The IRS not only has to deal with taxpayers that are as harmless as you can imagine (think your grandma who wouldn’t hurt a fly), but increasingly, they also have to deal with taxpayers who are involved in such things as identify theft cases which can involve organized crime. Taxpayers come in every size and shape including some with nefarious intent. If you’re an IRS agent with information that you may be dealing with someone who may be a bit more than just unhappy to see you walking up to their door, it’s perhaps a good idea to be armed with a bit more than just your briefcase and some papers.
The IRS has a number of special agents who are trained law enforcement professionals who work in their Criminal Investigation division. Besides a pocket protector and a briefcase, their equipment can include handguns, long guns, bulletproof vests, night vision scopes, body armor, and contraband inspection kits. The IRS has had long standing policies and procedures on such things as “When Force May Be Used”, “Weaponless Control”, “Handcuffs and Restraints”, “When Deadly Force May Be Used”, “Medical and Liability Considerations”, “Emergency Driving” and the list goes on.
To collar some criminals, the path to justice must run first through the Treasury Department (remember Al Capone?). But apparently the IRS is not the only federal agency that must be prepared to deal with people of bad intent. It’s been reported that as many as 67 federal agencies unaffiliated with the Department of Defense have budgets for guns and ammo.
By Dale F. Jensen, CPAPosted on August 24 2016 by admin
The Social Security Administration has added a new step this month to protect your privacy as a mySocialSecurity user. This new requirement is the result of an executive order for federal agencies to provide more secure authentication for their online services. Any agency that provides online access to a customer’s personal information must use multifactor authentication.
When you sign in at ssa.gov/myaccount with your username and password, the SSA will ask you to add your text-enabled cell phone number. The purpose of providing your cell phone number is that, each time you log in to your account with your username and password, you will be sent a one-time security code you must also enter to log in successfully to your account.
Each time you sign into your account, you will complete two steps:
- Step 1: Enter your username and password.
- Step 2: Enter the security code SSA sends as a text to your cell phone (cell phone provider’s text message and data rates may apply).
The process of using a one-time security code in addition to a username and password is one form of “multifactor authentication,” which means the SSA is using more than one method to make sure you are the actual owner of your account.
If you do not have a text-enabled cell phone or you do not wish to provide your cell phone number, you will not be able to access your mySocialSecurity account.
If you are unable to or choose not to use mySocialSecurity, there are other ways you can contact the Social Security Administration including calling, emailing or walking in to an office. To learn more, please review the Frequently Asked Questions found here.
It’s a sign of the times that you’ll be required to share additional personal information to use the convenient mySocialSecurity online service.
By Melinda Nelson, CPAPosted on August 23 2016 by admin
The Internal Revenue Service has re-launched the “Get an IP PIN” tool on IRS.gov. By adding multi-factor authentication, the IRS hopes to prevent future fraudulent applications and automated attacks.
An Identity Protection Personal Identification Number (IP PIN) is given to taxpayers who are already victims of tax related identity theft. The six-digit IP PIN verifies a taxpayer’s identity to the Internal Revenue Service and allows the taxpayer to electronically file his/her tax return and receive timely refunds.
Approximately 2.7 million IP PIN holders will receive their number through the mail late in the calendar year in advance of the 2017 filing season. Taxpayers who lose their IP PIN may use the tool to retrieve their number. The IP PIN number changes each year.
The “Get an IP Pin” tool requires taxpayers to verify their identities using a more rigorous Secure Access process that requires them to have immediate access to an email address, account information from a credit card or other loan types and a text-enabled mobile phone. The Secure Access steps are outlined in Fact Sheet 2016-20, How to Register for Get Transcript Online Using New Authentication Process.
Other taxpayers who may be victims of non-tax related identity theft and who submitted an Identity Theft Affidavit (Form 14039) to the IRS may opt into the IP PIN program and obtain an IP PIN through the tool. Taxpayers from Florida, Georgia and the District of Columbia also may obtain an IP PIN through the tool as part of a pilot project.
By Melinda Nelson, CPAPosted on August 18 2016 by admin
According to the IRS, the phone scammers are back at it; targeting taxpayers with aggressive and threatening phone calls. Scammers making unsolicited calls claiming to be IRS agents are using false credentials, false badge numbers and victims’ personal information to make themselves appear official. Additionally scammers can alter caller ID numbers to make it look like the IRS or another government agency is calling.
