IRS news/announcements


As I type this, I am watching the winds pick up outside of my window. It’s a gloomy day out here in eastern Pennsylvania and about to get gloomier: Hurricane Sandy is headed our way.

I grew up in coastal North Carolina. It’s hurricane central so I’ve spent plenty of time taping up windows, filling up water jugs, and yes, blasting Billy Ocean’s “Caribbean Queen” – it was sort of a tradition. My parents have gotten so used to dealing with hurricanes that my mom can boast of baking a birthday cake over a propane tank (Hurricane Diana, 1984) and my dad has rigged a makeshift shower on the deck (Hurricane Fran, 1996). They’re like pros. In fact, pretty much, every time you’ve seen Jim Cantore on a pier in North Carolina, he’s been close to my parents’ house. He even filmed a commercial at Wrightsville Beach spoofing his storm presence (you can watch it here).

So, I’m no stranger to hurricanes.

But this one, Hurricane Sandy (*insert eye roll over the ferocious sounding storm name here*) has the potential to affect millions of folks because of three factors:

1, It’s huge;
2, It’s slated to slam into a nor’easter, a la 1991’s so-called “Perfect Storm”; and
3, It is headed for several major metropolitan areas.

If Sandy is headed your way, you should take precautions. And not just the “buy batteries, candles, and bottled water – and don’t forget the booze!” variety. I’m talking financial and tax precautions. Here are a few to consider:

  • Protect important tax records such as W-2s, tax returns, and other paper documents. Consider scanning those and them backing them up (you can save them to CDs or DVDs or use an online document storage service). If you keep paper copies, store those in a safe and secure place. Remember that when flooding is likely, the basement is a terrible place to store records; twice this year, I’ve had clients report that they have lost all of their documents due to flooding in the basement.
  • If you have a business, consider backing up your financial and electronic files and storing them in a separate location, off-site from your actual business.
  • Take pictures or videos of valuable items in your home and/or business. This is good not only for insurance purposes but provides a good starting point for documenting casualty/loss deductions on your tax return.
  • Put aside an emergency fund for essentials. It’s tough to save, I know, but that “rainy day” fund can prove invaluable in the case of a disaster. My advice is to put it in account with restrictions – such as a money market that limits withdrawals – to make it less tempting to dip in on non-emergency days. You may need cash in the event that you suffer property damage and are waiting on tax or insurance relief.
  • Have an emergency plan in place for your home and business and review it annually – you can find some great info to use as a starting point on FEMA’s preparedness site. With respect to your business, your employees need to know under what circumstances they should venture into work during bad weather (my advice: hardly ever unless it’s a bona fide emergency) and how they can access records remotely. Employees who handle payroll and/or personnel matters (such as hiring) need to know how and where to store backup copies of records.
  • And of course, make sure that you can track the weather and any local emergency situations as they happen. Keep a weather radio at your home or business. You can also register in many counties and townships (like this one for eastern PA and parts of NJ) for text alerts to your cell phone. And don’t forget social media: you can track alerts for FEMA, NOAA, your local weather station, and the like on Facebook or Twitter. For starters, the hot hashtag is #sandy.

Got it? The key for home and business is to be prepared. Once you’ve gotten yourself settled, do me a couple of favors, will you? Check on your neighbors – especially older ones – to see if they are adequately prepared. Then call your mother and tell her you’re fine (she’ll thank you for it). And let’s be safe out there, okay?

It’s not just the goblins and ghouls that you have to worry about this month. It’s the real bad guys: scammers and thieves.

Just this week, the IRS issued another warning about tax scams. This one – a new one – uses a website that mimics the IRS e-Services online registration page.

The real IRS e-Services page can be found here – it’s always with the .gov at the end. The phony site looks similar but may have a different ending on the URL such as .com, .net or .org.

It’s also important to note that the IRS e-Services page is for tax pros, not taxpayers. If you’re not a tax professional, you don’t need to register for a PTIN or any similar service. Don’t enter your personally identifiable information onto any page that claims otherwise.

If you receive these emails, just delete them. Or, if you’re so inclined, you can help the IRS out by forwarding the URL to So that it doesn’t get lost, use the subject line: Suspicious website. You can also forward any suspicious-looking emails to the same address.

Please consider this your regular reminder that the IRS will never, ever initiate communication with you about your federal taxes via email or on a social media site.

