IRS Drops Investigation of Big-Shot Donors

The IRS had been investigating five unnamed donors who each contributed hundreds of thousands, if not millions of dollars, to certain unnamed 501(c)(4) tax-exempt organizations. The nonprofit organizations then spent this money on political advertising. This occurred during the 2010 elections, and is expected to occur in 2012 as well. The question was whether or not these donors had to pay a 35% gift tax on their donations. But it’s not really a question any longer because the IRS decided not to pursue further examinations.  Why did the IRS drop the investigation? Because they just don’t have any rules/case-law/guidance on this issue.

As part of their statement, the IRS noted that they will “review the need for additional guidance or legislation [and] it is possible that Congress may choose to clearly articulate through legislation the applicability of the gift tax to contributions to 501(c)(4) organizations.”

It was instant tax relief for these donors.  Tax relief, tax avoidance, whatever you want to call itthey didn’t have to pay, and they didn’t have to lift a finger in their defense. Imagine that, 3.8 million words in the tax code and the IRS is still suggesting there isn’t enough.

Said the IRS:

“Questions have been raised regarding the application of gift tax to contributions to I.R.C. § 501 (c)(4) organizations. This is a difficult area with significant legal, administrative, and policy implications with respect to which we have little enforcement history. My office will be coordinating with the Office of Chief Counsel to determine whether there is a need for further guidance in this area.

Until further notice, examination resources should not be expended on this issue. It is anticipated that any future examination activity would be after the coordination described above and would be prospective only after notice to the public. Thus, the Service should not expend examination resources initiating referrals or developing audits. Accordingly, all current examinations relating to the application of gift tax to contributions to I.R.C. § 501(c)(4) organizations should be closed.”

Click here for the official July 7th IRS memo from Steven Miller, Deputy Commissioner for Services and Enforcement.

Step-by-Step Tax Relief for “Non-Filers”

Tax Relief for Non-Filers

There are thousands of Americans every year who do not file their tax returns and owe the Internal Revenue Service (IRS) in violation of federal tax laws. Likewise, there are thousands of reasons why; stemming from those who believe that the United States lacks the legal authority to levy and collect taxes, to those who simply don’t know how to file a tax return or are not able to pay the taxes owed. Americans who owe the IRS a tax liability need to take a systematic and organized approach to rejoining the tax-filing and tax-paying society to ensure their tax headaches are minimized.

Do you owe the IRS but haven’t filed your taxes yet? Click here for step-by-step tax relief suggestions.

New Orleans Tax Assessor in Deep

Identity: Betty Jefferson, former New Orleans tax assessor

Offense: conspiracy to commit mail fraud money laundering, and tax evasion; and now the subject of a state tax audit that raises questions about suspicious / undocumented expenses.

Amount of Money Involved: $113,796

More Info: see Forbes.com story

Australian Pollution Tax

Australia, one of the world’s biggest polluters due to their heavy reliance on coal-fired power, is introducing a new tax on emissions. The new tax will likely be a fixed Aus$23 (US$25) per tonne for carbon emissions and will affect 500 of the country’s worst offenders – only big businesses according to Prime Minister, Julia Gillard. The number of affected business was reduced from 1,000 to 500, and Gillard cites this change to emphasize that the tax will really only impact a very limited number of Australia’s big businesses.  However, the pollution tax will undoubtedly impact regular families as these affected businesses raise prices (somewhere in the neighborhood of Aus$406 per year).  The government has promised that 90% of all households would get tax relief in the form of tax cuts or pension boosts to help meet the rising living costs.  The tax is very controversial in Australia, but has been praised as “one of the most significant economic reforms in Australia for decades” (see AP news article).

Summer Jobs

Remember your first legitimate job, that first paycheck?  If you are anything like me, you were probably mystified by the discrepancy between your mental calculations and the actual net amount on the check.  Not much can prepare you for that hard reality.  For many students, their first tax lessons are learned when they land their first summer job.

The IRS offers six tax tips for students starting summer jobs:

1. Fill out a Form W-4 so your employer will know how much to withhold.

2. All tips are taxable.

3. Money earned from odd jobs are taxable.

4. Pay self-employment tax if earnings are $400 or more.

5. Food and lodging allowances paid to ROTC students participating in advanced training are not taxable, but active duty pay is taxable.

6. Generally newspaper carriers under age 18 are not subject to self-employment tax.

2018 Winter Olympics

I know of few events so grandious that preparations must begin 7 years in advance.  But the Olympics is one of them.  The International Olympic Committee today announced that the location of the 2018 Winter Olympics will be Pyeongchang, South Korea.  Pyeongchang will be the first Asian city besides Japan to host the Winter Olympics.

In case you’re keeping track, or planning to attend, here are all the scheduled locations:

  • 2012 (summer) – London, England
  • 2014 (winter) – Sochi, Russia
  • 2016 (summer) – Rio de Janeiro, Brazil
  • 2018 (winter) – Pyeongchang, South Korea

Payroll Deduction Agreements

An individual seeking tax relief may be in a position to make installment payments to the IRS. There are three primary methods of making installment agreement payments: mail in a check, electronic debit, and payroll deduction. The taxpayer can initiate the electronic debit method directly on Form 9465 or Form 433-D. However, a payroll deduction agreement requires the use of a separate form (IRS Form 2159). There are three parts to this form: the Acknowledgement Copy (to be returned to the IRS), the Employer’s Copy, and the Taxpayer’s Copy. The front page of each copy is identical. However, there is an instructional second page to each copy, each containing different information. The second page of the IRS Copy contains a list of internal codes and number designations. The second page of the Taxpayer’s Copy contains some rather redundant instructions on how to fill out the form and what to do with it after it is completed. The second page of the Employer’s Copy is the most interesting. The employer is instructed to “continue to make payments unless the IRS notifies [the employer] that the liability has been satisfied.” This could be prejudicial to the taxpayer. First, the likelihood that the IRS will notify the employer in a timely manner is not very high. Second, if the taxpayer’s financial situation changes and he is unable to continue with the IA, it could be potentially very difficult to cancel the payroll deduction agreement.

 

Summer Day Camp Expenses

For some parents, the summer months mean additional child care expenses for their children under 13 years old who would normally be in school. If this sounds familiar, you should be aware of the Child and Dependent Care Credit, which is really available year round. This Credit may be applicable to Summer Day Camp too. Here are some IRS tips for you to consider:

1. The cost of day camp may count as an expense towards the child and dependent care credit.

2. Expenses for overnight camps do not qualify.

3. Whether your childcare provider is a sitter at your home or a daycare facility outside the home, you’ll get some tax benefit if you qualify for the credit.

4. The credit can be up to 35 percent of your qualifying expenses, depending on your income.

5. You may use up to $3,000 of the unreimbursed expenses paid in a year for one qualifying individual or $6,000 for two or more qualifying individuals to figure the credit.

A Little Good News for Employers

The “FUTA surtax” was finally laid to rest this week. After 35 years and 8 separate extensions, the “temporary” tax expired and was NOT renewed this time, providing a little tax relief to employers.

I say “little” because it never was a huge tax. The 0.2% FUTA surtax was enacted in 1976 for the purpose of paying for unemployment benefits following the recession of the early 1970s. Mission accomplished by 1987, but the tax stayed on the books. Dave Camp of the House Ways and Means Committee led the opposition to renewal of the tax. Current or future unemployment benefits will not be affected.