On this day in 1981 IBM introduced its first personal computer, the model 5150. Five years later Van Halen released its first album recorded with Sammy Hagar, also called “5150″ but in no way a reference to the computer.
This fun fact has been brought to you by Montgomery & Wetenkamp.
I have said this before, but it bears repeating. Any emails you might receive purporting to be from the IRS are more than likely spam. The IRS does not communicate with individual taxpayers in this manner. You should forward any such email to phishing@irs.gov and then delete the emails without opening them.
Apparently there is another batch of bad emails being dispersed this week. Thanks to Kelly Phillips Erb at Forbes for the heads up. One is from “manager@irs.gov” and the other is from “support manager@irs.gov.” Hopefully you’re not so curious that you would risk infecting your computer, or worse, giving up personal information to identity thefts. But, if you can’t stand not knowing what the emails say, this is the gist of it:
“Important information about your tax return. We are unable to process your tax return. We recived your tax return. However, we are unable to process the return as field. Our records indicate that the person identified as the primary taxpayer or spouse on the tax return did not provided all the required documents shown on the tax form. Our records are based on information received from the Social Security Administration. Based on this information, the tax account for the individual has been locked.” The message is full of typos, which could make you wonder if it really isn’t from the government. But it goes on to request personal financial information. Its definitely a scam.
The Philadelphia rapper pleaded guilty this week to failing to file federal income tax returns for 2003, 2004 and 2005. The IRS believes that Sigel failed to pay nearly $350,000 in federal income taxes over that time period on more than $1 million in income. This is just the latest in his fairly long history of legal troubles. He beat an attempted murder charge for which he was tried twice. And he pleaded guilty to gun and drug charges back in 2004. Apparently Sigel was earning money while in prison, and failing to report that income. Sentencing is set for November 18th and he could face up to three more years prison time for his tax issues. Click here for the complete story and some interesting background information on the career of Beanie Sigel.
Have you noticed that the celebrities who find themselves in hot water with the IRS are usually those aging stars whose careers seem to be going downhill? It’s no coincidence. Something similar tends to happen with business owners whose businesses are suffering. Income drops, but they tend to hold out hope that things will improve. And by “hold out hope” I mean that they do not change their standard of living or their celebrity lifestyle.
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.
The California Franchise Tax Board announced today that they mailed out 135,000 audit letters to taxpayers suspected of erroneously claiming Head of Household status on their 2010 tax returns. A similar audit campaign last year resulted in additional assessments exceeding $35 million. People use Head of Household status because of the tax savings, but few really understand how it works. To qualify, the taxpayer must provide care for more than one-half of the year and pay more than one-half the cost of maintaining their home. The qualifying person must be related to the taxpayer and meet the requirements to be a qualifying child or relative.
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.
“Markets will rise and fall, but this is the United States of America. No matter what some agency may say, we’ve always been and always will be a triple-A country.”
~ President Obama
Ever wonder what it would take to be convicted of a tax crime? It’s probably less than what you would think. Hopefully you continue reading this post to satisfy your curiosity and not because you have any real need to know. Obtaining tax relief early in the game will usually help you avoid criminal investigations.
So for inquiring minds, here are some of the more common tax violations:
1. Evasion of Assessment
2. Evasion of Payment
3. Failure to Collect or Pay over Tax
4. Failure to File
5. Fraud & False Statements
All of these offenses require wilfulness, or criminal intent. Take “Failure to File,” for example. You may be guilty under Internal Revenue Code section 7203 for failure to file a return if (1) you are required to file a return, and (2) you willfully fail to file the return when it is required to be filed. Simple as that. If convicted, the penalty can be as high as $25,000, or imprisonment for up to one year, or both.
The “Evasion of Assessment” and “Evasion of Payment” crimes may be applicable even if the tax assessment or payment was not ultimately evaded. For example, you may be found guilty under Internal Revenue Code section 7201 for attempting to evade or defeat a tax if (1) a tax is due and owing, and (2) you willfully attempt to evade or defeat a tax or the payment of a tax. If convicted, the penalty can be as high as $100,000, or imprisonment for up to five years, or both. See the IRS Tax Crimes Handbook for more information.
The silver lining here is that wilfulness is usually a subjective standard in the tax code, meaning that a defendant’s good faith belief that he is not violating the tax laws, no matter how objectively unreasonable that belief may be, is a defense in a tax prosecution.
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?
Nobody at the IRS knows a fine piece of art when they see it. Okay, that’s harsh and I’m perpetuating a stereotype that every IRS employee is robotic, boring, and unimaginative. There are thousands of IRS representatives and certainly a huge variety of backgrounds, interests, and personalities.
But its true what I say about their collective knowledge of art. The IRS outsources its art appraisal to an unpaid panel of 25 experts known as the Art Advisory Panel. If you’re hoping for some tax relief in the form of a low appraisal, you better think twice. These guys know their stuff; most of them are experts from renowned museums and galleries in New York.
According to the IRS, the Panel assists the IRS by reviewing and evaluating property appraisals submitted by taxpayers in support of the fair market value claimed in works of art involved in Federal income, estate and gift tax cases in accordance with the Internal Revenue Code. The IRS turns to its panel during an audit involving a piece of art with a claimed value of $50,000 or more. Or maybe the threshold is $20,000. According to the 2010 Annual Summary Report (which I looked through in its entirety and unfortunately did not see one single picture), its $20,000. Of all IRS publications, one would think at least this one should have some artwork, but no. Just words.
