Campaign Watchdogs Accuse Top Conservative Group of Violating Tax Laws

From WashingtonPost.com:

Two campaign-finance watchdogs asked the Internal Revenue Service on Tuesday to investigate Crossroads GPS, the big-spending conservative group supported by Republican guru Karl Rove, for allegedly violating U.S. tax laws limiting the political activities of nonprofit groups.

In a complaint filed with the IRS, Democracy 21 and the Campaign Legal Center say the group - an arm of the American Crossroads political committee - is using its nonprofit status to shield the identities of its wealthy donors.

The complaint says "the group was organized to participate and intervene in the 2010 congressional races while providing donors to the organization with a safe haven for hiding their role."

Jonathan Collegio, spokesman for American Crossroads and Crossroads GPS, said the GPS group "carefully follows all laws" governing nonprofit organizations.

"This is a baseless complaint, filed by a partisan group that files baseless complaints for its living," Collegio said.

Prepared Remarks of Commissioner of Internal Revenue Douglas H. Shulman

IRS Commissioner Douglas H. Shulman has released the text of his address to OCED and international tax and business communities. Among the topics Shulman addressed was offshore tax compliance and international tax information exchange. You can find a segment of his speech below, courtesy of the IRS newsroom.

The starting point is looking for the right launch pad. I believe international bodies such as the OECD and its Forum on Tax Administration are a good start.

As Chair of the FTA, I am working with my international counterparts to build greater cooperation between tax authorities across the world as we strive to improve tax administration, both domestically and internationally.

The commissioners of the FTA can also speak with a unified voice on such critical matters as offshore compliance, corporate governance and high net-worth individuals, as well as lay out practical solutions for issues, such as a coordinated approach to joint audits and early competent authority resolution. Let me walk you through this:

Last year, when I had the opportunity to address this gathering, I told you that we planned to try to take international cooperation to the next level and that I thought this should include joint examinations. A year later, we are now working on developing a protocol for joint audits with other countries. And before I go any further, let me be clear on a critical distinction. A joint audit is not a simultaneous exam. Rather, it is a process where two or more countries join together to carry out a single audit of a company with cross-border business activities.

As we envision it, the joint audit will be more sensible and efficient for the participating business because the business will not have the burden of two exam teams conducting two audits, and it will make sure both countries receive the same information and presentations from the taxpayer.

Climate Change Legislation To Generate $624 Billion In Tax Revenue

Earlier today I came across this interesting article on Examiner.com discussing the revenue Barack Obama’s climate change legislation could bring to the US in the next 10 years. I’ve included a snippet of their post below, but the full text can be found here.

The climate change legislation proposed by the Obama administration would generate $624 billion in revenue for the federal government over the next 10 years according to the administration's 2010 budget proposal. The cap-and-trade plan – or cap-and-tax plan as some call it – would place additional tax burdens on industry in the form of carbon emission fees.

Proponents see the measure as a way to help reduce carbon dioxide and greenhouse gasses which they view as the primary cause of global warming. Opponents on the other hand argue that those increased taxes will simply be passed on to consumers and result in a loss of jobs at a critical time in our weak economy.

According to the White House the bulk of the revenue would be returned to consumers by making permanent the tax credit Congress enacted earlier this year as part of the stimulus package. That credit resulted in a savings of $8 per week for the average American taxpayer. Other parts of the revenue would fund research and development of clean energy and climate science.

President Obama is hoping to have a deal in place on the climate change legislation before the Intergovernmental Panel on Climate Change’s (IPCC) meeting in Copenhagen in December. However, the measure is receiving no backing from Republican lawmakers and many Democrats are no longer in support of the legislation. John Dingell, a Democratic Michigan Congressman said, “Nobody in this country realizes that cap-and-trade is a tax – and it’s a great big one.”

Those opposed are concerned about the cost to consumers as industry will almost certainly pass on the cost of meeting the requirements of the cap-and-tax. The U.S. Chamber of Commerce recently studied the measure and determined it would cost each household $1,400 per year and result in 1.9 million in job losses. Other estimates have ranged to as high as $3,000 per household and all far exceed the $8 per week tax credit the legislation would give consumers.

5 Ways to Change the IRS

Independent journalist David Cay Johnston recently published an article titled Change and the IRS, which you can download via TaxProf blog by clicking here. In the paper Johnston acknowledges that the federal government needs revenue, and suggests 5 ways to change the IRS to benefit both taxpayers and the government.

1. Make English, and not bureaucratese, the first language of the IRS? Taxpayers are the users, and IRS forms should be friendly. Period.

