IRS Flouted Procedures When Selling Seized Property

Originally Published in ACCOUNTINGTODAY.COM

The Internal Revenue Service did not always follow its own procedures when selling some of the property it seized for unpaid taxes, according to a new report.

The report, from the Treasury Inspector General for Tax Administration, found that over the past four fiscal years from 2011 through 2014, the IRS has received approximately $114 million in proceeds from the sale of seized taxpayer assets. However, personal items were not always properly documented when they were returned, and personal information such as GPS navigation data and garage door opener settings weren’t always removed from the systems installed in seized vehicles, posing a potential security risk.

The IRS Restructuring and Reform Act of 1998 required the IRS to implement a consistent process for the sales of seized property in order to protect taxpayers whose property is being sold to satisfy delinquent debts. The IRS’s property appraisal and liquidation specialists are supposed to ensure that taxpayers’ rights are protected when property is seized for unpaid taxes.

TIGTA auditors attended six IRS auctions of seized assets and reviewed a sample of 44 seizure cases. The report found that for the cases they sampled, the seized assets in general were properly inventoried, safeguarded and handled professionally.

However, the written sale plans developed by the specialists provided varying amounts of detail for the actions to be performed on the date of the sale. More consistent and specific sale plans could improve managerial oversight and ensure consistent treatment of seized assets, TIGTA noted.

Personal items found in seized assets were not always properly documented when they were returned to taxpayers. In addition, TIGTA found there is no requirement for removing taxpayer information from installed systems in vehicles. Such information could present a security risk if a third-party purchaser gained access to it.

If procedures are not followed, there is an increased risk that the completed sales will not be in the taxpayers’ or the IRS’s best interest, TIGTA cautioned.

TIGTA also identified several strategies that the IRS should consider to potentially increase the number of bidders when selling seized assets.

“The IRS Restructuring and Reform Act of 1998 (RRA 98) requires the IRS to implement a consistent process for the sales of seized property,” said TIGTA Inspector General J. Russell George. “The IRS needs to fully comply with this provision of RRA 98.”

TIGTA recommended that the IRS require the property appraisal and liquidation specialists, or PALS, to consistently prepare a detailed sale plan once custody of the seized property has been accepted, and ensure that the return of all personal items from seized vehicles is documented.

The IRS should also require the PALS to follow requirements in the Internal Revenue Manual for conducting a sale adjournment and recalculating the minimum bid, as well as ensure that any adjustments are supported by the facts of the situation and properly documented, said the report. IRS employees should also take the necessary actions to remove taxpayers’ personally identifiable information from seized vehicles such as resetting any navigation, garage door and similar installed systems, according to TIGTA.

In response to the report, IRS officials agreed with seven of the nine recommendations and said it has hired a consulting team to improve its procedures.

“We have engaged a lean six sigma to review and evaluate all aspects of our seizure and sale program and present proposals for improving the program,” wrote Karen Schiller, commissioner of the IRS’s Small Business/Self-Employed Division. “Our goal is to further clarify our seizure and sales procedures while continuing to protect taxpayers’ rights.”

IRS officials disagreed with two recommendations to add guidance in the Internal Revenue Manual for indirect expenses of seizure sales that can be charged to the taxpayer and return of license plates from seized vehicles that are sold. Schiller pointed out that the IRM currently requires the return of personal items, which include license plates and documentation on Form 668-E if a taxpayer seeks personal items. She also pointed out that the manual and Treasury regulations already provide that the expenses allowed include the “actual expense incurred with the sale” in addition to expenses for the “protection and preservation of the property.” The expenses in TIGTA’s report related to expenses incurred at seizure sales for the safety and convenience of bidders.

TIGTA, however, maintains that the appropriate IRM sections should be updated to provide clear guidance for IRS managers and employees to follow.


Senate Committee Report Accuses IRS of Mismanagement in Tax-Exempt Scandal

Originally Published in ACCOUNTINGTODAY.COM

Leaders of the Senate Finance Committee have released a bipartisan investigative report on the scandal involving the extra scrutiny the Internal Revenue Service’s gave to applications for tax-exempt status from political groups, finding evidence of mismanagement at the agency.

Members of the committee were briefed by staff with authority to review private taxpayer information in a number of closed-door briefings on the findings and recommendations of the report before a vote to release the long-anticipated report.

The report found that from 2010 to 2013, IRS management failed to provide effective control, guidance and direction over the processing of applications for tax-exempt status. Top IRS managers did not stay informed about the applications involving possible political advocacy, thereby forfeiting the opportunity to provide the leadership that the IRS needed to respond to the legal and policy issues presented by these applications.

