Talk Tax With Your Partner

Maybe you’ve already met the one for you and are either in or on your way to marital bliss. If so, congratulations on being so lucky-in-love! When you have decided to spend the rest of your life with someone, please find the time to have a discussion about finances—including taxes. You’ll be doing your love life a favor for years to come. And you’ll ultimately be doing yourself a favor knowing beforehand exactly what financial situation you are getting into.

Here are five tax topics to discuss with your partner:

1. Tax Debt. Have a candid discussion with your partner about whether they currently owe or will owe the IRS. Really, you and your partner should have a number of conversations concerning finances and debt, but just make sure that one is focused specifically on tax debt. This will also help you determine whether or not you will file jointly or separately.

2. Compliance. Has your partner filed all required tax returns? Failing to file a tax return can result in penalties and ultimately a hefty tax bill. It also is a good clue as to who should and shouldn’t be in charge of taxes moving forward.

3. Easy Money. Weddings can be expensive and the temptation to pull from a retirement account to assist with the cost can be difficult to resist. However, there are serious tax consequences for doing so. Another important question is whether or not your partner has already borrowed from a 401K or IRA account. They will likely have to pay taxes (or even a tax penalty) on this amount.

4. Other federal obligations. The IRS has the authority to collect back child support, alimony and federal student loan obligations. The IRS has the ability to withhold all refunds due and apply the funds to the back obligation; so if your partner owes other federal obligations you may want to file separately.

5. Filing status. Jointly or separate. Again, this is an important talking point. Although, the most advantageous filing status for married individuals is married filing jointly, there are instances in which spouses should opt to file separately. See the chart below:

File Married Filing Jointly if:

• All of your financial information is comingled and easy to access
• Neither spouse has a preexisting tax debt or other federal obligation
• You want to take advantage of every tax credit and deduction available

File Married Filing Separate if:

• One or both spouses have pre-existing tax debt or other federal obligation
• Both partners earn equitable income
• One partner has significant itemized deductions that are subject to the AGI floors (e.g. medical expenses, casualty losses, miscellaneous itemized deductions
• One partner has a tendency to use questions tax-filing decisions

IRS Launches New Global Program to Target High Wealth Individuals

IRS Commissioner Douglas Shulman spoke with the media yesterday about the IRS’s new program targeting wealthy Americans. The IRS is hoping to identify better methods to ensure compliance among these individuals, who’s returns are complicated by investment income and capital gains. You can watch a video of Commissioner Shulman’s statement here or read more about the program and what it hopes to achieve courtesy of CNS News.

The Internal Revenue Service has launched a new global program to target what it calls “high wealth individuals,” IRS Commissioner Douglas Shulman said Monday.

“Through our new global high wealth operating unit we are taking a unified look at the entire web of business and economic entities controlled by high wealth individuals so we can better assess the risk such arrangements pose to tax compliance,” Shulman said at the National Press Club on Monday.

Shulman said the IRS is using “our robust and evolving enforcement program that ensures that everyone pays what they owe.”

The IRS initiated its Global High Wealth Industry group in the Fall. Schulman told an October 26 meeting of the American Institute of Certified Public Accountants that it would be part of “the globalization of tax administration,” which he called a “game changing trend” in tax enforcement:

“This brings me to another important development--a game changing trend--the globalization of tax administration,” said Shulman.

Continue reading at CNS News.com…

New York Runs Sting To Nab Crooked Tax Preparers

Over the weekend, I came across this article on Ailbaba.com about crooked tax preparers in New York, and I wanted to make sure post about it here on my blog. It is very important to have strict laws and regulations in place so that everyone in the tax preparation industry is properly trained and in full compliance of all tax laws. I am glad to see New York is taking action to help ensure compliance. Below is a snippet from the article, but you can read the full version by clicking here.

New York State tax officials say they have uncovered evidence of significant fraud among professional tax-return preparers in a statewide sting operation in which undercover agents posed as clients.

Officials say they're startled not only by the unexpectedly large amounts of tax evasion they witnessed -- such as hiding taxable income and inflating deductions -- but also by the brazen nature of the cheating, which was caught on secret recordings. In one case, for example, a preparer told an undercover investigator: "I did not declare your full gross income from your business because you will pay a lot of taxes," according to a criminal complaint filed recently against a Queens, N.Y., preparer.

In another case, a tax preparer said he is going to report only $13,188 as taxable income, instead of the $131,884 the undercover agent had said was the correct amount, says an official at the New York Department of Taxation and Finance. Another preparer, referring to records given to him by the undercover agent, said: "This one and this one, I never saw this. It's going into the shredder."

Officials have already begun prosecuting some preparers on criminal charges, and they expect additional criminal prosecutions against other preparers -- as well as some clients, says William Comiskey, the tax department's deputy commissioner, office of tax enforcement. Officials will also be seeking civil fraud penalties against preparers. Mr. Comiskey says some preparers have agreed to cooperate and go undercover to show that their clients knew of the fraud and build evidence against those clients -- and, in some instances, against other preparers.

"They are cooperating against their former clients in other ways as well," such as sharing client lists and identifying fraudulent returns, Mr. Comiskey says. He says the state hasn't yet investigated tax-preparation chains, and that most of the preparers "were sole practitioners or were in small group practices."

Officials say they found evidence of fraud among about 40% of the 85 professional tax-return preparers they visited. If all the phony returns that were prepared had actually been filed, "it would have cost the federal, state and local governments approximately $4 million" in taxes, says Mr. Comiskey.