  Or will it be enough to simply put the fear of God in the existing leadership?  I’m sure we will eventually get to know his leadership style, but for now we should be content knowing that the man gets results.

IRS and the DOMA Decision

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On June 26th the Supreme Court overturned a portion of the Defense of Marriage Act (DOMA) in Windsor v. United States.  This opinion held that section 3 of DOMA is unconstitutional because it deprives same-sex married couples of equal treatment under the Fifth Amendment.  So what kind of tax consequences does this have for same-sex couples?  The IRS hasn’t officially weighed in on this yet other than providing this curt statement on their website:

We are reviewing the important June 26 Supreme Court decision on the Defense of Marriage Act. We will be working with the Department of Treasury and Department of Justice, and we will move swiftly to provide revised guidance in the near future.

In simplest terms, the federal government, including the IRS, must now treat same-sex  couples who are legally married the same as their heterosexual counterparts.  Therefore, married same-sex couples should now be allowed to file a joint tax return and take advantage of various estate planning provisions that have traditionally been available only to heterosexual couples.

It is impossible to determine how many same-sex married couples will file amended tax returns in hopes of getting a refund.  Not all people benefit from filing jointly, and not everybody wants to file jointly, even if there is some financial benefit.  According to IRS rules, those that do see a benefit may go back only three years seeking refunds.

There are still several unanswered questions:

  • What happens when couples marry in a state that recognizes same-sex marriage, but then move to a state that does not recognize it?
  • Will same-sex marriages be considered valid for federal tax purposes retroactively?
  • Will civil unions be treated as marriages for federal tax purposes?

 

IRS Appeals & Alternative Dispute Resolution

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If you have an IRS tax debt and are unable to achieve a satisfactory resolution with the office originally assigned to handle your matter, you may need to call on the IRS Appeals Office to take a second look.  Last time I wrote about the procedures and steps leading up to Appeals.  Today I will discuss some of the options available to taxpayers already in Appeals.

Once the controversy has advanced to the stage of appeals the IRS offers a variety of “alternative dispute resolution” options designed to keep the matter out of court.

The mission of Appeals is to resolve tax controversies, without litigation, on a basis that is fair and impartial to both the Government and the taxpayer, and in a manner that will enhance voluntary compliance and public confidence in the integrity and efficiency of the Service.

~ IRS Pub 4167

Fast Track Mediation (FTM)

  • Intended for Small Business/Self Employed taxpayers
  • Case remains in SB/SE
  • Parties must agree to FTM using Form 13369
  • Taxpayer meets with IRS representative and third party Appeals personnel
  • Solution normally reached within 40 days
  • Solution is not binding (i.e., parties are not obligated to accept the outcome)
  • Automated Collection Service (ACS) cases excluded

Fast Track Settlement (FTS)

  • Available to most other taxpayers (not just SB/SE)
  • Must complete application, Form 14017
  • Decision normally reached with 60-120 days
  • Taxpayer may withdraw at any time and retains all traditional appeal rights

Arbitration

  • For factual issues only (no legal issues)
  • Outcome is binding
  • Most collection issues excluded

In need of an OIC Appeal?

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Once in a while an Offer in Compromise (OIC) is accepted based only on the documents originally submitted, but this is extremely uncommon.  Normally the IRS will at least have some questions, and usually, they will have somewhat of a laundry list of questions and document requests.

Once the Offer Examiner has received all the information necessary to put together a complete analysis, she will send a “preliminary analysis letter.”  Most of the time the IRS will determine that the taxpayer is able to pay the tax liability in full and/or that acceptance of the offer is not “in the government’s best interest.”  Some of the language in this letter has a hint of finality to it and taxpayers tend to misjudge/misread it as a rejection letter.  But the offer can often be kept alive at this point by supplying additional information and by making the right arguments.

If taxpayer’s response does not convince the IRS to change its position, then the IRS will (after manager approval and independent review) submit a decision letter.  A decision letter could be any of the following:

  • Acceptance
  • Rejection (with OIC appeal rights)
  • Rejection with the option to increase
  • Return (no OIC appeal rights)

But even a rejection letter isn’t always the end of the road.  If there are legitimate issues, a taxpayer may want to file an appeal.  Filing an appeal puts the offer in front of an independent and fresh set of eyes.  The IRS Office of Appeals is “independent” in the sense that it is not connected with the office that decided to reject your OIC.  Don’t think that the Appeals Office is a completely independent government agency because it is not.

An Offer in Compromise must be filed on a specific form and within 30 days from the date of the rejection letter.  Taxpayers may substitute a letter instead of the appeal form, but the letter must contain all the same elements required by the form.  Once your appeal has been filed, be prepared to wait about the same length of time you waited for your OIC to be assigned.  Also, remember that the collection statute is tolled (extended) during the entirety of the appeals process just as it is during the OIC review.