taxgirl » IRS news/announcements

IRS Awards Funds: Guess Who Gets Nothing?

Kelly — Thu, 12 Nov 2009 17:11:23 +0000

The IRS announced that it has awarded nearly $8 million in matching grants to support its Volunteer Income Tax Assistance (VITA) program. The funds will be divided between 147 organizations in all 50 states and the District of Columbia.

Richard Byrd, Jr., the Commissioner for the IRS Wage and Investment Operating Division, said of the distributions, “We’re proud to support the VITA program and their volunteer tax preparers who provide an invaluable service to millions of taxpayers.”

VITA, which was created in 1969, is a volunteer program which aids low and moderate income taxpayers. Generally, this means individuals and families with adjusted gross incomes of $49,000 or lower. In 2009, more than 3 million tax returns were prepared at nearly 12,000 locations through VITA and the Tax Counseling for the Elderly programs.

You can see a list of organizations which received funds, including the amounts, here (downloads as a pdf).

Notably absent on the list?

Yep, ACORN. No surprise here.Similar Posts:

IRS Claims 2 Out of 3 Taxpayers Now E-File

Kelly — Mon, 02 Nov 2009 21:51:27 +0000

And here’s their evidence:

Of course more folks are e-filing. It’s fast, it’s easy. And with more folks than ever with internet and computer access, it’s to be expected.

But.

And you knew there would be a but.

Here’s my cynical take… You’ll note fewer taxpayers filing generally, down a whopping 12 million this year. There’s a bump in 2008 – certainly attributable to the stimulus. Might it be the case – and I’m just saying – that folks have been encouraged to filing electronically in order to get money back a little quicker.

I’d love to see the data for 2009 returns filed in 2010. I’m betting if you back out the homebuyer’s, that percentage will drop a little. And I’m not a betting girl normally. But I have a hunch on this one.Similar Posts:

2010 Not Likely to Be All That Different From 2009

Kelly — Fri, 30 Oct 2009 19:28:36 +0000

It looks like 2010 likely won’t be all that different from 2009 – at least when it comes to taxes.

Each year, by law, the dollar amounts for certain tax provisions are indexed for inflation. But inflation hasn’t budged all that much (that’s good, right?) which means that a lot of nothing is happening. Here’s an update on next year’s numbers released by the IRS earlier this month:

Personal and dependency exemptions remain at $3,650.
The standard deduction for married filing jointly remains at $11,400.
The standard deduction for single taxpayers and married filing separately remains at $5,700.
The standard deduction for head of household increases by $50 to $8,400.
The annual gift tax exclusion remains unchanged at $13,000.

The big kicker, of course, is what the heck is going on with the estate tax? As of now, nobody knows for sure.

Similar Posts:

IRS Targets Wealthy for Enforcement

Kelly — Tue, 27 Oct 2009 16:28:38 +0000

So, who among us didn’t see this coming? IRS Commish Doug Shulman has announced the establishment of a new enforcement unit targeting the very wealthy. The group, called the Global High Wealth Industry, will specifically investigate partnerships, offshore trusts and other techniques used by the wealthy to hide income.

How wealthy is wealthy? Unlike a number of reality TV shows of late, this isn’t about faux millionaires. Try tens of millions of dollars wealthy.

The new enforcement group comes on the heels of a recent amnesty program offered to taxpayers who had been hiding money offshore. Tax pros, including me, viewed the amnesty program as the writing on the wall that the IRS would be ramping up enforcement. A mere two weeks after the extended amnesty deadline, the IRS confirmed that suspicion.

Whether the new enforcement group is a success remains to be seen. Some critics argue that an additional level of administration won’t help – and may, in fact, just confuse matters. But Shulman sees it differently: “You cannot assess compliance among the nation’s wealthiest individuals by looking only at their 1040s…. Our goal is to better understand the entire economic picture of the enterprise controlled by the wealthy individual and to assess the tax compliance of that overall enterprise.”Similar Posts:

Numbers Rolling in for Offshore Amnesty

Kelly — Sat, 17 Oct 2009 20:45:14 +0000

The IRS amnesty program for taxpayers who had previously failed to disclose income from offshore accounts ended last week on October 15. By all accounts, it was wildly successful.

According to IRS Commish Doug Shulman, nearly 7,500 taxpayers came forward to make voluntarily disclosures in hopes of avoiding criminal prosecutions. Dollar amounts ranged from $10,000 to $100 million.

Don’t expect any “Mr. Nice Guy” now. Next on the IRS’ list: more vigorous enforcement of offshore tax cheats.Similar Posts:

Infant Formula Not a Medical Expense

Kelly — Wed, 14 Oct 2009 10:28:24 +0000

It’s somehow appropriate that the IRS would release a private letter ruling regarding a double mastectomy in October (in case you’re not aware, it’s Breast Cancer Awareness month). Here are the facts:

Taxpayer had a double mastectomy. She later gave birth to a healthy baby. As a result of the mastectomy, she was not able to breastfeed her baby. To meet her baby’s nutritional needs, taxpayer bought infant formula. She then requested a ruling from the IRS to classify infant formula as a deductible medical expense on her tax return.

It’s worth noting that infant formula can be a significant expense. Estimates are all over the place but seem to settle in at about $40 per week for formula – or just over $2000 per year. If you require a special formula, such as Alimentum, you can easily double that estimate.

Generally, infant formula is not deductible as a medical expense. It’s nutrition and as far as the IRS is concerned, it’s no different than, say, an apple. That’s spelled out at section 262 of the Code which bars deductions for mere personal or living expenses.

