Tuesday, May 23, 2017

The Fraud of Business Identity Theft

One of the biggest problems in the area of Taxes and Accounting is business identity theft. This dishonesty is when a person or group creates, uses, or tries to use a business’s information to try and get tax benefits. The IRS is trying to deal with this growing problem, but they have a long way to go. In 2013, there were 133 tax returns that were suspected of having a share in business identity theft. From that group, 97 claimed refunds of over $2 million.

The IRS is establishing procedures to look for patterns that come up in business tax filings that are based on fraudulent claims. They are also going to be proactive in reaching out to businesses that may have had their identities stolen. These patterns keep changing, so will their detection process. These stolen refunds end up effecting every taxpayer. This program would seem to be a step in the right direction to stop this problem. What do you think?

Friday, May 19, 2017

Willful or Non-Willful, A Label With A Big Difference

          When Tax Law is applied, there is a difference between Willful and Non-Willful conduct. To be considered Willful, a Taxpayer must choose to break the law or avoid a legal duty. This intent can lead to Criminal prosecutions and large Civil judgements. Some may try to claim that they had no prior knowledge that what they were involved in was illegal, and it was all just a simple mistake. However, the IRS often looks at a Taxpayer’s actions to determine intent.
          There was a Taxpayer who opened 2 Swiss bank accounts in the early 1970’s and never reported them on his Tax Return. He first mentioned them to his accountant in this 1990’s. The accountant said that they should have been reported since they were opened, but not to do anything now. It would all be settled when the Taxpayer died. About 20 years later that accountant died. The new accountant prepared documents to report the smaller of the 2 Swiss accounts. In time, an amended Tax Return needed to be filed to report both accounts. Upon seeing how large the difference in income was, the IRS penalized the Taxpayer, but was going to treat him as Non-Willful. Before that could be finalized, his case was transferred to another agent, who classified him as Willful.
          Here is the distinction between these 2 labels. In a Civil proceeding, a Non-Willful violation can be up to $10,000 per account per year for up to 6 years. That is painful, but not as much as a Willful violation. A penalty in that situation can be up to $100,000 or 50% of what is in the account. A Criminal case can lead to a $500,000 fine and/or 10 years in prison. These are situations that can be avoided by seeking the help of a qualified Tax Professional. Click here to read about this example: The Case in Question

Monday, May 15, 2017

Weigh The Risks And Benefits of Amending A Tax Return

         Why would a Taxpayer want to file an Amended Tax Return? It should not be for a simple math error. The IRS will fix those when processing the Tax Return and if they need specific documents, they will ask for them. If it’s something more than that, then filing an Amended Tax Return may be the best option.
          Keep in mind that when fixing mistakes, this should not be done in a way that only adds to Tax Refunds and not Taxes owed. Making these sorts of changes will get the attention of IRS and make them take a closer look at the adjustments. It can be the easy way to get to an audit. Normally the statute of limitations for the IRS to take action on a Tax Return is 3 years. Amending the Tax Returns filed during this period of time can help a Taxpayer discover a refund that has been waiting for them, or a debt that needs to be paid. Either way, it can lead to big changes.

Friday, May 12, 2017

Keeping Up With the Speed of Change 3

          It seems today, that the only constant that we can rely on is change. Whether that is true or not, there are many things that we do need to be aware of, and adjust to. There are waves of change that hit us whether we like it or not. In the area of Taxes, one almost yearly change is the IRS collection policy. Over the last few years, they have been given more Congressional tools to use to collect Federal Taxes owed. They were law when signed, but have now started to be administered.
          The best way to avoid these programs is to get help as early as possible. A qualified Tax Professional can be a necessary representative for the Taxpayer to the IRS and keep a bad situation from getting much worse. They keep updated on yearly changes.
          For example, those with an Offer In Compromise with the IRS have in the past had extra time to file all documents while processing the application. This has now changed. If all material is not filed before the application for an Offer In Compromise, it will be revoked and the down payment will not be returned. Procedures change from one year to the next. There are options for those on the IRS radar and they should not go down this path alone.

Monday, May 8, 2017

What's An "Offer In Compromise"?

        There are many situations in which a Taxpayer can wind up with a Federal Tax debt. In some cases, they are not able to pay it. For those in this position, there is an option called Offer In Compromise. Very few will actually qualify for it, but for those who do, it can be a great source of relief.
          This is NOT a payment plan. The Offer In Compromise is very unique in that it will allow for the settlement of a tax debt for less than the actual amount. There are a variety of options that the IRS offers Taxpayers to help them in paying any taxes owed and a qualified Tax Professional can guide you through these decisions and what would be required. Here’s a video that gives more detail on an Offer In Compromise: https://youtu.be/imMIMk5mIa8

Friday, May 5, 2017

To Question the IRS

         Did you know that taxpayers and businesses can approach the IRS in advance of making a tax decision, to see what the outcome would be? While that sounds simple, it really isn’t, and is probably not something that the majority of people would want to get involved in. Here are some things to consider about approaching the IRS their blessing on a tax plan.
          One can submit a written request for an IRS Ruling. These will be binding when given, can take up to 6 months to handed down, and can have a fee of over $20,000 attached to it. This option should only be used if there is a strong likelihood of receiving a “Yes”. Even if the request is withdrawn later because of a negative outcome (or no decision is given), the next Tax Return will be flagged for an audit, since they know what is being planned.
          Another option is an IRS Tax Opinion. This is an informal, discussion about the tax matter. It is not official and takes only a few weeks to complete. This involves getting the general idea of the IRS viewpoint by talking to some of their attorney’s. No matter what the outcome is, it’s not official. A qualified Tax Professional can help in these areas, especially if the stakes are high.

Monday, May 1, 2017

Automatic Tax Extensions

         There are some, from the perspective of the IRS, who qualify for a Tax Filing Extension without needing to apply. This is a relatively small group of people with very outstanding and unique circumstances.
          Those who live and work outside the US have until June 15 to file their Tax Return and pay any taxes due. This is also true of members of the military on duty outside of the US and Puerto Rico. However, military personnel in combat zones have an extension of at least 180 days after leaving the combat zone before needing to file. Taxpayers living in presidentially declared disaster areas can get more time to file their Tax Return. Some parts of Georgia and Mississippi have until May 31, while an area of Louisiana has a deadline of June 30.