2. Hire Stanford's Joseph Bankman to make real a brilliant idea he proposed in Tax Notes -- letting most people pay their income tax without filing.

3. Stop the consumer fraud inherent in letting anyone prepare a tax return for a fee.

4, With the right technology, the IRS will be able to do something much more important than process tax returns. It will, like Oracle, be able to analyze data to detect patterns and identify not just blatant cheats, but chiselers.

5. Hire tens of thousands of auditors. Last year the audit odds were 1 in 263, down a third from the peak year of 1998, both much too low to deter anyone but a Casper Milquetoast.

Group asks IRS to investigate Catholic bishop against Obama

From USA Today:

A church-state watchdog group has asked the Internal Revenue Service to investigate whether the Roman Catholic bishop of Paterson, N.J., violated tax laws by denouncing Democratic presidential nominee Sen. Barack Obama.

In a letter sent to the IRS on Wednesday (Oct. 22), Americans United for Separation of Church and State accused Paterson Bishop Arthur Serratelli of illegal partisanship for lambasting Obama's support of abortion rights.

In a column posted on the Diocese of Paterson's website and published in its weekly newspaper, Serratelli also compared Obama to King Herod, the biblical monarch who ordered the death of John the Baptist.

The bishop did not refer to Obama by name but only as "the present democratic (sic) candidate."

Under federal tax law, nonprofit groups — including religious organizations — are prohibited from intervening in campaigns for public office by endorsing or opposing candidates.

How to Avoid Common Errors that Delay Stimulus Payments

In their newest press release, the IRS has identified a list of common mistakes that may have caused an delay in your receipt of an economic stimulus check. If you are expecting a check, but have still not received it, then be sure to carefully read the following list and check out the IRS’ “Where’s My Economic Stimulus Payment?” Web tool.

File only one tax return — People should file only one 2007 tax return. It takes the IRS up to 12 weeks to process paper returns and issue the stimulus payments. However, some people are filing more than one tax return in an effort to receive a stimulus payment, which could further delay their stimulus payment. The IRS is concerned there will be more multiple filings as the Oct. 15 deadline approaches for filing a return in 2008.

List qualifying income — Some people are listing their monthly income instead of annual income. People must list their annual amount of qualifying income to be eligible for the minimum payment of $300 ($600 married filing jointly). The qualifying income required by law is at least $3,000 in benefits from Social Security, Veterans Affairs and Railroad Retirement, earned income and/or combat pay.

Review your tax liability — Some people who have either small amounts of tax liability or no tax liability are getting smaller stimulus payments than they expected or none at all. Generally, the law provided for a maximum stimulus payment of $600 ($1,200 for married couples) or an amount equal to a taxpayer’s tax liability, whichever was less. Tax liability is the net amount of federal income taxes paid after deductions and credits. If people had no tax liability but had at least $3,000 of “qualifying income” from specific sources, they would be eligible for $300 ($600 for married couples). There also is a $300 payment for each qualifying child.

Amended return — Generally, people cannot file an amended return solely to get an economic stimulus payment unless they are a retiree, veteran or have other “qualifying income.” While amended returns will be processed to correct the income, deductions and income tax as appropriate, the economic stimulus payment amount will not be adjusted based on an amended return. If people do not receive a payment this year, they can claim it when they file their tax return in 2009.

Use most current address — People must use their most current address in order to receive a timely payment. People who change addresses after filing should complete Form 8822 and a change of address card with the U.S. Postal Service. If the postal service is unable to deliver the payment, it is returned to the IRS.

IRS to Suspend Collection of Options Tax

From BusinessWeek.com:

“The Internal Revenue Service has agreed to suspend collection of alternative minimum tax on incentive stock options, Sen. Chuck Grassley said Friday.

The suspension of collection efforts will give Congress time to ease the burden on affected taxpayers, according to Grassley, R-Iowa, ranking Republican on the Senate Finance Committee and former committee chairman.

Alternative minimum tax is an alternate tax calculation system targeting high-income Americans that ensnares more people each year because it is not indexed for inflation. Incentive stock options are a type of employee stock option with a tax benefit, when exercised, of not having to pay ordinary income tax. Instead, the options are taxed at a capital gains rate. However, they involve more risk for the option holders because they must keep the options longer in order to qualify for the lower capital gains rate.