Lois Lerner, who was then the director of the Exempt Organizations unit, became aware of the Tea Party applications in early 2010, but failed to inform her superiors about their existence, according to the report. While under Lerner’s leadership, the Exempt Organizations unit undertook seven botched initiatives to make a decision on the escalating number of applications from Tea Party and other groups for tax-exempt status.  Every one of those initiatives ended in failure, resulting in months and years of delay for the organizations awaiting decisions from the IRS on their applications for tax-exempt status.

The committee also found that the workplace culture in the Exempt Organizations Division placed little emphasis or value on providing customer service.  Few of the managers appeared to be concerned about the delays in processing the applications, delays that possibly harmed the organizations ability to function for their stated purposes.

“This bipartisan investigation shows gross mismanagement at the highest levels of the IRS and confirms an unacceptable truth: that the IRS is prone to abuse,” said Senate Finance Committee chairman Orrin Hatch, R-Utah, in a statement Wednesday.  “The committee found evidence that the administration’s political agenda guided the IRS’s actions with respect to their treatment of conservative groups. Personal politics of IRS employees, such as Lois Lerner, also impacted how the IRS conducted its business. American taxpayers should expect more from the IRS and deserve an IRS that lives up to its mission statement of administering the tax laws fairly and impartially—regardless of political affiliation. Moving forward, it is my hope we can use this bipartisan report as a foundation to work towards substantial reforms at the agency so that this never happens again. ”

Sen. Ron Wyden, R-Ore., the ranking Democrat on the committee, disagreed with Hatch that the report found evidence of the administration’s political agenda influencing the IRS’s actions. “The results of this in-depth, bipartisan investigation showcase pure bureaucratic mismanagement without any evidence of political interference,” said Wyden. “Groups on both sides of the political spectrum were treated equally in their efforts to secure tax-exempt status. Now is the time to pursue bipartisan staff recommendations to ensure this doesn’t happen again.”

The report describes how the Exempt Organizations unit used not only terms associated with conservative groups such as “Tea Party” and “Patriots” to screen applications, but also terms associated with liberal groups such as “Progressive,” “Occupy” and “ACORN.”

The committee made a number of recommendations to address IRS management deficiencies. It said the Hatch Act should be revised to designate all IRS, Treasury and Chief Counsel employees who handle exempt organization matters as “further restricted.”  “Further restricted” employees are precluded from active participation in political management or partisan campaigns, even while off-duty.

The report also said the IRS should track the age and cycle times of applications for tax-exempt status to detect backlogs early in the process and allow management to take steps to address those backlogs.  In addition, the Exempt Organizations Division should track requests for assistance from both the Technical Branch and the Chief Counsel’s office to ensure the timely receipt of that assistance.

A list of overage applications should be sent to the IRS Commissioner on a quarterly basis, the report recommended. Internal IRS guidance should also require that employees reach a decision applications no later than 270 days after the IRS receives that application.  Employees and managers who fail to comply with these standards should be disciplined. Minimum training standards should be established for all managers within the EO Division to ensure that they have adequate technical ability to perform their jobs, the report suggested.

The IRS responded to the report Wednesday, saying it planned to make improvements in response to the recommendations. “We appreciate the work of the Senate Finance Committee on this extensive report, and we look forward to reviewing it along with the recommendations,” said a statement emailed by an IRS spokesperson. “The IRS is fully committed to making further improvements, and we want to do everything we can to help taxpayers have confidence in the fairness and integrity of the tax system. We have already taken many steps to  make improvements in our processes and procedures, and we are pleased to have other suggestions from the committee to help us in our continuing effort. Throughout this, the IRS has cooperated with Congress and other investigators. The agency has produced more than 1.3 million pages of documents in support of the investigations, provided 52 current and former employees for interviews and participated in more than 30 Congressional hearings on these issues.”

Issuance of the report was delayed for more than a year after the IRS belatedly informed the committee that it had not been able to recover a large number of potentially responsive documents that were lost when Lois Lerner’s hard drive crashed in 2011, the committee noted.

The report acknowledged that the IRS functioned in a politicized atmosphere following the Supreme Court’s Citizens United decision in 2010, which put pressure on the IRS to monitor political spending. Employees in the Tax Exempt and Government Entities Division, including Lerner, were aware that the IRS had received an increasing number of applications from organizations that planned to engage in some level of political advocacy. “Yet senior IRS executives, including Lerner, failed to properly manage political advocacy cases with the sensitivity and promptness that the applicants deserved,” said the report. “Other employees in the IRS failed to handle the cases with a proper level of urgency, which was symptomatic of the overall culture within the IRS where customer service was not prioritized.”