However, section 213(d)(1)(A) of the Code allows you to claim an expense for “medical care” for amounts paid:

(A) for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body

“Medical care” may include special foods and beverages if they are prescribed to treat a specific illness and are in addition to your normal diet. But… And it’s a big but… If those special foods and beverages are consumed as substitutes for your normal diet, they aren’t deductible. This is why, for example, you can’t deduct your Jenny Craig meals (though certain diet program fees may be deductible).

So, using that criteria, the IRS found that, in this case, the infant formula was considered food and not a deductible medical expense as that term is defined under section 213.

Keep in mind that while private letter rulings are interesting in that they provide insight into where the IRS is going on a particular issue, they are not binding and are only applicable to the individual taxpayer. That said, do you think the IRS got this one right?

(Hat Tip: TaxProf Blog)Similar Posts:

IRS Calls for Paper Proposals

Kelly — Sat, 03 Oct 2009 13:52:30 +0000

The Internal Revenue Service invites proposals for original papers for the 2010 IRS Research Conference. Topics can include tax compliance, taxpayer burden, improving tax administration, and the nature and behavior of the taxpayer population.

You don’t have to be a tax pro to enter. Proposals are welcome from government and non-government researchers. One author from each winning paper will receive funding for travel and possibly, honoraria.

The proposal deadline is December 1, 2009. The deadline for the actual conference papers will be in May with time for revisions through August.

To make a submission, send:

A title
An abstract not to exceed two pages in length
Names and affiliations for all authors
An e-mail address and phone number for at least one contact author
Proposals for complete sessions of three papers, a session organizer, and a discussant are also invited.

Please e-mail your submission with “proposed paper” in the subject line. For more info, see the IRS web site.

Janice M. Hedemann
Chair, 2010 IRS Research Conference

Similar Posts:

If You Pay Them, They Will Come

Kelly — Fri, 02 Oct 2009 17:45:53 +0000

Here’s a crazy thought: if you give people a financial incentive, you can make them do almost anything (trust me, I watch a lot of reality TV).

For the IRS, the financial incentive comes in the form of increased rewards for turning in tax cheats. A new law, which was established by the Tax Relief and Health Care Act of 2006, rewarded taxpayers who reported tax cheats in the workplace. But they aren’t looking for small potatoes: the tax, penalties, interest, additions to tax, and additional amounts in dispute must exceed $2 million for any taxable year (that’s the sother restrictions also apply).

Is it working? Boy is it ever. The IRS whistleblower office announced this week that tips have increased to about 100 per month – up from 10-20 per month before the incentives. And it’s big money: 64 of the cases from last year alleged underpayment of $100 million or more. Run the quick numbers on that. If true, it’s mind-boggling.

That doesn’t mean that things have gone smoothly. The law is still very new (it took effect in 2007) and tax cases take a long time to investigate and prosecute. As a result, there hasn’t yet been a single payout to a tipster.

The program has met with mixed reactions in Washington. Some point to the increased numbers of complaints and say that it’s proof that upping financial incentives was the right thing to do – and that it’s just a matter of working out the kinks for payment. Others claim that the process is too slow and will discourage future tipsters from coming forward. Still others claim that the process actually encourages fraud. Joe Francis (of Girls Gone Wild fame) is a prime example: Francis claimed that his accountant set him up by preparing returns without his knowledge and then turned him into the IRS under the whistleblower program to get a reward (Francis later took a plea for filing false returns).

What do you think? Is the program a good idea? Or a bad idea with some good press?Similar Posts:

IRS Scam Emails May Put Your Info at Risk

Kelly — Tue, 29 Sep 2009 01:58:37 +0000

By now, you have to have received one of the scam emails purporting to be from the IRS with the subject line: “Notice of Underreported Income.” I’ve received 59 of them just since September 18, 2009. Persistent little spammers.

But if you’re smart or if you follow me on twitter (not that those things are mutually exclusive), you know that those emails are bad news.

The emails look like this:

The email encourages you to click on a link to view your tax statement. Don’t do it. The links are associated with a number of viruses and malware, including Zeus Trojan. If your computer becomes infected with the Zeus Trojan, your personal and financial information may be at risk, with a specific focus on online banking.

How prevalent is Zeus Trojan? A recent investigation by a prominent computer security firm found that at least 55% of the computers that it searched were infected, despite anti-virus software on the computers. The group behind Zeus, thought to be located in Europe, has become more aggressive as it targets users.

How do you protect yourself and your information? Don’t click on links or attachments in emails which purport to be from the IRS unless you requested the information. The IRS never begins investigations or contacts taxpayers with tax information unannounced via email. Never. Ever. Never.

Hit delete and don’t look back.Similar Posts:

IRS Cuts Ties with ACORN

Kelly — Thu, 24 Sep 2009 11:52:21 +0000

The IRS announced on Wednesday that it is cutting ties with ACORN after disastrous video footage was released showing ACORN workers offering inappropriate and flawed tax advice. The IRS will no longer include ACORN in its VITA (volunteer income tax assistance) program:

“The IRS has partnered with hundreds of community and volunteer organizations, including ACORN, to provide free tax assistance to low- and moderate-income Americans. It is absolutely critical that taxpayers have trust in our Volunteer Income Tax Assistance program partners. In light of recent events, the IRS has decided to terminate its relationship with ACORN.”

For its part, ACORN had also (wisely) decided not to continue its tax program. The group’s president, Bertha Lewis, claims that a letter advising of this fact was mailed to the IRS on Monday.Similar Posts: