BEWARE! Orlando Mass-Shooting Scam!!

Issue Number:    IR-2016-89

Inside This Issue

IRS Warns Consumers of Possible Scams Relating to Orlando Mass-Shooting

WASHINGTON ― The Internal Revenue Service today issued a consumer alert about possible fake charity scams emerging due to last weekend’s mass-shooting in Orlando, Fla., and encouraged taxpayers to seek out recognized charitable groups.

When making donations to assist victims of last weekend’s terrible tragedy, there are simple steps taxpayers can take to ensure their hard-earned money goes to legitimate charities. IRS.gov has the tools taxpayers need to quickly and easily check out the status of charitable organizations.

While there has been an enormous wave of support across the country for the victims and families of Orlando, it is common for scam artists to take advantage of this generosity by impersonating charities to get money or private information from well-meaning taxpayers. Such fraudulent schemes may involve contact by telephone, social media, e-mail or in-person solicitations.

The IRS cautions donors to follow these tips:

  • Be sure to donate to recognized charities.
  • Be wary of charities with names that are similar to familiar or nationally known organizations. Some phony charities use names or websites that sound or look like those of respected, legitimate organizations. The IRS website at IRS.gov has a search feature, Exempt Organizations Select Check, through which people may find qualified charities; donations to these charities may be tax-deductible.
  • Don’t give out personal financial information — such as Social Security numbers or credit card and bank account numbers and passwords — to anyone who solicits a contribution. Scam artists may use this information to steal a donor’s identity and money.
  • Don’t give or send cash. For security and tax record purposes, contribute by check or credit card or another way that provides documentation of the gift.
  • Consult IRS Publication 526, Charitable Contributions, available on IRS.gov.   This free booklet describes the tax rules that apply to making tax-deductible donations. Among other things, it also provides complete details on what records to keep.

Bogus websites may solicit funds for victims of this tragedy. These sites frequently mimic the sites of, or use names similar to, legitimate charities, or claim to be affiliated with legitimate charities in order to persuade people to send money or provide personal financial information that can be used to steal identities or financial resources.

Additionally, scammers often send emails that steer recipients to bogus websites that appear to be affiliated with legitimate charitable causes.

Taxpayers suspecting fraud by email should visit IRS.gov and search for the keywords “Report Phishing.”

More information about tax scams and schemes may be found at IRS.gov using the keywords “scams and schemes.” 

IRS Service Levels - HELP!

Unfortunately the IRS service levels continue to cause challenges.  Best advice is to be patient.  Really patient.  Please see the blog below from the AICPA (American Institute of CPA's) discussing IRS service levels. 

IRS Service Levels: Don’t Give Me Excuses!

Posted by Edward Karl, CPA on Jan 29, 2016

Abysmal service levels; I hear you, I really do. It’s been a long time since I’ve been in practice but those busy season scars are still with me. I half joke but the memories don’t go away completely.

So, another busy season and the prospects for easily – wait, reasonably – representing your clients with the IRS appear to be no better than they were last year, when I blogged several times about service issues. In May, for example, you may have read about the AICPA governing Council resolution directing the Institute to intercede on a long-term solution to the service crisis. We started those conversations but, frankly, the environment in Washington got worse. Hard to believe, but it did. In October, House Oversight and Government Reform Committee Chair Jason Chaffetz (R-UT) joined 18 members of the committee in introducing an impeachment resolution against IRS Commissioner John Koskinen. The resolution is pending before the House Judiciary Committee.

That “honest disagreement” between Congress and the IRS regarding appropriate funding levels and effective management of the appropriated funds has been a huge barrier. You probably don’t care; you just want to properly represent your clients. You’re probably more interested in signs of progress. Right now, I can offer two:

Sign 1: In its Annual Report to Congress, the National Taxpayer Advocate outlined a summary of at least 20 of the most serious problems encountered by taxpayers each year. For 2015, the NTA identified 24 such problems. Guess what tops the list? Yup – taxpayer service. Shining the light on the problem, as the AICPA and National Taxpayer Advocate continue to do, is important to progressing to a solution.

Sign 2: In December, President Obama signed into law the Consolidated Appropriations Act, 2016 (P.L. 114-113), which increases the IRS budget by 3% over fiscal year 2015. The $290 million increase is targeted specifically for taxpayer services and is focused on improving fraud detection and prevention, cybersecurity and the response rate to taxpayer inquiries. These are obviously critically important areas for taxpayers and practitioners; the additional funding is an important step after several years of cuts.