As a result of these failings, a number of Tea Party and other political advocacy groups waited as long as five years to receive a decision from the IRS, according to the report. These delays negatively affected applicants in many ways, including inability to gain tax-exempt status within their state until the IRS issued a determination letter; significant time and financial cost to respond to lengthy and burdensome IRS questions; ineligibility for grants and other financial support that require IRS documentation of tax-exempt status; decreased donations; and financial uncertainty about whether the organization would owe a tax liability if the IRS determined that it did not meet the criteria for tax-exemption.

After experiencing these problems, numerous organizations withdrew their applications for tax-exempt status, while some organizations ceased to exist altogether.

“The consequences of the IRS’s actions in singling out organizations based on their name and subjecting them to heightened scrutiny, substantial delays, and to burdensome and sometimes intrusive questions are far reaching and troubling,” said the report. “Undoubtedly, these events will erode public confidence and sow doubt about the impartiality of the IRS. The lack of candor by IRS management about the circumstances surrounding Lois Lerner’s missing emails may only serve to reinforce those doubts.”


Tax Cut Pays Part of Its Way in Test of Republican Scoring

Originally Published in ACCOUNTINGTODAY.COM

(Bloomberg) A bipartisan U.S. Senate bill that would revive and extend dozens of lapsed tax breaks would spur economic growth and cover about 11 percent of its own costs, according to Congress’s nonpartisan scorekeeper.

The analysis released Tuesday is an early test of Republicans’ focus on what’s known as dynamic scoring. It refers to the principle that legislation can be significant enough to change the size of the economy and affect the U.S. budget.

Republicans say that’s a more accurate way to study bills, and they’ve changed budget rules to include the analyses. Democrats are dubious, citing the uncertainty of projections.

The bill in question was approved 23-3 by the Senate Finance Committee last month. It would extend lapsed tax breaks through 2016, including 50 percent bonus depreciation, the research and development break and the production tax credit for wind energy.

Without dynamic scoring, the bill would cost the government $96.9 billion in lost revenue over the next 10 years. The tax breaks cause production and tax revenue to grow by 0.1 percent over the first five years, according to the analysis from the Joint Committee on Taxation.

The analysis says the bill would create $10.4 billion in tax revenue by increasing economic growth, after subtracting the increased cost of federal debt stemming from higher interest rates. The result would be a net cost of $86.6 billion.

The estimate, unlike previous attempts to use dynamic scoring, produces a single number, though one that the scorekeepers say is “subject to some uncertainty.” It’s not likely to settle the partisan dispute over dynamic scoring.

“We have in hand a good start for our new scoring rule approved as part of the balanced budget resolution earlier this year,” Republican Mike Enzi of Wyoming, chairman of the Senate Budget Committee, said in a statement. “This is something from which we can build upon as we go forward in this new era of better legislative scoring and honest accounting.”


Tax Strategy: The ACA Marches On

Originally Published in ACCOUNTINGTODAY.COM

The Supreme Court’s recent King v. Burwell decision upheld the availability of the Code Sec. 36B refundable credit for premiums paid for health insurance purchased on Federal Exchanges. In doing so, the decision not only helps preserve the immediate viability of Federal Exchanges, but also the necessary mechanisms that make the continued imposition of the so-called individual mandate feasible. Indirectly, it also helps small businesses and their employees better cope with health care costs, although possessing some traps of their own.

In many ways, the fate of the Sec. 36B credit, the individual mandate, and small businesses in coping with health care costs are now more intertwined than ever, with certain tensions among them becoming more readily apparent. In this month’s column, we review some of the fundamentals of those relationships, as well as some recent developments, with a particular focus on small businesses and their employees.


While the employer mandate is phased in based upon workforce size, the individual mandate has been in place for everyone since 2014. And although a small business with fewer than 50 employees may never be subject to the employer mandate, its employees are generally nevertheless subject to the individual mandate.

Enforcement of the individual mandate is accomplished through an incremental penalty structure. The amount of the penalty is generally the greater of a flat dollar amount or a percentage of the taxpayer’s income, but it cannot exceed the annual average premium the taxpayer would pay for health insurance.

The flat dollar amount and the applicable percentage associated with computing the individual mandate are both phased in during 2014 through 2016. The flat dollar amount is $95 for 2014, $325 for 2015, and $695 for 2016; it is then adjusted each year for inflation. The percentage of income is a phased-in percentage of the amount of the taxpayer’s household income that exceeds the taxpayer’s filing threshold (1 percent in 2014, 2 percent in 2015 and 2.5 percent thereafter). The penalty is imposed on applicable individuals for each month that they fail to have minimum essential health coverage for themselves and their dependents.