The application of alternative minimum tax to income from incentive stock options is widely regarded as unfair because it left thousands of taxpayers with huge tax bills on income they never actually realized. Most of the taxpayers had stock options on shares of the technology companies at which they were employed. They exercised the options just before the technology bubble burst in 2001 and 2002, causing the price of tech shares to plummet. But the IRS calculates the income based on the value of the shares at the time they were exercised rather than at the time they were sold. That left many taxpayers with huge tax bills without stock profits they could use to pay the IRS.

Among the victims of the tax were many employees of telecommunications companies operating in Cedar Rapids, such as McLeodUSA, now part of PAETEC, and MCI, now Verizon Business.

Ron Speltz of Ely, a McLeodUSA executive who now works at PAETEC, and his wife, June, crusaded nationally to correct the tax code, working with the Coalition for Tax Fairness and other groups. Their efforts were rewarded by a legislative fix in the Tax Relief and Health Care Act of 2006 that provided gradual refunds of previous payments. But the legislative fix did not stop the IRS from trying to collect the original tax, penalties and interest.

"These families are facing the garnishments of wages, foreclosures of homes, seizures of retirement accounts, and all the other tools available to the IRS to settle uncollected tax debts," said a letter to IRS Commissioner Douglas Shulman cosigned by Grassley and 26 other members of Congress.

In the letter, Grassley wrote "there is now a very broad bipartisan consensus to abate all interest and penalties attributable to ISO AMT liabilities and permit taxpayers to apply the full amount of their future refundable credits toward the entirety of their ISO AMT liabilities." He wrote that there is strong commitment in both houses of Congress to enact legislation to accomplish those goals this year.”

Disgruntled Taxpayer Rams Car into IRS Building

From AccountingWeb.com:

“A 48-year-old resident of Center Point, AL who was apparently upset about his finances, rammed his car into the Birmingham, AL IRS building on Tuesday.

After a phone call with the IRS, in which the man, who has not been named in the press, threatened an IRS agent, the agent called Birmingham police. A Jefferson County sheriff was dispatched to the man's house where he was told by the man's wife that the man had left his house. The wife told authorities that the man was armed.

The wife provided the sheriff with the man's cell phone number. When a dispatcher from the sheriff's office contacted the man on his phone, the man indicated he intended to kill himself.

According to a report in the Birmingham news, the dispatcher tried to calm the man down and asked where he was, but the man said not to worry about where he was. He said he was going to drive himself off a cliff and then everybody would know his location.

The man did not appear to be injured after driving his car into the IRS building, but was taken to Cooper Green Mercy Hospital for evaluation. No one at the IRS office was injured in the crash.

No formal charges have been filed, however Birmingham police spokesman Lt. Henry Irby indicated that the man could face state and federal charges.”

IRS moves Audit Pressure from the Largest Companies to Individual Taxpayers

The IRS's scrutiny of the biggest U.S. companies is running at a 20-year low, according to a study conducted by a research group affiliated with Syracuse University. The study, made public Sunday, points to "a historic collapse in audits." It found that major corporations - defined as those with assets of at least $250 million – have about a one in four chance of being audited, down from about three in four almost 20 years ago.

That makes me wonder where the IRS is placing its extra audit scrutiny. Well, according to the research group – the Transactional Records Access Clearinghouse, or TRAC – individuals have about a 10 percent chance of being audited, more than double the odds in 2000. However, the IRS claims it is more focused on partnerships and other “opaque [business] entities.”

For the International Herald Tribune’s full article, click here.

IRS Claims E-Filing off to a Strong Start

The IRS announced that e-filing is off to a great start this tax season. So far, over 38 million returns have been electronically filed. This represents a 5 percent increase from the same period last year, with double-digit growth coming from taxpayers filing from their home computers. More than 12.3 million returns were filed from home computers, which is an increase of almost 14 percent from the same time last year.

“E-filing continues to be the preferred way to file your tax return. It is the fast, easy, safe and more accurate way to file your tax return,” claimed IRS Acting Commissioner Linda E. Stiff.

As for the total amount of all refunds, $106.7 billion has been issued so far in 2008 with the average refund amount of $2,708, up two percent from the same time last year. So far this year, the IRS has directly deposited 33 million refunds out of the total of 39 million refunds. The direct deposit refunds were valued at just over $96 billion with the average amount of a direct deposit refund of $2,900.

IRS Reminds Farmers & Fishermen They May Have Until March to E-File

The IRS published a release reminding agricultural taxpayers, including farmers and fishermen that they may need to wait until March 3rd to e-file their tax return. According to the IRS, any taxpayer who files Form 1040 returns with Form 4136, Credit for Federal Tax Paid on Fuels, will have to wait.

