Still Waiting on Your Tax Refund?

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By the time you read this article, you should have that interest free loan that you gave to Uncle Sam returned to you via your federal tax refund. This assumes that you filed your tax return on time, and that you exercised savvy tax planning so that you didn’t incur a tax debt. So have you already spent your refund, or are you still waiting for the money you’ve already earmarked for that desired frill?

According to the IRS, they generally issue refunds within 21 calendar days of receiving your tax return. This is, of course, if you E-File your tax return and disclose your banking information for purposes of direct deposit. If you snail mail a paper return and want a check or savings bond snail mailed back to you, your refund should arrive in about six to eight weeks.

Should you have received your refund already? Still waiting? You may want to use the IRS’ where’s my refund tool available online at www.irs.gov or as a smartphone application. If you are still left wondering where your money is, like many have been this tax season, a systematic approach may help you alleviate your anxiety if you think you should have already received your refund.

Step 1: Were there basic errors on your tax return?

The first question you need to answer is whether you made an error on the face of your tax return. This includes, for example, using the wrong social security number, making computation mistakes, checking wrong or multiple boxes, failing to sign your return, or pay for postage. Any of these seemingly simple tasks results in common errors which will likely cause an error in the initial processing of your tax return and a delay in issuing your refund. So double check your tax return before sending it, and if you’re still waiting for your refund, maybe check the copy of your tax return (you did save a copy your return, right?) and see if there is some basic error that needs to be corrected.

Step 2: Do you owe the government?

So you reviewed your tax return and confirmed that you made no errors on the face of the tax return. Then, the delay in receiving your refund may be more problematic. I receive calls every year from people who owe the government taxes or some other type of debt and are wondering why they didn’t receive their refund that they had already earmarked for some necessary expense. Unfortunately, the federal government, like any other creditor, isn’t going to give your money back when a debt is owed. If you owe the government, it’s almost certain that your refund was applied to your debt in the best interest of the government.

Step 3: Was your tax return more complex?

So you’re certain that you don’t owe the federal government any money and that you made no errors on your tax return; then what are the other reasons that your refund may be delayed? A refund may also be delayed if you use an Individual Taxpayer Identification Number, amend a tax return, or claim specific tax credits that need to be manually reviewed like the adoption tax credit, for example. Or, maybe the IRS is examining/auditing or disputing some item(s) on your tax return. The latter is usually not the normal operating procedure for delaying a refund as the refund is normally issued, and then months later an audit notification is sent, then informing you that your tax return is being audited. However, it is always a possibility especially if you are using novel accounting practices or extreme red flag expenditures.

Step 4: Have you moved recently?

The IRS will mail to you notifications regarding delays, examinations, or other problems in issuing your refund. If you recently moved, you may not be receiving notification from the IRS explaining what actions are being taken on your account causing your refund to not be timely issued. Therefore, you or your authorized representative may need to contact the IRS to determine why your tax refund has been delayed. This is the case even if you did not move and you have not received an explanation for the delay.

Lastly, the government is back-logged and does make mistakes; this is always a consideration when waiting for a refund check that doesn’t come. This basic approach will hopefully help you determine when it’s time to contact the IRS for clarification or seek professional assistance in obtaining that tax refund that you’ve already counted on to get through the month.

IRS Employees Protest Planned Furloughs

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Why is it so amusing to imagine IRS employees picketing?  I almost wish I could be in Manhatten next week to see how it goes for them — it’s sure to be pretty rowdy, right?

The rally was organized by the National Treasury Employees Union (NTEU) Chapter 47 which represents IRS employees in Manhatten.  They will be protesting the upcoming unpaid furlough days, hopefully not using signs made with government materials on government time.

This is only one of many demonstrations that have taken place outside of IRS offices around the nation this year, including NTEU Chapter 20 in San Francisco on February 28th, Chapter 92 in San Diego on March 7th, Chapter 97 in Fresno on March 22nd, Chapter 143 in El Paso on March 23rd, Chapter 61 in Albany on March 26th, and Chapter 34 in Pittsburgh on April 15th.  Yes, that’s right, April 15th!  Here is Chapter 34 posing for a picture on the IRS’ busiest day of the year with one employee holding a sign that says (ironically, I think) “Let Me Do My Job”:

photo via www.nteu.org

I really don’t have a problem with IRS employees protesting the sequester and furloughs.  I realize that they’re doing it on their lunch breaks.  I just think it’s funny that they are so opposed to a few days off this year.  Although they wouldn’t openly admit it, I suspect that more than a few IRS employees would be upset if the government reneged on the furloughs.

Foreign Accounts & Quiet Disclosures

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There is a general, overriding principle in the world of Federal Tax that goes something like this: if you voluntarily come forward to admit your prior tax shenanigans and get yourself back in the good graces of the IRS, there will be less negative consequences than if the IRS catches you trying to get away with it.