Nobody has a crystal ball. I’ve sat through presentation after presentation (and given a couple myself) on the state of the federal estate and gift tax for 2013 and beyond. There are all kinds of theories about what might happen. But the reality is, we know very little.

Quite frankly, much of it hinges on what happens in November. And no, I’m not talking about the presidential election. Realistically, although the President may claim to drive policy when it comes to the federal estate and gift tax, he doesn’t. Congress does.

So let’s talk about what will happen if nothing happens. I know that sounds weird… but what I mean is what is slated to happen unless Congress actually proposes – and passes – legislation that alters the schedule.

As it stands today, on January 1, 2013, the federal estate and gift tax law will revert to those which were in effect in 2001. That means that the federal estate tax exemption will only be $1 million (as opposed to the $5 million exemption currently in effect) and the rate for married couples will not be portable. The federal estate tax will top out at 55%. The gift tax exemptions and rates will follow suit.

Practically, that also means a return in state estate taxes. The “pick up tax” or “slack tax” – the amount that tended to be the difference between the federal estate tax state death tax credit and the actual state death tax payable – was phased out in 2005. Without a state death tax credit, the formula used by many states was meaningless, so there was no actual state estate tax payable. Since the state estate tax wasn’t actually repealed and is still on the books in most states, a reversion on the federal estate tax side to the 2001 rates also means a reversion for state estate tax purposes. Pretty crazy, right?

All of this could change tomorrow. Okay, not tomorrow. Congress isn’t in session until mid-November. Even then, you can expect a lot of gloating and not much action. But eventually, say, in December, they’ll do something. Until then, the 2013 rules are soooo 2001.

There is one change taking effect in January 2013 that’s new: the annual gift tax exclusion. The annual gift tax exclusion amount, which is adjusted annually, will be $14,000 for 2013, as announced by IRS last week (it won’t be in hard copy until it hits the Internal Revenue Bulletin 2012-45 on Nov. 5, 2012). That means that taxpayers can make gifts of up to $14,000 per person in 2013 without any federal gift tax consequences (and yes, the per person qualifier means that you can gift up to $14,000 each to one person or a million people without owing a penny in federal gift tax).

As to what else is to come? You tell me… Your guesses?

As expected, Internal Revenue Service (IRS) Commissioner Doug Shulman, the 47th commissioner to serve, has officially announced his plans to step down at the end of his term. That makes November 9, 2012, his last day in office. Shulman has served as IRS Commissioner since March 24, 2008.

Shulman had already indicated earlier in the year at a Q&A at the National Press Club that he would be stepping down after his term ended. Commissioners generally only serve one term after being appointed and no Commissioner has served longer than five years since the office was created by Congress by the Revenue Act of 1862 (although the IRS was, at that time, referred to as the Bureau of Internal Revenue). In Shulman’s case, November 9 is the last day of the term because November 12 is Veteran’s Day, a federal holiday.

Shulman was appointed to office by President George W. Bush. He made waves in 2010 when he announced that he doesn’t do his own taxes, saying: “I use a preparer… I’ve used one for years. I find it convenient. I find the Tax Code complex, so I use a preparer.” It became quite the sound bite for Congressional officials to rail against the complexity of the Tax Code (ironic, of course, since Congress made it that way).

It has been a challenging term for Shulman, who has managed 100,000 employees at the IRS in the midst of a tough economy. That level of employee management is pretty impressive: according to the Census, fewer than 1,000 U.S. companies even come close to those kinds of numbers, putting it on par with Marriott, GM, and Starbucks and well ahead of Apple and Microsoft.

“The IRS team made remarkable progress in the last few years during a challenging period,” Shulman said. “It has been an honor to serve the American people during this dynamic time.”

Since IRS commissioners are nominated by the President and confirmed by the Senate, a new Commissioner won’t step in immediately. For now, Deputy Commissioner for Services and Enforcement Steven T. Miller will serve as acting IRS Commissioner when Shulman steps down. As to who will be officially appointed to take Shulman’s place? That die is likely cast the Tuesday before Shulman officially steps down, following the Presidential and Congressional elections.

Columbus Day is a federal holiday (one of twelve for Congress) which means that post office and other government offices are closed – but many local government offices are open for business as usual.

You can also bet that your local tax professional is working today: it’s just one week before the filing deadline for individuals on a regular extension for federal income tax returns. The due date is Monday, October 15.