"Normally, 1040 filers who are farmers or fishermen are not required to make an estimated tax payment if they file their return and pay all taxes due by March 1," claims the IRS. "But this year, because March 1 falls on a Saturday, the date extends to Monday, March 3. For eligible farmers and fishermen who attach Form 4136 to their Form 1040, the return will be considered timely filed with all tax paid if the return is e-filed and accepted on or before March 10 and all tax due is paid on or before March 10."

The IRS expects this delay to affect about 77,000 farmers and fishermen who electronically file Form 1040 with Form 4136 in the early weeks of the filing season. For more information, please visit www.IRS.gov.

IRS Now Processing AMT Affected Returns

Yesterday afternoon, the IRS announced that they have begun officially processing the five tax forms that were affected by the last minute AMT legislation. On Monday, IRS systems began to unofficially accept and process returns that include the five affected forms. After several days of processing, the IRS has confirmed that their systems are in fact working properly.

Back in December, the IRS announced that they would have to delay the processing of several AMT affected tax forms. However, for most people the filing season this year began on time. Only taxpayers whose return included the five affected forms were forced to wait.

The affected forms include:

• Form 8863, Education Credits
• Form 5695, Residential Energy Credits
• Schedule 2, Form 1040A, Child and Dependent Care Expenses for Form 1040A Filers
• Form 8396, Mortgage Interest Credit
• Form 8859, District of Columbia First-Time Homebuyer Credit

IRS Warns Taxpayers of Correct Locations

With tax season in full swing, taxpayers across the nation are beginning to file their returns with the IRS. As such the IRS distributed a press release reminding taxpayers that they may have to send their return to a different location than prior years.

If you received a booklet from the IRS then the correct mailing list will be included on the labels you receive. Additionally, taxpayers that e-file their returns will not need to worry. According to the IRS the mailing changes affect returns from seven states: Iowa, Kansas, Kentucky, Oklahoma, Pennsylvania, West Virginia, and Wisconsin.

Taxpayers should send:

• Returns from Iowa, Kansas, Oklahoma and Wisconsin to the IRS center in Fresno, California.
• Returns from Kentucky to the IRS center in Austin, Texas.
• Returns from Pennsylvania and West Virginia to the IRS center in Kansas City, Missouri.

For more information on the correct mailing addresses for the IRS centers, please visit IRS.gov.

IRS Promotes EITC Awareness

The Department of Treasury, the IRS, and dozens of other non-government partners are kicking off EITC (Earned Income Tax Credit) Awareness Day to promote the refundable tax credit for low-wage workers and options for free tax preparation.

"Believe it or not, there are many taxpayers who are eligible to receive the Earned Income Tax Credit, but fail to claim it simply because they are not informed," claimed U.S. Treasurer Anna Escobedo Cabral.

According to IRS data, over 22.4 million taxpayers received more than $43.7 billion from the EITC last year. However, they estimate that approximately one in four eligible taxpayers fail to claim the EITC.

"Ensuring that more eligible families receive their EITC is important this year, as it is every year. I encourage people all across America to check to see if you are eligible for the Earned Income Tax Credit," said Treasury Secretary Henry M. Paulson, Jr.

IRS Warns of Rebate Scams

According to the IRS, there are a few new e-mail and telephone "scams". These scams pretend to be from the Internal Revenue Service and attempt to get taxpayers personal or financial information The IRS is expecting the scams to continue through April 15th.

This time around the IRS is warned to lookout for scams that mention advance payment checks from the IRS. Congress has not yet passed the economic stimulus package, and even so, the checks are not expected to be mailed out until this spring.

The IRS’s new release claims: "identity thieves use a victim’s personal and financial data to empty the victim’s financial accounts, run up charges on the victim’s existing credit cards, apply for new loans, credit cards, services or benefits in the victim’s name, file fraudulent tax returns or even commit crimes. Most of these fraudulent activities can be committed electronically from a remote location, including overseas. Committing these activities in cyberspace allows "scamsters" to act quickly and cover their tracks before the victim becomes aware of the theft."

Therefore, it is important to be aware of these scams so you do not fall victim to their gimmicks. The IRS never sends out e-mails requesting personal or financial information. If you do receive an e-mail like this, do not reply to it. Instead, forward it to phishing@irs.gov.

New Years Resolutions For The IRS

Saturday afternoon my Internet marketing specialist submitted a press release regarding my latest open letter to the Department of Treasury and Internal Revenue Service. In the letter I identified 8 new years resolutions the IRS should consider. If the IRS were to implement these changes it would greatly help taxpayers seeking to settle their debts to the IRS. You can download a PDF of the letter by clicking here.