This principle holds true with respect to the reporting of foreign bank accounts.  Taxpayers who are caught hiding assets in foreign accounts are subject to criminal prosecution, and could very well face jail time.  But under the IRS voluntary amnesty programs, those who come forward and disclose their offshore assets are promised they won’t go to jail in exchange for payment of penalties that are based on a percentage of their account balances.

There are some who want to get back on the grid without having to pay hefty penalties.  They do this by making a so-called “quiet disclosure” of foreign assets; they report their foreign accounts without giving the government information about accounts held in previous years.  This type of disclosure sometimes tricks the IRS into believing the accounts are brand new.

According to a recent report by the Government Accountability Office (GAO), there may be more quiet disclosures happening around the nation than the IRS has the ability to identify.  The IRS is taking tips from GAO on how to detect more of these quiet disclosures.

More Aggressive Collection Trend at IRS

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In a report released publicly this week, the Treasury Inspector General for Tax Administration (TIGTA) stated that taxpayer satisfaction should be a factor in measuring the effectiveness of the IRS Collections Department.  I like to think the IRS will also be concerned with the satisfaction levels of taxpayers’ representatives.  In all my years of practice, I have never been asked about how satisfied I was with the interactions I had with a call center employee.  I have never been asked to complete a satisfaction survey at the conclusion of a revenue officer case.  But, maybe things are going to change.

Although they would have you believe otherwise, based on my experience, the IRS is primarily concerned with collecting revenue.  Afterall, just how effective would Collections be if they focused mainly on customer satisfaction?  The report doesn’t seek to conceal this fact.  Here are some interesting statistics that caught my eye:

  • The average dollars collected per revenue officer was 14 percent higher in Fiscal Year (FY) 2011 than in FY 2009.
  • The dollars collected through installment agreements in FY 2011 were 32 percent higher than the amount collected in FY 2009.
  • Overall, the total dollars collected in FY 2011 were 20 percent higher than the amount collected in FY 2009 even though there were fewer revenue officers on staff.

This is not the best news for those with unpaid taxes.  When revenue officers go about collecting dollars, they do so through asset seizures, wage garnishments, bank levies, etc.  So the fact that this statistic is on the rise, I think tells us something about the aggressiveness of IRS collections, especially because they’re doing it with fewer people these days.

Long Holiday Weekends for IRS This Year

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Now that tax season is over for the on-time filers, many IRS employees can relax just a little.  And for at least 5 additional days this year they actually can relax at home . . . without pay.  Bloomberg apparently got its hands on an internal IRS memorandum informing IRS employees which days have been scheduled as furlough days this year.

The IRS furlough dates are:

  • May 24
  • June 14
  • July 5
  • July 22
  • August 30

These furlough dates were chosen to coincide with the federal holidays already on the calendar, so we will be looking at several four and five-day IRS closures throughout the rest of 2012.  I say five days because the IRS often shuts down early the day before a holiday, sometimes for computer maintenance, and sometimes so they aren’t disturbed during their potlucks.  I’ve always thought that “computer maintenance” was code for holiday party or potluck, but that’s just my slightly jaded opinion.

The IRS, as well as many other federal government agencies, is resorting to furloughs in reaction to budget reductions that took effect earlier this year.  Acting IRS Commissioner, Steven Miller, explained his reasoning for the agency-wide closures:

We came to a decision that balances our primary mission to serve the taxpayers and considers the effect on employees. We settled on having uniform furlough dates for everyone and closing down agency operations entirely. This way, the IRS can gain additional cost savings on utilities and other services in our work locations.

According to Miller, the closures will affect all local taxpayer assistance centers and call centers.  IRS.gov should be up, but the availability of online services such as Transcript Delivery Service and other IRS practitioner tools is unknown.  And, if necessary, there may be an additional two furlough days coming in August and September.  Plan your vacations accordingly.

Is There a "Tax Cheat" Demographic?

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A recent study by the National Taxpayer Advocate Service (TAS) might help you figure out your chances of getting audited.  Or at least it could help you decide if you’re a high audit risk or low audit risk.  The new TAS report attempts to define the “tax cheat” demographic.

The highest concentration of “tax cheats” (and, therefore, the highest concentration of IRS auditors) are found in the Los Angeles, San Francisco, Atlanta, Houston, and Washington D.C.  metropolitan areas.  And there are some communities in California that seem to be especially attractive to the IRS, namely, Beverly Hills and Newport Beach.

TAS also confirmed what we have known for a long time: self-employed taxpayers are more likely to be targeted in a tax audit than wage earners.  There are even certain industries that tend to be audited more, like construction and real estate rental.

Finally, according to the TAS report, tax cheats tend to congregate in groups.  Apparently they are a social animal.  A tax cheat is often a member of one or more of the following groups:

  • civic leagues
  • fraternal societies & clubs
  • trade associations
  • labor unions

I guess if you are a self-employed Shriner with rental properties in Newport Beach, you’re pretty much screwed.