If you’re one of those nearly 10 million taxpayers who filed an extension in April to get a little extra time to file your federal income tax return – including Mitt Romney and me – you might want to spend the day getting your receipts organized (if you haven’t already). You need to have those returns in the mail or on their way electronically by Monday, October 15.

Remember that an extension to file is not the same as an extension to pay. If your return indicates that you owe taxes, you will likely also owe a few extra dollars in interest. It’s not the end of the world: lucky for you, interest rates remain fairly low.

If you’ve already filed for 2011, good for you! But take a peek at your calendar: now is the time to start thinking about 2012. Give your tax professional a call (er, just not this week).

As a kid, the church was always a big part of my life. I was that girl, the one who raised her hand and asked questions and often got shushed in service. I did, however, eventually have the good fortune to have a pastor who was everything that I thought a religious leader should be: smart, articulate, and compassionate. He encouraged us to read and think and seek answers. So I did.

When I got older, I taught Sunday School at my church. One Sunday, the lesson focused on the importance of being involved in governance – not necessarily running for office but how we had this bigger responsibility to make our communities and by extension, the world, a better place. I told my class that the cool thing about the United States was that we have the opportunity to communicate how we felt about issues not only by voting but also by writing directly to government leaders. I gave them paper and the address to the White House and asked them to write a letter to the President about an issue that was important to them.

I thought it was an innocent enough exercise. But apparently not everyone thought the same way. I was approached by the Sunday School director about my lesson. I was, we were told, not to mix politics and religion.

The next year, members of my church helped organize a boycott of ABC and Disney for airing Ellen – the TV sitcom featuring Ellen DeGeneres – because they felt it promoted homosexuality. Apparently that whole “don’t mix politics and religion” thing only applied when you didn’t like the result.

That’s exactly the dilemma that churches all over the country face each week in America – even more so during election season. While it is a free country and we do have the freedom of speech, the Tax Code has had, since 1954, prohibited tax-exempt organizations “from directly or indirectly participating in, or intervening in, any political campaign on behalf of [or opposing] any candidate for elective public office.” And that includes churches. Crossing that line can result in the loss of tax-exempt status.

Every election season, the Internal Revenue Service (IRS) sends out notices reminding tax-exempt organizations to be careful. But that doesn’t stop them. Religious intervention in politics has made news for years. The last presidential race, in particular, drew scrutiny from the IRS for a number of incidents. First Baptist Church of Buena Park Pastor Wiley Drake was investigated for formally endorsing Mike Huckabee for President on church letterhead (and later praying that those who objected to his endorsement would die). During that same race, Bill Keller of was called out for advising his followers that a vote for Mitt Romney was a vote for Satan because, as as he wrote, “Romney winning the White House will lead millions of people into the Mormon cult… ROMNEY GETTING ELECTED PRESIDENT WILL ULTIMATELY LEAD MILLIONS OF SOULS TO THE ETERNAL FLAMES OF HELL!!! (emphasis is Mr. Keller’s).” And, of course, Pastor James David Manning of Atlah World Ministries, made headlines for repeatedly calling then-Senator Barack Obama a “Mack Daddy” and a pimp before later referring to him as an “emissary of the devil” – all from the pulpit.

So far, this election has been tame by comparison. That may change this weekend: this Sunday, October 7, marks “Pulpit Freedom Sunday.” The event, which is the brainchild of the Alliance Defending Freedom (ADF), Alliance Defending Freedom (previously called the Alliance Defense Fund), is a call for pastors to speak from the pulpit and to address specific candidates, issues and politics head-on. The sermons will be taped and sent to the IRS – kind of like a big dare. ADF is not only hoping for but seeking a response from the IRS. The goal is to challenge a revocation of status in the courts as against freedom of speech and freedom of religion.

Will that happen? Probably not. Despite the IRS sending up flares each year, it appears reticent to take ADF seriously and with good reason: in 2008, the event only drew the support of about thirty pastors (the group expects bigger numbers this year; the number of those pastors participating has reportedly grown every year). It’s a stunt. An interesting stunt but a stunt nonetheless. From a tax standpoint, they’re way off base. The rules on this are very clear.

And yes, I believe in freedom of speech. I believe in freedom of religion. But I also believe in the separation of church and state. I’m not sure why religious leaders feel that they should have special rules – in fact, I’m pretty sure that most of those pastors preach from a Bible in which Jesus advises that it’s important to have respect for the rules of government.