My law firm, Roni Lynn Deutch, A Professional Tax Corporation, represents thousands of taxpayers across the country. Given my experience and perspective as a representative, I am confident that the IRS can better improve their service by taking my suggestions to hear.

My 8 suggested New Years resolutions include:

1. Lump Sum Payment Discounts
2. Accelerated Payment Plan for Release of a Federal Tax Lien
3. "Reminder to Save" Letter to Those Who Owed Taxes the Previous Year
4. Publicize Current Compliance Years and Collection Statute Expiration Dates
5. Past Commitment to Compliance Makes You Eligible for Tax Debt Waiver
6. Double the Amount of a Tax Refund if Applied to an IRS Back Tax Debt
7. Stop Levying Social Security for Individuals over the Age of 75
8. Create Online IRS Tax Debt Accounts

For more information check out Tax Lady Roni Deutch Sends Open Letter to the Treasury and Congress With 8 New Years Resolutions in 2008 Concerning the IRS on PRweb.com.

How the AMT Will Affect 08 Tax Filing

With Congress passing last minute changes to the Alternative Minimum Tax (AMT), expect the upcoming tax season to get quite confusing. The IRS expects tax season to begin as usual this January, except for the taxpayers affected by last minute AMT "patches." They estimate over 13.5 million taxpayers will use IRS forms related to the AMT. These taxpayers will have to wait to file their income tax returns until the IRS can reprogram its system.

The IRS hopes they will be able to begin accepting these tax returns by no later than February 11, 2008. They claims this date allows enough time to properly update and test their systems without disturbing other tax season related operations.

Therefore, federal tax returns that include the following forms cannot be filed until February 11th, 2008:

• Form 8863, Education Credits
• Form 5695, Residential Energy Credits
• Schedule 2, Form 1040A, Child and Dependent Care Expenses for Form 1040A Filers
• Form 8396, Mortgage Interest Credit
• Form 8859, District of Columbia First-Time Homebuyer Credit

The AMT became part of the U.S. tax code with the Tax Reform Act of 1969. Originally, Congress designed the AMT to target a small number of high-income taxpayers that could claim so many deductions they owed little or no income tax. However, the AMT gained a lot of negative attention as an increasing number of middle-income taxpayers became subject to the AMT.

IRS Working Quickly to Implement AMT Patch

The IRS announced yesterday that it will immediately begin taking the necessary steps for its income-tax processing systems to prepare for the upcoming tax season following final passage of the Alternative Minimum Tax "patch" Wednesday by the House of Representatives.

"Our people will do everything they can to quickly update our systems for this major change and make this filing season as smooth as possible for everyone," said Linda Stiff, IRS Acting Commissioner. "Our goal is to process tax returns accurately and to issue refunds to taxpayers as quickly as possible."

The IRS will post more information on the AMT patch on their website as it becomes available.

IRS Expands Their Fast Track Settlement Program

Recently the IRS announced that it would be expanding the number of test areas that can take advantage of the Fast Settlement program for taxpayers under examination by the Small Business/Self-Employed (SB/SE) Division. The program will run until September 5, 2008 in the following areas: Philadelphia, central New Jersey, San Diego, Laguna Nigel, California, and Riverside, California. The program will continue in the three original test cities (Chicago, Houston and St. Paul.)

According to the IRS’ news release, “the program was designed to expedite IRS case resolution. It allows taxpayers under examination with issues in dispute work with IRS representatives from SB/SE’s examination unit and the Appeals Division to resolve those issues. Fast Track employs various techniques to facilitate case resolution. A taxpayer or IRS examination representative may initiate the Fast Track process after an issue is fully developed, and preferably before a 30-day letter is issued. The Fast Track process is designed to be completed within 60 days of acceptance of the application.”

However, taxpayers retain the right to have their issue addressed through the traditional appeals process.

IRS Announces OPR Settlement

Earlier in the week, the IRS’s Office of Professional Responsibility (OPR) announced a settlement agreement with three attorneys in connection to a $31 million municipal bond issuance involving River Park Square in Spokane, Washington in 1998 handled by the former firm of Preston, Gates & Ellis LLP. However, the IRS and the attorneys both agreed that the settlement does not constitute any admission of wrongdoing. According to the IRS, the ORP is pleased to have reached this agreement because it demonstrates their commitment to ensuring bond lawyers comply with Circular 230 when involved in tax-exempt municipal bond issuances.