They demand that the taxpayer pay a fraudulent tax bill through a prepaid debit card or wire transfer using the threats of arrest, deportation or revocation of a license to intimidate the victim into paying.
What should you do if you get a call like this? Do not give out any information. Hang up immediately. Many of the organizations will track phones where a person answers and that will cause an increase in calls, trying to find the person’s hot button that will get them to send money.
Keep in mind that the IRS will NEVER:
- Call to demand immediate payment, nor will the agency call about taxes owed without first having mailed you a bill.
- Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe.
- Require you to use a specific payment method for your taxes, such as a prepaid debit card.
- Ask for credit or debit card numbers over the phone.
- Threaten to bring in local police or other law-enforcement groups to have you arrested for not paying.
- Threaten you with a lawsuit
If you get a phone call from someone claiming to be from the IRS and asking for money, here are some additional suggestions:
- If you know you owe taxes or think you might owe, call the IRS at 1.800.829.1040. The IRS workers can help you with a payment issue.
- If you know you don’t owe taxes or have no reason to believe that you do, report the incident to the Treasury Inspector General for Tax Administration (TIGTA) at 1.800.366.4484 or at www.tigta.gov.
- You can file a complaint using the FTC Complaint Assistant; choose “Other” and then “Imposter Scams”. If the complaint involves someone impersonating the IRS, include the words “IRS Telephone Scam” in the notes.
Remember, too, the IRS does not use unsolicited email, text messages or any social media to discuss your personal tax issue. For more information on reporting tax scams, go to www.irs.gov and type “scam” in the search box.
By Lauren SweeneyPosted on August 17 2016 by admin
In the past, beneficiaries who sold inherited assets may have reported different (higher) values of assets than what was originally reported on the estate tax return. To stop this, the IRS issued proposed and temporary regulations that now require a beneficiary’s basis in certain property acquired from a decedent be consistent with the value of the property as finally determined for federal estate tax purposes.
Beneficiaries started receiving copies of their Schedule A by/after June 30, 2016. The Schedule A reports the value of property as reported on the estate tax return that the beneficiary has received or may receive, in whole or in part, from the estate of the decedent. The IRS also receives copies of each beneficiary’s Schedule A so they can now “match” the value on future tax returns.
If the executor has not made distributions, the Schedule A will list all of the property that could potentially be used to satisfy the beneficiary’s interest. Thus, the Schedule As of multiple beneficiaries may be duplicative. When the beneficiary receives his Schedule A, he may think he is getting a windfall, and may be very disappointed when his distribution is ultimately significantly less than the assets reported on his Schedule A.
The asset’s value reported on Schedule A becomes the beneficiary’s initial basis for calculating depreciation or amortization, or for determining gain or loss on the sale, exchange or disposition of the property.
Since the IRS has three years after the estate tax return is filed to audit and adjust the value, if the final value has not been determined when the beneficiary’s basis in the property becomes relevant for federal tax purposes, (for example, to report a sale on Schedule D) the beneficiary will use the value reported on his Schedule A. He is now prohibited from claiming a basis in excess of the value reported on Schedule A. If the final value changes and is different from the initial basis reported on the tax return, the beneficiary will be required to file an amended return. Failure to amend may result in a deficiency and underpayment penalties.
Supplemental Reporting Required for Future Gifts or Transfers of Inherited Property to Related Transferees
If a beneficiary later gifts or transfers all or a portion of any property reported on a Schedule A to a related person (as defined in § 267 of the tax code), he must give a new Schedule A to that transferee and file it with the IRS within 30 days of the transfer. A new Schedule A is required to be filed for all subsequent lifetime transfers to related transferees.
The beneficiary should retain his initial and/or supplemental Schedule(s) A indefinitely as the information will be needed for any later sales, gifts or transfers of all or any portion of the inherited property received from the estate. He should also provide his tax (and financial) advisor(s) with a copy of Schedule A so the advisor(s) can assist with the federal tax compliance.
By Jennie WardPosted on August 16 2016 by admin
An executor who is required to file a federal estate tax return (Form 706) is also required to file the new Form 8971, Information Regarding Beneficiaries Acquiring Property from a Decedent, with the IRS to report the final value of that property, the recipient of that property, and other information prescribed by the form and instructions. The executor must also give each beneficiary who has acquired or will acquire property from a decedent a Schedule A reporting the final values of assets reported on the estate tax return.