I would think if you think those rules unfairly tie your hands – and you want to say what you want to say – then do it. Just don’t take advantage of tax-exempt status. Realistically, charitable deductions and tax breaks for charitable organizations make a dent in tax revenue. And we’ve decided, as a society, that it’s a good thing if those dollars are going to good causes like medical research and feeding the hungry and educating our children. Not stumping for your candidate of choice.

Tax issues aside, I don’t know about you but I happen to think I’m in a pretty good place to decide which candidates and which issues matter to me. I don’t need a specific candidate endorsement from my religious leader, no matter how cool I think he is (in fact, even though we don’t always agree, my priest weighs in on the blog some time on issues).

So, you do what you have to do this Sunday. But I would urge you to consider the words of one of our Founding Fathers, Thomas Jefferson (*that’s the J in the post’s title, by the way):

Religious institutions that use government power in support of themselves and force their views on persons of other faiths, or of no faith, undermine all our civil rights. Moreover, state support of an established religion tends to make the clergy unresponsive to their own people, and leads to corruption within religion itself. Erecting the ‘wall of separation between church and state,’ therefore, is absolutely essential in a free society.

If you’re like me, you got slammed today with bogus emails claiming to be from the IRS. Most were the run of the mill “Federal tax transaction rejected” variety  – like the ones from before. A few, however, were a bit more sophisticated. This one, in particular, caught my eye:

Dear business owners,

Due to the changes in the taxation policies that have been recently ratified, IRS informs that LLC, C-Corporations and S-Corporations have to validate their EIN in order to confirm their actual status. You have 14-day period in order to examine all the changes and make necessary amendments. We are sorry to cause inconvenience.

For the details please refer to:

Sincerely yours,
Margaret Myers
Internal Revenue Service Representative

Of course, it’s fake, too. But clearly, the spammers are making more of an effort to give you pause to consider whether it just might be something this time. It’s not. Remember, the IRS is never going to initiate contact with you via email regarding your tax matters.

As for this email? The IP address indicates that it originated in Peru. The links in the email will direct you to all kinds of sites including a hypnotist site with a professional psychic. Just go ahead and delete the email. And don’t feel guilty – if they’re really psychic, they knew you were planning to get rid of it anyway.

How appropriate that after yesterday’s post on e-bills I received not one – but nine – scam emails purporting to be from IRS. Apparently, those scammers are making yet another effort to cheat taxpayers, hoping for short memories. Don’t fall for it.

The subject headers all have some variation of “Your federal tax transaction” or “Rejected federal tax payment.” The emails encourage you to click on the link to find out why your payments were rejected.

As before, the link likely contains a virus that could infect your computer or direct you to a site in order to steal your identity or otherwise access your financial information. You know the drill. You can forward it to or just hit delete.

Consider this your regular reminder that the IRS will never, ever initiate communication with you about your federal taxes via email.

In just a few weeks, students will be moving into dorm rooms across the country. The new school year is officially beginning!

The first few days of college are often a blur of forms, registrations – and more forms. One of the most popular – and yet confusing – forms is the Free Application for Federal Student Aid (FAFSA). While the deadline for FAFSA submissions might have passed (depending on your state and your school), it’s not unusual for students to have to complete additional requests for information to supplement the FAFSA.

FAFSA requests can be tricky because students (and sometimes, parents) can’t always easily access their tax information for purposes of completing the form. Even then, figuring out what goes where can be complicated.

The Internal Revenue Service (IRS) has a free service, the IRS Data Retrieval Tool, which automatically transfers tax data from a taxpayer’s federal tax return directly to a FAFSA form. It has been available since the 2009-10 school year.

Here’s how it works. On the FAFSA, you must report financial information, including bank balances and information from your tax forms. That information is from the tax year prior to the academic year: so, if you are filling out the FAFSA for the coming school year (2012-2013), you will use your 2011 tax year information (if you’re still on extension, you can estimate those amounts).

If you complete the FAFSA online and you meet the eligibility criteria, you can use the IRS Data Retrieval Tool. The tool takes you to the IRS website, where you’ll need to log in by providing your name and other information exactly as you provided it on your tax return. When you pop back to the FAFSA site, the fields on the form will be populated with your tax information and marked “Transferred from the IRS.”

To be eligible, you must have filed a federal 2011 tax return using any status other than married filing separately and your marital status must not have changed since December 31, 2011. You must not have amended your return. You must have a valid Social Security Number (and not an ITIN) and have not filed a Puerto Rican or other foreign tax return. Finally, you must also have a Federal Student Aid PIN or apply for one through the FAFSA application process.

If you’re not eligible to use the tool and still need your tax info, you can get an official transcript from the IRS. You can get your transcript online, by calling the IRS toll-free at 1-800-908-9946 or by using a federal form 4506-T (downloads as a pdf).

And yes, all of this information still applies if you’re relying on your parents’ financial and tax information to complete the form.

Once that’s over, all that’s left is to hit the books! Good luck!

It’s been a quiet hurricane season so far on the east coast. After last year, that’s a relief for a lot of folks. And it looks like the pattern will continue: the National Oceanic and Atmospheric Association (NOAA) is predicting a “near normal” season for the year, with expectations of 13 named storms, 5 hurricanes, and 2 major hurricanes (if you’re keeping score, we’re at 4 named storms so far and just one hurricane, Hurricane Chris).

Even a relatively quiet season can result in damage, however, so the Internal Revenue Service (IRS) is reminding taxpayers to take steps to safeguard information and have a strategy for dealing with storm-related interruptions. What do they recommend?

  • Create a Backup Set of Records Electronically. This is good advice in all cases. You should have a backup system stored safely away from your original set of data. This would include not only tax returns but bank statements and copies of other financial information (more about which records to keep and for how long here). The IRS accepts scans – and has since 1997 – so long as they meet the same criteria as original records (legible, sufficient, and easily available).
  • Document Valuables. Consider documenting the contents of your room or office by writing down what you have and, ideally, taking photos or videos of your belongings (again, keep that information in a safe location). This comes in handy not only for insurance claims but for proving property damage and casualty losses on your tax returns, if appropriate.
  • Update Emergency Plans. In the event of an emergency, you’ll want to have a strategy for mitigating damage and working to resolve issues quickly – especially if you are a small business owner. That plan should include how to meet filing deadlines and protect contemporaneous records – as well as recording and reporting damage. You should share relevant pieces of the plan with your key employees and keep in mind that as employees come and go, you may need to continue to update the plan.

The IRS does have specialists on hand that are trained to handle disaster-related issues. If you need to talk with the IRS about such an issue, you can call 1-866-562-5227. But act immediately: I have a number of clients who lost records due to flooding years ago and are now struggling to recreate returns and receipts for purposes of examination and appeals. It can be frustrating and expensive to be in that situation. Taking proactive steps now – combined with timely reactions immediately after a disaster – can keep a bad situation from turning worse.

Those of us who have grown up near storm-prone areas tend to develop tricks for muddling through storm seasons (my mom figured out how to bake a cake on the porch using a propane tank). Since we’re in the midst of hurricane season (it started June 1), I thought it would be fun for my readers to share tips for making it through a bad storm. It could be a list of your best “emergency kit” items; how to keep the kids occupied when the power goes out or how to keep your documents safe from water damage. It doesn’t have to be business or tax-related (though clearly, I’d love to hear those, too). I’ll choose one random winner from all of the entries to receive a large mixed nut sampler from

Here are some more rules because, as you know, I’m a lawyer and I like rules:

  • Entries must be posted in the comments section for this blog post in the space below by 11:59 p.m. EST August 2, 2012.
  • While I love my twitter followers and my Facebook fans, responses on twitter or Facebook will not be included for purposes of the contest. Ditto for emails. Comments have to show at this post below.
  • Don’t panic if your comment doesn’t show immediately. If it goes to moderation because, for example, you’re new here, the time stamp on your comment is what counts.
  • You can enter as many times as you like but you must leave a different tip each time you comment.
  • My normal comment policy applies (you can read it here). No offensive language, no trash talk, no spam. I have standards, you know. Offensive comments or comments that otherwise violate the comment policy will not be considered valid for purposes of the giveaway.
  • Pingbacks and other links will be disregarded for purposes of the giveaway.
  • I have to be able to contact you. That means you have to register with using a valid email address. I won’t publish your email address but I do need contact information for the winning entry.
  • Due to shipping considerations, only United States addresses, please. Sorry, Canada, eh?
  • I respect your privacy and I will not send you anything unrelated to your entry in this contest.
  • By entering the contest, you agree that I may post any part or all of your submission including your name as a part of the contest announcements or promotions, with the exception of your email address.

Comment away!