Boston Marathon Tax Relief

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Did you file your tax return yesterday? If not, did you file an extension to file? While your typical tax extension is only an extension to file your actual tax return, but not an extension to pay the tax owed, the Internal Revenue Service announced a three-month tax filing and payment extension to Boston area taxpayers and others affected by Monday’s Boston Marathon explosions.

Smartly, the IRS is allowing geographic and disaster related tax relief. This tax relief applies to all individual taxpayers who live in Suffolk County, Massachusetts. Since the marathon was both a national and international event, the tax relief also applies to victims, families, first responders, others impacted by Monday’s Boston Marathon tragedy who live outside of Suffolk County and other taxpayers whose tax preparers were adversely affected by the tragic events.

“Our hearts go out to the people affected by this tragic event,” said IRS Acting Commissioner Steven T. Miller. “We want victims and others affected by this terrible tragedy to have the time they need to finish their individual tax returns.”

Under this specific tax relief program, the IRS will allow eligible taxpayers until July 15, 2013, to file their 2012 returns and pay any taxes normally due April 15. Normally, non-filing and non-payment IRS penalties are severe and crushing. Under this tax relief program, no filing and payment penalties will be due as long as the tax returns are filed and the payments are made by July 15, 2013. By law, interest, currently at the annual rate of 3 percent compounded daily, will still apply to any payments made after the April deadline.

Unlike other IRS tax relief programs, generally, no specific action is necessary for this program. The IRS will automatically provide this extension to anyone living in Suffolk County. However, action is needed for impacted and qualified taxpayers who reside outside of Suffolk County. Eligible taxpayers living outside Suffolk County can claim this relief by calling 1-866-562-5227 beginning Tuesday, April 23, and identifying themselves to the IRS before filing their tax return or making their tax payment. Eligible taxpayers who receive penalty notices from the IRS can also call this number to have these penalties abated.

"irs.gov is not responding"

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This is the error message I kept getting when I tried to navigate around the IRS website today.  I don’t know enough about computers to say for sure what is going on, but I would guess the problem is too much internet traffic from last minute filers and refund seekers.

Happy Tax Day! – April 15, 2013

The most useful bit of advice I could give today is this: if you’re not 100% prepared to file your taxes, don’t throw your forms together at the last minute.  File an extension!  Enough said.

File an extension using Form 4868.

Birkenfeld Was an Anomaly

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The IRS is still not doing enough to attract whistleblowers and to move whistleblower cases along towards a resolution.

After the IRS awarded Bradley Birkenfeld $104 million for blowing the whistle on UBS last September, I wondered if there would be an increase in whistleblower cases, and there was.  But it was short-lived.  2012 actually saw a total of only 332 tips, down from 472 in 2009.  I also wondered if the Birkenfeld case represented a new era for the IRS Whistleblower Office and if we would continue to see handsome, timely payouts.  Well, if there have been payouts, the IRS isn’t making them public.  A private whistleblower award is almost pointless because it doesn’t spark the desire in others to come forward and it does nothing to deter would-be tax cheats.  So if we’re not hearing about awards, chances are they aren’t happening.

The IRS is a revenue collecting machine and the idea that “you have to spend money to make money” applies just as much to the IRS as it does in the business world.  The IRS understands this reality.  When the IRS pleads for more money for staffing they tend to cite the statistic about how the IRS is able to collect something like $194 for every dollar spent.  Why can’t they embrace this philosophy in other departments of the IRS?  They will collect more in the long term through voluntary compliance if they would just fix what is wrong with the Whistleblower Office.

IRS Records Prove AROD is a Bad Guy in Boston

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According to a recent Boston Globe review of Internal Revenue Service (IRS) filings New York Yankee Alex Rodriguez is a bad guy. A Boston news source depicting a Yankee as a bad guy is hardly surprising. What interests me, as a tax attorney, is that the basis for hatred for Rodriguez this time is not baseball related; it is based on IRS records. According to the Boston Globe, nonprofit organizations are generally expected to donate 65 to 75 percent of their revenues to their designated charitable causes. The remainder of their revenues are supposed to be used to pay their necessary expenses and reasonable salaries of nonprofit employees. This was not the case for Rodriguez’s non-profit organization, according to the Globe.

In 2006, Rodriguez hosted a charity poker tournament that helped the A-Rod Family Foundation raise $403,862 for charity. How nice! However, according to IRS reports, barely 1 percent of the money raised were actually paid to charity. Specifically, only $5,000 was paid to Jay-Z’s Shawn Carter Scholarship Fund and only $90 was paid to a Little League baseball team in Miami; how charitable. The not for profit organization subsequently stopped submitting financial reports to the IRS, and was then stripped of its tax-exempt status. Again, AROD is a bad guy … no shocker … just surprised the revelation was tax based.