Tax Songs

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Musicians (especially the boots and large belt-buckle donning musicians) love to sing about ordinary stuff that we’re familiar with.  What respectable country song doesn’t mention at least one of the following?:

  • dog
  • truck
  • liquor
  • women
  • bar fight
  • being broke

Well what about taxes?

We all know how common tax problems are, but they just don’t seem to get fair coverage in country songs.  The nice thing about taxes is you don’t have to reveal your political leanings when singing about how much you hate them.  Taxes are a universal inconvenience; a thorn in our collective side.  But taxes don’t belong in just any genre of music, otherwise you end up with something horrible like this:

‘Cause they taxed me

With a scalpel piece by piece

They cut me deep and bled me dry

Until there was nothing left to bleed

(from “Life After Death and Taxes” by Relient K)

A good tax song sounds something like this:

 

 

Common Tax Prep Errors

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Today’s IRS Tax Tip (Number 2012-58) warns about common tax prep errors.  The bottom line?  To avoid tax problems, double-check everything, especially the numbers.

You’re not likely to misspell your last name, jot down the wrong address, or forget to claim one of your children.  But entering a wrong number here or there is a typical mistake.  Whether it be in the transposing of the number or the computation of the number, it is critical that you take your time and double-check.  In fact, it’s a good idea to get a second set of eyes to go over each form if possible.

So, where do the most common number errors show up?

  • social security numbers
  • bank account numbers
  • adjusted gross income figures

Some tax prep errors can result in a tax return being returned, adjusted, or audited.  Be sure you spell names correctly, use the correct income figures from 1099 and W-2 form(s), and always, always be sure to sign your return.

The IRS Book of Numbers

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Nowhere else will you ever see as many “millions,” “billions,” and “trillions” than in the Annual IRS Data Book.  The 2011 IRS Data Book was released this week and, once again, it is teeming with large, almost incomprehensible numbers; just the kind of thing that makes a tax attorney smile.

The Data Book is the number one source for statistics related to return filing, refunds, revenue collected, enforcement, taxpayer assistance, IRS budget, and IRS workforce.  Here is a small sampling of some of the huge numbers reported in the 2011 Data Book:

  • IRS collected $2.4 trillion in 2011
  • IRS processed over 234 million tax returns
  • Taxpayers filed more than 133 million returns electronically (77% of all individual returns)
  • IRS paid almost $338 billion in refunds
  • IRS examined 1.1 percent of all individual income tax returns
  • IRS examined 1.5 percent of all corporate income tax returns
  • 319 million visits to irs.gov for taxpayer assistance
  • 83 million walk-ins and phone calls for taxpayer assistance

If you’ve never seen the annual data book, it may be worth your time to take a look.  It is interesting to see the progression of total revenue collected year-by-year beginning in 1960, or compare revenue collected by state or by type of tax.  Just don’t inadvertently hit your print button because everything about the publication is huge, including the page count — 74

IRS Audit Rates

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Tax relief for the wealthy does not have much popular support these days.  And apparently the IRS feels the same.  The IRS recently reported that audit rates for individual taxpayers earning over $10 million has nearly tripled since 2009.  If you’re one of the .01 percent who makes that kind of money, then you have a 29.93 percent chance of being audited.

I know how some people are going to read this headline.  Some people are going to think that they are safe because they earn a lot less than $10 million per year.  If the IRS is focusing its efforts and manpower on examinations of the ultra wealthy, then that means audits of returns filed by the average Joe are decreasing, right?

Wrong.  The overall audit rate remains constant at 1.11 percent.  Maybe you like those odds.  Well, before you do anything you’ll regret later, be aware that income is only one factor that the IRS looks at when determining who to audit.  Furthermore, I’m not certain that these statistics include the so-called correspondence audits, which are becoming more and more common these days.

IRS to Cooperate with Local Police in Fraud Probes

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The IRS’ criminal investigation division has kept itself very busy with refund fraud cases in recent years.  They would love to be able to enlist the cooperation of local law enforcement but have always been prohibited from sharing some of the information necessary to apprehend tax criminals.  Individual tax return information, for instance, has always been kept strictly confidential under long-standing IRS rules.  In fact, it is a crime for IRS workers to share this sensitive information outside the context of their work.  Believe me, they are very cautious with this data, even in standard tax resolution inquiries.

However, under a pilot program that will be initiated in Tampa, Florida, the IRS will begin sharing some tax return information to local police, so long as the victims of identity theft and tax refund fraud give their consent.  There is no start date yet.

Surprisingly, National Taxpayer Advocate, Nina Olson, is not opposed to this new legislation, as long as the information shared with police is used strictly for law enforcement purposes.

Phony IRS Email

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Today one of my clients who has a tax debt found the following email in her inbox, which was obviously NOT from the IRS:

Good day,Here is a notice, that you need to pay a penalty because you did not file income tax return by the deadline that is January 31, 2012.

Please note, that IRS [Section 6038(b)(1)] determines a monetary penalty to the amount of $10,000 for each [Form 5471] that is sent after the due date of filing the income tax return, or does not include the exhaustive information determined in [Section 6038(a)].

You will be released from the penalty provided that the taxpayer shows that the failure to meet the deadline for filing was caused by substantial reasons.

Please enter our official site for more details.

Kind regards,
Internal Revenue Service United States
Department of the Treasury

As you can probably imagine, the link (“Please enter our official site”) does not take you to the IRS website.  Had she clicked on the link, she could have compromised her computer files or possibly subjected her computer to a virus.  It is important to keep in mind that the IRS does not send unsolicited emails.

Paperwork is not IRS’ Forte

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What would you think of an English teacher who couldn’t spell?  How about a surgeon who couldn’t hold his hands steady?  It’s a problem, right?

Well I was dumbfounded to discover, by way of the latest TIGTA audit, that the IRS is not so good with paperwork.  In 2012 the IRS processed over 230 million tax returns, so it’s not a stretch to say that the IRS is in the business of doing paperwork.  The wage garnishment, bank levy, liens . . . all excuses to do more paperwork.

TIGTA (Treasury Inspector General for Tax Administration) issued a press release today outlining the results of an audit that found holes in the IRS job applicant prescreening process.  Ok, not the process itself, just the documentation (the part that the IRS should have nailed):

Our report does not indicate that the IRS hired applicants who were not suitable or that the steps were not completed; rather, we found that the documentation of some of the prescreening steps was unavailable.

~ J. Russell George, TIGTA

On the bright side, I am told that the IRS is meticulous in ensuring that each and every candidate for employment can write their name and count to 100.

Stress About your Bracket, Not your Taxes

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We’re approximately one month away from Tax Day and the IRS is offering up a bit of advice on how to get through these next few weeks without losing too much sleep. The most prominent ingredient in IRS’ anti-stress formula is “Don’t Procrastinate.” This is good advice. Why wait until the weekend of April 15th to get started on your taxes? If you rush around at the last minute to get your taxes done, then the likelihood that you will make an error increases. Also, don’t think you can pop in to see an accountant or a busy tax preparer at the 11th hour. There are many people who put it off and you’re going to have to “take a number” and wait your turn.

If you’re due a refund then you probably file early. Most of the last-minute filers are people who know they are going to owe. Some of them know they will owe and also know they can’t afford to pay — and that can certainly be a big source of stress. But it doesn’t have to be…

Self-serving plug: The tax attorneys at Montgomery & Wetenkamp know how to resolve tax debts quickly and fairly. Call now for your free consultation.

IRS Getting Push-back on Return Preparer Regs

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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

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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.