Our Taxing Times

More Phishing?

I just received 2 e-mails (different accounts) from the US Treasury about fraud in the wire transfer system. The e-mail says they are closing the system for several days. The link for more info does not look right. It uses a .us instead of the .gov on the official federal reserve site.
While I have not been able to definitively rule this a fraud, yet, I would be very, very, very careful with that link.

The IRS Doesn't Email

If you get an e-mail from the IRS, do not respond. It is a fraud.

The Wait

This is the hardest part of the tax season. All the bookkeeping and payroll reports are done. As are the office set up, pre-season mailings, software testing and cleaning. All there is to do now is wait for the early season clients to start making appointments.  In short, I am waiting on more W-2s and 1099s to be issued. The Wait is frustrating because it is out of my hands. The employer will decide when to issue their W-2s not me. But part of the frustration is because of the IRS.

I can't electronically file a return without W-2s. That is one of the e-file rules. It always has been. If I draw a e-file audit, they will match my filings to signed 8879s and W-2s. I can use a pay stub to estimate the taxes for a client but until I have the actual W-2 no e-file. But that doesn't stop the car dealerships, pawn shops and kitchen table preparers from using online services to file with pay stubs. They aren't registered as e-file providers so they have nothing to lose by not following the rules. And even if they are reported for filing without W-2s, the IRS does nothing to shut them down. 

I am not suggesting changing the rules on no e-file without W-2s. But I lose clients each year to these "tax preparers" because people are in such a hurry to get their refunds that they will pay more for the convenience. I would like to see the IRS go after these guys more aggressively. But I think for that to happen, we will have to have a tax return preparer licensing/registration that is written to address the e-file problem.

In the meantime, I sit and wait for the W-2s and their owners to come in for our annual visit. My brain knows it is still a little early but that doesn't stop the nerves.

Stimulus Rebate-Taxable This Year?

NO! It isn't taxable on the 2008 Federal or Kansas returns (I don't know about all the states.) So if you are told that it has to be added back to your 1040, please find another preparer. 

However! A good preparer will check with you to see how much stimulus rebate you qualified for last year. The rebate was an advance on 2008 credit. But 2007 returns were used to estimate how much rebate a taxpayer qualified. It could be that you qualified for more this year. If you had a child or your income changed in 2008, you might be entitled to a Recovery Rebate Credit this year. For example, the full stimulus rebate a married couple with one child could receive was $1500. A child born in 2008 qualifies the couple for an extra $300.

The key is the amount the taxpayer was qualified to receive, not they actually received. Many of the rebates was taken for back taxes, child support or other debt. If you have a question about what you qualified for last year, you can use the lookup page the IRS has developed.

Also, if you didn't file your 2007 before October 16th, you can still get your rebate by filing your 2008 return.

Online Filing

E-file began yesterday (16th). W-2s are being received and clients have started trickling in to the office. But if you are a do-it-yourselfer and are looking for a way to e-file your return, please give my online filing a chance.

The basic info and link and be found on my web site. It cost as little as $13.90 and that price includes one state return. I have partnered with 1040.com to offer this service.

1040.com is also a great site to find tax and financial info. I have found the financial calculators (under tax tools) very useful.

Whether you are looking for an experienced preparer or an online filing service, McIntire Tax Center is a great choice.

Throwing Stones

Treasury Secretary nominee Timothy Geithner is running into some problems in his Senate confirmation hearing. The big hot button is his 2001 and 2002 tax returns. While working for IMF, Geithner should have paid his own self-employment tax on the money he earned. SE tax is both sides of the Social Security and Medicare most people pay out of their paychecks. Geithner was audited in 2006 and paid the tax for 2003 and 2004 (the years under audit.) 2001 and 2002 would have been closed years by that time and the IRS could not have audited them unless they believe that fraud was involved. There has been no discussion about that or allegation that his returns have not been compliant since them. The issue was why he did not pay the SE tax on his 2001 and 2002 income. I am assuming that he didn't get a bill and that his accountant didn't push the issue of amending the 2001 and 2002 returns. 

What would you do? You just paid a big tax bill. Someone says you should go back and pay another big bill but if you don't nothing will happen. Would you pay if there looked to be no consequences for not paying? As a taxpayer, I want everyone to pay their fair share but I also can't be 100% sure that I wouldn't have done the same thing. I know I would have thought about it.

I don't expect public servants to be perfect. I demand ethical behavior as long as I am paying their salary. But I know people will make mistakes and too often we throw out qualified people for mistakes that are unrelated to their job. If Geithner was in line for IRS Commissioner or the economy wasn't a disaster, I would not be as forgiving. But if his confirmation hearing show that he is qualified to help get the U.S. out of this mess, I will cut him some slack about how long it took him to settle up his taxes. 

Brokers Late Again

The IRS says that Brokers have to February 17, 2009 to send out composite 1099s. The Energy Improvement and Extension Act of 2008 gives Brokers until 2/15 to get out Form 1099-B. The Service has expanded this to include interest and dividends that are normally reported on composite statements with 1099-B.

IRS Help for Taxpayers Owing Back Taxes

If you currently owe the IRS and are having trouble making payments due to your current financial condition, there may be relief for you from the IRS. While they won't forgive the debt, they will make it easier to get through the economic crisis. From IR-2009-2:

• There will be more flexibility for taxpayers with an installment agreement in place. They may be allowed to miss a payment or even reduce their monthly payment. Contact the IRS if this might help you (and it is always better to contact them before you cut your payment or miss one.)
• It may be possible to get a the IRS to take a second look at your Offer in Compromise. Because of the volatility of real estate, taxpayers in distress with real property assets may be entitled to a review of their OIC which takes market fluctuations into account. 
• If you have an Offer in Compromise payment plan, you can contact the IRS if you are having problems making payments. 
• In some situations, the IRS may suspend collection actions until the taxpayer is in a better position to pay their tax debt. 
• Levy release will be expedited once a debt has been paid. Again the taxpayer needs to contact the IRS at the phone number on their notice of levy. 

If you have questions, please contact the IRS handling your case. 

Job Description

I have been thinking about what the job description of a tax preparer really is the last few days. Behind this process are the new use and disclosure rules that go into effect today (discussed in this post.) The rules state that I can use client info to prepare a tax return. But that I can't use that info, the final return, or documents created to get the final return for a non-tax preparation use with out the client's prior permission in writing. I can understand the need for these rules in the context of a tax preparer using that info to offer refund loans or sell investments. 

The changes to section 301.7216-3, outlined in Rev. Proc 2008-35, cover what I have to do to use tax return info not in the "context of preparing and filing a return." But the Rev. Proc. doesn't tell me what the IRS in including in "preparing" the return. No where can I find and IRS definition of "preparing a tax return." Specifically, is offering tax advice part of preparing a return? 

To me, offering my clients tax advice is part of my job. That is one reason so many taxpayers use a professional to prepare their return is they want to pay the least amount of taxes legally. So, they ask questions, what happens if I put money in an IRA, file separately, retire early, etc?  In answering their questions, I advise them and make suggestions. The question arising from the new rules: is advising a separate use of tax return info and require a "Consent to Use" or part of tax return preparation. If you don't sell investments or IRAs, at first I would say that you don't need a signed release. But the examples the IRS has provided are confusing, not well written and open to interpretation. At a time where preparers are under siege with more and more due diligence requirements and sky high penalties, it's understandable to take the easy way out and ask all clients to sign a release to let me offer tax advice. But we are also fighting car lots, pawn shops and tons of seasonal shops. The harder I make it for my clients to use my service with more forms to sign and time spent on due diligence, the more likely they are going to who will make it easier on them. 

How am I going to handle this issue? First, I have created a job description for me as tax preparer. It will include tax advising as part of the tax preparation process. Should a client want a meeting after the return is done to ask tax advice, I will create a consent to use for that. Hopefully, the IRS will soon issue clarifications on the consent changes that are applicable to what real world preparers face.

At McIntire Income Tax Center, tax preparation is the completion of a tax return that follows all current tax laws but allows the taxpayer to pay the least possible tax. All returns will be subject to applicable due diligence. Clients will also be advised to strategies to legally reduce their tax liabilities or plan for changes to their tax situations.