Form 8971 is not required for estate tax returns filed only to elect portability, to allocate the generation-skipping transfer tax exemption or to make a protective filing.
Property reported on Form 8971 includes all property in the gross estate for federal estate tax purposes with four exceptions:
- cash, other than coins or paper bills with numismatic value;
- income in respect of a decedent;
- items of tangible personal property for which an appraisal is not required, ex. household and personal effects with no marked artistic or intrinsic value and a total value of $3,000 or less; and
- property that is sold or otherwise disposed of by the estate in a transaction in which capital gain or loss is recognized.
Each beneficiary who receives property required to be reported on Form 8971 must get a copy of their Schedule A reporting the values of property distributable to that beneficiary. If the executor does not know what property will be used to satisfy the interest of each beneficiary by the due date of the form, the executor is required to report all of the property that could potentially be used to satisfy that beneficiary’s interest.
Form 8971 and Schedule(s) A must be filed with the IRS, with each beneficiary given a copy of their Schedule A, on or before the earlier of the date that is 30 days after the due date of the federal estate tax return (including extensions) or the date that is 30 days after the date on which the return is filed with the IRS.
If the beneficiary is a trust, estate or business entity, the Schedule A is provided to the trustee, executor or to the business entity. If the executor is unable to locate a beneficiary by the due date, the executor must report that information and explain the efforts undertaken to locate the beneficiary.
The executor must file supplemental Form 8971 and/or Schedule A upon a change in the information required to be reported that causes the original information to be incorrect or incomplete. Some examples of mandatory supplements are if the final value of property changes due to an audit, if additional property is discovered or property was omitted or to correct a taxpayer identification number or spelling of beneficiary’s name. A supplemental form is not required to correct inconsequential errors or omissions or to specify the actual distribution of assets previously reported as being available to satisfy the interests of multiple beneficiaries.
By Jennie WardPosted on August 11 2016 by admin
On August 2, 2016 the U.S government proposed making it harder for wealthy business owners to transfer assets to heirs without paying estate and gift taxes. The Treasury Department’s plan would place new limits on a common tactic used to transfer interests in illiquid businesses.
“By taking advantage of these tactics, certain taxpayers or their estates owning closely held businesses or other entities can end up paying less than they should in estate or gift taxes,” Mark Mazur, the assistant secretary for tax policy, said in a written statement. “Treasury’s action will significantly reduce the ability of these taxpayers and their estates to use such techniques.”
Estate and gift taxes, or transfer taxes, are taxes on the transfer of assets from one person to another either by gift during their lifetime or by inheritance at death. Only transfers by an individual or their estate in excess of $5.45 million are subject to tax. For married couples, no tax is collected on the first $10.9 million transferred. This generous exemption amount means that fewer than 10,000 of the largest estates are subject to any transfer tax at all in a year.
The proposed regulations are a response to the practice of discounting the value of fractional interests in closely held businesses or land, allowing wealthy families to pack assets inside the $10.9 million lifetime exclusion from estate and gift taxes. The Treasury is intent on making it harder for taxpayers to claim valuation discounts by changing how the IRS considers restrictions of an individual’s right to liquidate interests in a business.
The government has signaled for months that the regulations are imminent. Estate planners have urged clients to complete transfers before the government acted. Such efforts may accelerate in the coming months, because the proposed regulations are subject to a 90-day public comment period. The regulations themselves will not go into effect until the comments are carefully considered and then 30 days after the regulations are finalized.
By Pamela Wheeler, EAPosted on August 10 2016 by admin
A recent study performed by The Tax Foundation has produced an approximate total cost, in time and dollars, of tax compliance in the United States. For those not familiar with The Tax Foundation, they are an independent and non-profit organization founded in 1937, whose mission is to study, improve and simplify the tax code, for the benefit of taxpayers and the United States as a whole.
The figures produced by the study are quite staggering; based on data from the Office of Information and Regulatory Affairs, as well as the Bureau of Labor Statistics, The Tax Foundation pins the total time spent on tax compliance by Americans at over 8.9 billion hours in 2016. That’s billion, with a B. According to the study, those 8.9 billion hours translate to over $409 billion in lost productivity annually.
So, why are taxes such a massive time drain? The primary reasons are the size and complexity of the present day tax code. In 1955, the full text of the Internal Revenue Code stretched to 409,000 words. Since then, the Code has ballooned to 2.4 million words, with the majority of that expansion happening since 1985. The Code itself is merely a small part of the full library of IRS tax literature. There are nearly 8 million words of tax regulations, which are releases from the IRS that clarify how the Internal Revenue Code should be interpreted in practice, as well as countless court cases, letter rulings, and other publications.
Unfortunately, meaningful simplification of the tax code appears unlikely, at least for the foreseeable future. Quite the opposite in fact, as the Code seems to inevitably become larger and more complex each year. So for now, the economy is going to continue to have to do without all those hours of productivity, as they will surely be devoted to tax compliance for years to come.
To read the full study or get more information on The Tax Foundation, visit www.taxfoundation.org.
By Austin Bradley, CPAPosted on August 9 2016 by admin
You may or may not have read the news lately, but there has been a battle between Intel and the IRS which could lead other companies to have big tax “windfalls”. The discrepancy comes from recording and reporting stock-based compensation of U.S. employees.
The IRS argues that foreign subsidiaries of U.S. firms are required to pay their parent company for costs relevant to the foreign part of the business. This is including wages from a U.S. employee that produces a product sold abroad, specifically targeting stock-based compensation.
Intel is clearly taking the opposite side. They argue that all the costs associated with the wages are U.S. costs and therefore, can be deducted against the U.S. high tax bills compared to the smaller tax bills that are abroad.
This small difference isn’t that small on the grand scheme of things. Other technology companies stand to benefit from Intel’s battle if they succeed. Alphabet, Google’s parent company, is one such company. They stand to have a $3.5 billion gain if Intel comes out on top. Microsoft and smaller technology companies have also disclosed an interest in the outcome.
So far, the U.S. Tax Court ruled 15-0 in July agreeing with Intel. The IRS has appealed the case so the wait continues as other technology companies cannot realize any gains until the rule is changed and the outcome presented.
By Christopher Morrison, CPAPosted on August 4 2016 by admin
Many are aware of the reporting requirement to the federal government for bank deposits of more than $10,000.00. A person who purposely tries to evade these reporting requirements is guilty of a crime known as “structuring” even if the money comes from a legal source. The IRS has had the power to use “civil forfeiture” and seize huge amounts of cash in such situations even if the individual has never been convicted of a crime. While financial crimes weaken the U.S. financial system and threaten the integrity of our tax system, enforcement of these rules via forfeiture of monies earned from a legal source has generated public outcry and received congressional attention.
As a result, the Internal Revenue Service has established a special procedure for people whose assets were involved in “legal source” structuring to request a return of their forfeited property or funds. As of June 2016, the IRS will begin mailing letters to potentially eligible property owners to participate in this initiative. Property owners who participate in this process must qualify by establishing that the underlying funds came from a legal source and there is no evidence the requesting party engaged in structuring to conceal other criminal activity.
In those “legal source” structuring cases which were “administrative” and did not involve a formal judicial proceeding, the IRS has authority in appropriate cases to remit funds directly to the affected property owner. In judicial cases, the IRS can make recommendations in appropriate cases to the Department of Justice who has final authority on any decision to be made.
By Dale F. Jensen, CPA-- Older Entries »
There is nothing more complex than the world of taxes. We know this and yet we chose careers where we face these issues everyday. We get questions day in and day out about new tax laws, forms and news items and how they affect everyday people and businesses. Well, here at Henry & Horne we have set out to do what we do best; help everyday people understand what is going on in the world of state, local, federal, estate and international taxation. We will provide these weekly posts and we encourage you to give us feedback on those posts as well as letting us know what else you would like to know more about. Welcome to "Tax Insights." We hope you find this blog informative and worthy of your time.
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- Don’t Mess with the IRS – Their Budget Includes Guns
- MySocialSecurity Website Ups Its Security Protocol
- IP PIN Tool Returns to IRS Website
- Scammers Impersonating IRS to get Your Money
- What Beneficiaries Need to know for Form 8971
- What Executors Need to Know for Form 8971
- Will this Estate Planning Loophole be Closed?
- The Economic Cost of Tax Compliance
- What’s at Stake in Battle of Intel vs. IRS?
- New Procedure to Request Return of Property Seized by IRS in Structuring Cases