Washington is set to be hit with an historic blizzard as I pen these words, yet I can’t help feeling that we may be facing the beginnings of a thaw in the outlook toward the IRS service situation. To leverage the changing environment, the AICPA has organized a “fly-in” in February to provide lawmakers and IRS officials with voices from the trenches to underscore the impact of this currently unacceptable level of service. (The term fly-in refers to CPAs who are flying into Washington, D.C. to talk with members of Congress and the IRS Commissioner.) We also see this fly-in as a way to accelerate the move toward providing the country with an IRS capable of world-class service and citizen satisfaction. The AICPA is immensely grateful to these CPAs for taking the time to help all of us during an obviously inconvenient time for them. But it is the time circumstances dictate and it is an important next step. This problem didn’t evolve overnight. Solving it will take time but we are committed to seizing every opportunity we can on your behalf and on behalf of taxpayers. (Our advocacy work doesn’t end here – check out our latest Washington Tax Brief for an update on all the ways we represent you.)

We also have a busy season webpage available with helpful resources that might take the edge off. When next season starts, my personal goal is to multiply the signs of progress that translate into tangible results to make your work easier. I think we all look forward to the day I no longer need to write about it. 

And as Mahatma Gandhi said “Strength does not come from physical capacity. It comes from an indomitable will.” We are resolute in our determination.

Edward Karl, Vice President-Taxation, American Institute of CPAs. 

Tax Attorney Pingree Offers IRS Audit Advice

Steve Pingree is a guest blogger and offers advice for those tax preparers wanting to avoid or minimize the chances of having a client selected for an IRS audit.   And for the tax payer, Pingree' s advice is also relevant to you as well.  Know what the red flags are and be prepared to explain or defend your tax return. 

 

STEPHEN P. PINGREE

Attorney at Law, a Law Corporation

820 Mililani Street 701

Honolulu, HI 96813

Pingimac@mac.com

Tel: 808-983-9520             Fax: 808-356-8189

“KNOW YOUR CLIENT & AVOID BECOMING A WITNESS”

The purpose of this article is to alert Tax Practitioners about the “Red Flags” that may be present during the preparation of tax returns.  Recognizing these “Red Flags” can enable the return preparer to avoid errors that can have serious legal and ethical consequences for both the practitioner and client.  

*UNUSAL INCOME:  lifestyle analysis; this is a common audit procedure if the taxpayer’s records don’t support the source of income and expenses.

*UNUSAL RISE IN NET WORTH:  review sources of investments.

*PREVIOUS TAX RETURNS INCONSISTENT:  seek explanation and documentation that will support and explain differences from prior returns.

*UNUSAL POSSESSION OF ASSETS:  relatively low income with new cars and toys.

*FOREIGN BANK ACCOUNTS AND ASSETS: This is a #1 IRS exam priority.  There are strict reporting requirements and sanctions.  Permanent Residents (Green Card holders) have same tax responsibilities as U.S. Citizens.

*MONEY LAUNDERING: real estate purchases, cash transactions, offshore companies and false invoices and payments.  There is a high level of prosecutions for both Money Laundering and Tax Evasion.

*BANK RECORDS: a quick analysis of bank records can reveal potential audit issues.

*WILLFUL BLINDNESS: this is not an acceptable defense.

*TAX RETURN PREPARATION: is not merely data entry.  AICPA auditing standards require a review and documentation of taxpayer’s records to support return entries.

*DOCUMENT YOUR FILE:  your client file should contain notes and backup especially if you find unusual transactions.  This is the best accountant defense if the audit begins to get suspicious.

CONSEQUENCES of becoming involved in a client’s audit listed here in order of ascending severity.

*You are served with a Grand Jury Subpoena or an audit Information Document Request (IDR) to produce your client’s records.

*Federal or State agents interview you, which is very stressful and time consuming.

*It may be necessary to retain counsel to avoid legal consequences (interview, records production or court witness).

*You may be called to testify before the Grand Jury as a witness.  This costs time and money for counsel, and potentially could result in accountant liability.

*Criminal tax charges as a co-conspirator as return preparer for your client/defendant.

Almost all costly consequences (time and money) to the accountant can be avoided by looking, asking questions and conducting a minimal examination of the client’s records.

