IRS Audit Focus for 2013

Posted on September 25, 2012 by Kursti Nakagawa

The IRS constantly researches areas it needs to analyze and focus on each year. We are coming up to the start of the government’s fiscal year on October 1^st, and the government has already announced areas that it will focus on for the coming year. When it comes to compliance, the IRS has begun to look closely at small business underreporting. Small business underreporting is responsible for 84% of the $450 billion tax gap. Below are some of the major highlights discussed by the IRS at the national and regional tax forum held this summer in regards to small business audits.

Correct work reclassification Business classification can be an important interest to the IRS. The IRS realizes that businesses tend to incorrectly classify workers as independent contractors rather than employees, due to the fact independent contractors can cost about 30% less than an employee.

Extra perks, especially the personal use of company cars – The IRS has noticed that employers are not reporting employee’s use of company vehicles on W-2’s or 1099’s. The IRS is also looking into all company cars especially, luxury autos, in its audits.

High Wealth/High Income Taxpayers – The IRS classifies high wealth/ high income taxpayers as those who have a total positive income of more than $200,000 a year. In 2013 the IRS will focus on taxpayers with a total positive income of more than $1 million who file a schedule C business return in the last year

Matching 1099-K Form – The IRS announced in 2013 that it plans to introduce a business-matching form program that will address a good amount of small business non-compliance.

Small business employee health insurance credit, under Section 45R – This credit became first available in 2010 returns. However, now the IRS will examine small business employers and tax exempts for compliance with Section 45R eligibility requirements.

Transactions being abused, especially international transactions – The IRS is actively looking for taxpayers who hide assets overseas. The IRS will also focus on offshore transactions for small and large businesses.

If you have tax debt you are unable to pay or any other questions our tax settlement professionals are happy to discuss you’re tax resolutions free of charge. For more information about our services, visit us today at www.professionaltaxresolution.com. With over 16 years in the business of resolving tax debt, we have a thorough understanding of tax law together with the experience to know which settlement option will be the best fit for your specific set of circumstances.

For more information about our tax debt resolution services visit us at www.professionaltaxresolution.com. Contact us by phone at 877.889.6527 to receive a free, no obligation consultation

IRS Taxpayer Advocate Service Changes Case Acceptance Criteria

Posted on September 18, 2012 by Kursti Nakagawa

The Taxpayer Advocate Service (TAS) is altering the measures it uses to accept cases from taxpayers that are having difficulty dealing with the Internal Revenue Service to lighten its caseload. The TSA has restricted its case admission criteria as budget cutbacks are taking a toll on the IRS.

The IRS sent a recent email to tax professionals. “The Taxpayer Advocate Service is designed to be a “safety net” for taxpayers who are experiencing problems with the IRS. However, because TAS cannot help all six million to twelve million taxpayers who may be having problems at any given time, it must focus on cases where it can add the most value.”

The email was then linked to a document listing four categories the TAS plans to focus on in accordance to the revised case acceptance criteria.

Where a taxpayer is having financial hardship, emergency, or difficulty, and the IRS needs to move quicker than it usually does under normal circumstances. Because if the IRS does not move quickly (i.e. to release a lien or remove a levy), the taxpayer will have even more financial difficulty.
Where several different units and steps are required, and the case needs a “traffic cop” or “coordinator” to make sure everyone does their role. This is important for TAS to do.
Where the taxpayer has tried to find a resolution through normal IRS portals, but they have not worked.
Where the taxpayer is displaying unique issues or facts (legal issues included) and the IRS is not able to customize their approach.

“Last year, we assessed where our efforts have the greatest impact, and identified the four types of issues in which the IRS seemed to get the right answer (though slowly)”, said TAS. “Those cases involve the processing of original tax returns, amended returns, rejected and unstoppable returns, and injured (but not innocent spouse claims). We determined that TAS generally won’t accept cases involving pure processing issues so we could focus on higher-impact problems.”

“However, there are many exceptions to this policy. If the taxpayer is suffering an economic burden, TAS will take the case. If the case involves other issues, TAS will take the case. If the taxpayer is referred by a congressional office, TAS will take the case. And if the taxpayer specifically requests and insists, TAS will take the case.”

TAS has stated that it is trying to do its best to help tax preparers and taxpayers, but within limits. “We’ll continue striving to help tax professionals and their clients. But before you contact TAS, please remember that we are a finite resource that Congress created not to substitute for regular IRS procedures but to help taxpayers who need special attention.”

For more information about our tax debt resolution services visit us at www.professionaltaxresolution.com. Contact us by phone at 877.889.6527 to receive a free, no obligation consultation

Tax Debt Incurred By Medicaid Providers

Posted on August 14, 2012 by Kursti Nakagawa

A new study by the Government Accountability Office discovered that the 7,000 Medicaid providers had an estimated $791 million in unpaid federal taxes from 2009 or earlier, but still received about $6.6 billion in Medicaid reimbursements that year. The three chosen states were Texas, Florida, and New York.