 

Stephen P. Pingree, Attorney at Law, has over 30 years of experience defending tax and financial investigations in civil audits, criminal investigations and criminal indictments through trial.  Steve over the years has given many seminars to CPAs, EAs, Tax Practitioners and attorneys on these subjects.  Steve is always available, at no charge, to consult with tax practitioners.  Please feel free to call Stephen P. Pingree, Attorney at Law, at 808-983-9520.

 

IRS Service Levels to Continue Decline!

Due to heavy workload (like the ACA and late tax changes/extensions by Congress) and a significantly reduced budget the IRS will be cutting back on service levels again.  See the National Taxpayer Advocate annual report below.

National Tax Advocate's report criticizes IRS's planned reduction in taxpayers' service.

In her 2015 annual report to Congress, National Taxpayer Advocate (NTA) Nina Olson expresses concern that IRS may be on the verge of dramatically scaling back telephone and face-to-face service that it has historically provided to assist the nation's 150 million individual taxpayers and 11 million business entities comply with their tax obligations. In particular, she calls for IRS to release its “Future State” plan documents, provide additional detail about its anticipated impact on taxpayer service operations, and solicit public comments, and recommends that Congress conduct oversight hearings on IRS's plan. IR 2016-1

Tis The Season for IRS Audits!

Steve Pingree is a tax attorney and guest blogger.  He has a very insightful view of what is going on within the halls of the IRS.  It will be well worth it to take a look at this post. 

 

STEPHEN P. PINGREE

Attorney at Law, A Law Corporation

Mililani Building Suite 701

820 Mililani Street

Honolulu, HI 96813

Pingimac@mac.com

Tel: 808-983-9520    Fax: 808-356-8189

 

TAXPAYER REPRESENTATION IN UNCERTAIN TIMES

It would seem that with the IRS budget cuts and audit percentages down below 1% for the majority of taxpayers, (read less than $200,000 of AGI) that citizens do not have much to fear these days about tax audits.  Unfortunately, that is not the case.

The IRS and the State of Hawaii are both concerned with maximizing tax revenues through civil audits and collection, and criminal tax investigations.  The reality is that, although fewer numerically, the Examination division, the Collection Division and the Criminal Investigation Division are focusing on taxpayer profiles that provide the maximum tax revenue for the audit hours spent.  For taxpayers reporting income of $200,000 or more, the audit percentages rise from 2% to potentially 24%.  By targeting specific return profile areas, the criminal investigation division is reporting over 94% conviction rate for criminal tax cases.  The majority of criminal investigations are initiated by a referral by the Examination or Collection divisions resulting from civil audits.  Foreign assets and off shore bank accounts are a major target area and the requirements of the FBAR and FACTA reporting laws require caution and attention.  Foreign banks are reporting US Citizens’ accounts to the IRS.

Underreported income or extraordinary deductions will trigger red flags in the IRS computer return profile programs for specific industries.  W-2, W-2Gambling and 1099 reports to the IRS will alert to potential unreported income.  Once an audit is commenced a “life style” audit may reveal that the taxpayer is living beyond their reported income.  The State has created a special audit unit called “Special Enforcement Section” (SES) targeting cash businesses for unreported income and General Excise tax.

The State Tax Criminal Investigation Section, after the last few years of inaction, has recently been ramped up by the hiring of two retired Federal Special Agents (ATF and DEA) and two ex-IRS agents.  Their primary targets are failure to file returns and pay GET, and tax evasion.

The IRS has created a Fraud Technical Advisor (FTA) unit of specialists who consult with the auditors and collectors and train them to focus on potential fraud issues.  The motive is that the Fraud Penalty can reach 75%.  This practice, while legally debatable, necessitates that taxpayers be very cautious when responding to an IRS audit letter requesting information.  It is well to note that IRS audit results are forward to the State of Hawaii Department of Taxation.

If you receive an IRS or State Tax notice that you are being audited or investigated, do not ever ignore it or delay responding.  Once the wheels of the IRS begin to move the process of notification, collection and enforcement can go quickly.  You should contact an experienced CPA and or tax defense attorney without delay.

Reg Baker, CPA (808-753-6026) has 30 years’ experience representing taxpayers before the IRS and the State Department of Taxation in audit and collection matters.  If the situation appears to require legal representation, Reg may contract with Stephen P. Pingree, JD (808-983-9520), a 35 year experienced civil and criminal tax defense attorney.  Both Reg and Steve are available for free consultations to evaluate your situation.

IRS Fights ID Theft!!

This is a little long but well worth the read.  Very useful information to protect yourself from ID theft.  rb

IRS NewswireNovember 19, 2015

Issue Number:    IR-2015-129

Inside This Issue

IRS, States and Tax Industry Announce New Steps to Help Public Protect Personal Tax Data

IRS YouTube Video:
Taxes.Security.Together. English

WASHINGTON — The Internal Revenue Service, state tax administrators and the private-sector tax industry today announced a new campaign aimed at encouraging more people to protect their personal and financial data online and at home.

The “Taxes. Security. Together.” campaign is designed to raise public awareness that even routine actions on the Internet and their personal devices can affect the safety of their financial and tax data. The education campaign will complement the expanded series of protections the IRS, states and tax industry are putting in place for the start of the 2016 filing season to address tax-related identity theft. (See IR-2015-117 and Fact Sheet 2015-23.)

“Identity thieves are evolving, and so must we. Everyone has a part to play,” said IRS Commissioner John Koskinen. "The IRS, the states and the tax industry are putting in place even tougher safeguards for 2016. But, we need the public’s help. We need people to join with us and take an active role in protecting their personal and financial data from thieves.”

The campaign -- which will continue through the April tax deadline -- was announced today at an event hosted by the Federation of Tax Administrators, comprised of state revenue departments across the nation. The effort is part of the Security Summit, a collaborative effort started in March between the states, the IRS and the tax industry.

The joint consumer campaign includes several components, including YouTube videos, consumer-friendly Tax Tips each week and local events across the country. Several IRS publications have been added or updated to help taxpayers and tax professionals. The information will also be shared across IRS.gov, state web sites and platforms used by the tax software community and others in the tax community.

"The governments and industry are taking new steps to protect taxpayers. To build on this even further, we are joining forces to share important information across our websites - whether it's at the state level, in the tax industry or at the IRS. This is an unprecedented collaborative effort for tax administration," said David Sullivan, Tax Administrator for the Rhode Island Division of Taxation and immediate past president of the Federation of Tax Administrators.

It is clear that increasingly sophisticated identity thieves have access to excessive amounts of personal and financial data, which they buy and sell on the black market, and use this data to file fraudulent tax returns using victims’ names and Social Security numbers. While the IRS, states and tax industry are taking new steps to toughen their systems to protect taxpayers, there are also things people can do as well.

"People handle some of their most sensitive personal and financial information when they prepare their taxes on their home computer. But when they sit down, we want to help make sure they are preparing their taxes on a device that is secure. Tax time is two months away, but it's not too early for people to make sure they are doing the right things to protect themselves," said Bernie McKay, an executive vice president at Intuit, one of more than 20 members of the tax industry participating in the Summit process.

The IRS, states and tax industry are urging the public to take active steps to protect themselves. The partners are encouraging people to:

  • Use security software to protect computers. This includes a firewall and anti-virus protection. If tax returns or sensitive data are stored on the computers, encrypt the files. Use strong passwords.
  • Beware of phishing emails and phone scams. A common way for identity thieves to steal names and Social Security numbers, passwords, credit card numbers, bank account information is to simply ask for it. Clever criminals pose as trusted organizations that you recognize and send spam emails, calls or texts. Their email may ask you to update a bank account or tax software account and provide a link that to a fake website that is designed solely to steal your logon information. They may call posing as the IRS threatening you with jail or lawsuits unless you make an immediate payment. They may provide an attachment which, if you download, will infect your machine and enable the thief to access sensitive files or track your key strokes.
  • Protect personal information. Do not routinely carry your Social Security number. Properly dispose of old tax returns and other sensitive documents by shredding before trashing. Check your credit reports and Social Security Administration accounts at least annually to ensure no one is using your good credit or using your SSN for employment. Oversharing on social media also gives identity thieves even more personal details.

“These are all basic, common sense steps that you no doubt have heard many times if you are a regular Internet user. But there are 150 million households that file taxes, and problems still happen. Security software still gets turned off. And there are still, on a regular basis, victims who are tricked by these clever phishing schemes. Not only can this harm the individuals attacked, this can have a direct impact on tax administration," Koskinen said.

The partners are asking all tax preparers and businesses to share information with employees, clients and customers. See www.irs.gov/taxessecuritytogether for more information. There also is IRS Publication 4524, Security Awareness for Taxpayers, which provides a brief overview of steps people can take.

In March, Koskinen convened an unprecedented meeting of IRS, state tax officials and the tax industry to determine what additional steps could be taken. On October 20, the Security Summit participants provided an update to the public.

For the 2016 filing season, there will be new standards for logging onto all tax software products such as minimum password requirements, new security questions and standard lockout features. The software industry will provide more than 20 additional data elements from the tax return submission to the IRS and, in turn, to the states to help identity fraudulent returns. All parties agreed to information sharing on a weekly basis to help quickly identify and adjust to new and emerging tax-related fraud schemes.

The IRS also continues to work to help victims of identity theft and pursue criminals using identity information to file fraudulent tax returns. IRS Criminal Investigation has worked on thousands of identity theft cases. Since 2013, nearly 2,000 identity thieves have been convicted, with the average sentence running well over three years.

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More IRS Problems!

Looks like we are going to have another challenging tax season.  Please plan ahead and be ready to act quickly to stay in compliance.  In this situation things can change unexpectedly. 

IRS Commissioner Sees Budget Cuts Hurting Practitioners, Warns of Delayed Tax Season

by MICHAEL COHN

Internal Revenue Service commissioner John Koskinen told a group of tax practitioners that budget cuts at the agency are harming not only taxpayers, but tax practitioners as well, and warned that unless Congress acts on tax extenders legislation, tax season might need to be delayed next year. At the same conference, National Taxpayer Advocate Nina Olson complained of declining taxpayer service levels by the IRS and obstructions to the work of her office on behalf of taxpayers. READ MORE »

Get Your Refund Early!!

Tax Preparedness Series: Employees Should Take Time to Check Withholding

IRS YouTube Videos:

IRS Withholding Calculator – English | Spanish | ASL

IRS Podcasts:

IRS Withholding Calculator – English | Spanish  

WASHINGTON — The Internal Revenue Service reminds taxpayers that the earlier in the year they check their withholding, the easier it will be to get the right amount of tax withheld.

Besides wages, income tax is often withheld from other types of income, such as pensions, bonuses, commissions and gambling winnings. Ideally, taxpayers should try to match their withholding with their actual tax liability. If not enough tax is withheld, they will owe tax at the end of the year and may have to pay interest and a penalty. If too much tax is withheld, they will lose the use of that money until they get their refund.

This is the first in a series of weekly tax preparedness releases designed to help taxpayers begin planning to file their 2015 return.

When Should Taxpayers Check their Withholding?

  • When a taxpayer gets a big refund, or finds that they have an unexpected balance due. 

  • Any time there are personal or financial changes that might affect their tax liability, such as getting married, getting divorced, having a child or buying a home.

  • When there are changes in federal tax law that might affect their tax liability.

How to Check the Amount being withheld

Use the IRS Withholding Calculator on IRS.gov. This easy-to-use tool can help figure the taxpayer’s federal income tax withholding so their employer can withhold the correct amount from their pay. This is particularly helpful if they've had too much or too little withheld in the past, their situation has changed, or they started a new job.

Taxpayers may also use the worksheets and tables in Pub 505: TaxWithholding and Estimated Tax, to see if they are having the right amount of tax withheld.  

How to Change the Amount being withheld

Events during the year may change a taxpayer’s marital status or the exemptions, adjustments, deductions, or credits they expect to claim on their return. When this happens, taxpayers may need to give their employer a new Form W-4, Employee's Withholding Allowance Certificate to change their withholding status or number of allowances.

Generally, taxpayers should give their employer a new Form W–4 within 10 days after either:

  • A divorce, if they have been claiming married status, or

  • Any event that decreases the number of withholding allowances they can claim.

Other Considerations

    • Taxpayers, who bought 2015 insurance coverage through the Health Insurance Marketplace, should report changes in circumstances to the Marketplace when they happen. Reporting changes in income or family size will help taxpayers avoid getting too much or too little advance payment of the premium tax credit. Receiving too much or too little in advance can affect the amount of their refund or how much they may owe when they file their tax return. For help getting it right, see this change in the circumstances estimator
    • Taxpayers may need to include Additional Medicare Tax and Net Investment Income Tax when figuring withholding and estimated tax. Taxpayers may request that employers deduct and withhold an additional amount of income tax withholding from wages on Form W-4 if they are affected by these taxes.

Find more information on this and other tax topics by visiting: www.irs.gov/Individuals.

Contact me if you need help with this!