Around 40 Medicaid providers were researched. They consisted of home care providers, dentists, doctors, hospitals, medical suppliers, and others. These businesses and individuals received a total of $235 million in Medicaid reimbursements, while having unpaid taxes of about $26 million. The amount of unpaid federal taxes ranged from approximately $100,000 to over $6 million. According to the report these 40 cases, show “the sizable amounts of unpaid federal taxes owed by some Medicaid providers, are among the most egregious examples of Medicaid providers with unpaid federal taxes we identified.”

About 5.6 percent of the Medicaid providers reimbursed by the selected states during 2009 are represented. The report also stated that the amount of unpaid federal taxes that the Government Accountability Office identified is most likely minimized because taxpayer data from the Internal Revenue Service emulates only the amount of unpaid taxes either reported on a tax return or assessed by the IRS through enforcement. It does not include businesses and individuals that did not file tax returns or underreported their income.

According to the Government Accountability Office two of the providers reviewed by investigators are currently, or were previously, under criminal investigation. One case of criminal behavior was a provider caught in a medical billing fraud scam. Then, another company was found guilty of “improperly prescribing controlled substances.” Meanwhile other providers had been fined, disciplined, and/or had their licensed revoked by the state regulatory agencies and others.

The senate has vowed to crack down on fraud in the federal health care programs. In reaction to the GAO report the senate introduced the Medicare and Medicaid Fighting Fraud and Abuse to Save Taxpayers Dollars Act. It is also known as the Fast Act.

“It is outrageous that health care providers who cheat on their taxes are getting paid with taxpayer dollars through the Medicaid program.” Stated by Carl Levin, D-Mich, who chairs the subcommittee. “The federal government ought to prohibit health care providers with unpaid taxes from enrolling in Medicaid, allow continuous levies on health care providers’ Medicaid payments to recover unpaid taxes, and authorize tax levies on Medicaid payments to Managed Care Organizations whose doctors or other principals are tax delinquent.”

For more information about our tax debt resolution services visit us at www.professionaltaxresolution.com. Contact us by phone at 877-889-6527 to receive a free, no obligation consultation

Gift and Estate Tax Changes Expected to Occur at the End of 2012

Posted on July 26, 2012 by Kursti Nakagawa

The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act which was signed into law in 2010 increased the amounts of the estate, gift and generation skipping tax exemptions and, at the same time, lowered the tax rates for each of these taxes. However, unless Congress takes some action before the end of the year, the estate tax benefit benefits provided by this law will expire on December 31, 2012. The major provisions of the 2010 Tax Relief Act are outlined below together the changes that will take place on January 1, 2013 if Congress does not take further action.

Gift Tax

Current

The gift tax exemption is $13,000 per year for gifts made by any one person to any number of people. There is a lifetime gift tax exemption of $5,120,000 for gifts made above the $13,000 limit.

January 1, 2013

The gift tax exemption will remain at $13,000 per year (with a possible increase for inflation) for gifts made by any one person to any number of people. The lifetime gift tax exemption for gifts made above the $13,000 limit is scheduled to revert to $1,000,000.

Generation Skipping Tax

Current

The GST exemption is $5,120,000 with a tax rate of 35% on amounts above the exemption limit.

January 1, 2013

The GST exemption is scheduled revert to $1,390,000 per year (with a possible increase for inflation) with a tax rate of 55% on amounts above the exemption limit.

Estate Tax

Current

The estate tax exemption is $5,120,000 with a tax rate of 35% on amounts above the exemption limit. Portability of unused estate tax exemptions of one spouse to the surviving spouse is allowed.

January 1, 2013

The estate tax exemption is scheduled revert to $1,000,000 per year with a tax rate of 55% on amounts above the exemption limit. Portability of unused estate tax exemptions of one spouse to the surviving spouse will no longer be allowed.

With January 1, 2103 fast approaching, taxpayers are anxious to see what, if any, action will be taken by Congress. If Congress does nothing, the exemptions for gift, generation skipping and estate taxes will revert to their 2009 levels and the tax rates for amounts above the designated exemption levels will increase to 55%. On the other hand, if Congress votes to extend the Tax Relief Act, the exemption limit for these taxes will remain at $5,120,00 with a possible inflation adjustment and the tax rate for amounts above the exemption limits will be held at the current 35%. Barring a full repeal of the estate tax, the third alternative would be the passage of some sort of compromise law that would place exemption limits and tax rates somewhere in the middle of the 2009 levels and those set by the Tax Relief Act of 2010.

If you owe back taxes due to a gift or inheritance, we can help you determine whether the assessed amounts are accurate based on past and current estate tax laws. Very often, the process of accurately interpreting the law and making use of tax benefits the law provides can result in a significant reduction in the tax amount owed. Following this analysis, our experienced tax settlement professionals will resolve any existing tax debt in the most effective way available. For more information about our tax debt resolution services, visit us today at www.professionaltaxresolution.com. Contact us by phone at (877)-889-6527 or by email at info@protaxres.com to receive a free, no obligation consultation.