  • Payment. The individual mandate penalty is paid with the taxpayer’s tax return, but the Internal Revenue Service cannot use liens, levies or criminal prosecutions to collect it. The penalty is coordinated with the premium assistance credit, which is intended to help defray the cost of health insurance purchased on the individual market by taxpayers with household incomes between 100 percent and 400 percent of the federal poverty line.
  • Grandfathered plans. Grandfathered plans are generally unaffected by health care reform. A grandfathered health plan is generally any group health plan or health insurance coverage in which an individual is enrolled on March 23, 2010 (the date the Patient Protection and Affordable Care Act was enacted). The covered individual’s family members can generally continue to enroll in the grandfathered plan, and an employer’s grandfathered plan can continue to enroll new employees.


The penalty that enforces the individual mandate is coordinated with the Code Sec. 36B premium assistance credit, which is intended to help defray the cost of health insurance purchased on the individual market by taxpayers with household incomes between 100 percent and 400 percent of the federal poverty line. The Sec. 36B credit allows those who cannot otherwise “afford” premiums on a basic ACA-compliant health plan a way to do so.

An employee who qualifies for the Sec. 36B credit to buy insurance on an exchange may trigger an employer-mandate penalty, but only if the employer is an applicable large employer (generally, a business with 50 or more full-time and full-time-equivalent employees).

For 2015, employers with at least 50 but fewer than 100 full-time employees, including full-time-equivalent employees, may be eligible for transition relief (TD 9655). The IRS imposed a number of requirements that employers must satisfy before they may be eligible for the transition relief. Under the transition relief employers with 100 or more full-time employees, including full-time-equivalent employees, may only be required to provide coverage to 70 percent, instead of 95 percent, of qualified employees in 2015.

The government may pay an advanced Code Sec. 36B credit amount directly to the insurer to reduce the taxpayer’s out-of-pocket premium cost, in which case the advance credit payments and the annual credit amount must be reconciled on the taxpayer’s return. Individuals refer to the information on Form 1095-A to complete Form 8962. On that form, individuals will calculate the amount of their credit and subtract the total amount of advance payments received.


The IRS finalized regulations last year on the Code Sec. 45R small-employer health insurance credit (TD 9672), another benefit to small businesses that indirectly helps their employees comply with the individual mandate. Generally, a qualified employer must have no more than 25 full-time-equivalent employees for the tax year; pay average annual wages of no more than $50,000 per FTE (indexed for inflation after 2013); and maintain a qualifying health care insurance arrangement. The tax credit is subject to a reduction (but not reduced below zero) if the employer’s FTEs exceed 10, or if average annual FTE wages exceed $25,000.

The credit is 50 percent of the eligible small employer’s premium payments made on behalf of its employees under a qualifying arrangement (35 percent for small tax-exempt employers).

An employer claiming the Code Sec. 45R credit must obtain coverage through the Small Business Health Options Program Marketplace or be eligible for an exception. Amounts made available by an employer under, or contributed by an employer to, health reimbursement arrangements, health flexible spending arrangements, and health savings accounts are not taken into account for purposes of determining premium payments by the employer when calculating the credit.


Most individuals are applicable individuals, but there are several exceptions based on the taxpayer’s status, religious objections, and income. Transition relief was available for some individuals for 2014.

The individual mandate applies to applicable individuals, also known as “non-exempt individuals.” Applicable individuals do not include prisoners, foreign citizens and nationals, members of health care sharing ministries, and individuals with religious objections to health insurance. Exceptions also apply to Native Americans, short lapses in coverage, individuals who cannot obtain affordable coverage, and individuals whose household income falls below their tax return filing threshold.

Dependents and certain persons outside the United States are also effectively exempt from the penalty.

The exemptions, whether or not they were received through the Health Insurance Marketplace, are reported or claimed on Form 8965, Health Coverage Exemptions. A partial list of the exemptions includes: unaffordable coverage, short coverage gap, general hardship, income below the filing threshold, certain noncitizens, residents of states that did not expand Medicaid, and members of Indian tribes.

The IRS’s Web site has a complete list of exemptions, including information on how to obtain them, as recently advised in FS-2015-14.


A controversy has been brewing over what tax-favored assistance a small employer may provide to employees in maintaining health care benefits. Although not subject to the employer mandate now or in the future as long as the 50-employee-threshold is not crossed, some small employers may be currently unaware of the $100-per-employee-per-day excise tax ($36,500 per year) under Code Sec. 4980D for which they may now be liable for running pre-tax health reimbursement arrangements for employees.

The controversy has its origins in Notice 2013-54, which held that employers’ use of standalone HRAs to reimburse employees for health-care-related expenses may not satisfy the Affordable Care Act’s minimum benefit and annual dollar cap requirements for health insurance plans offered by employers. As a result, the IRS warned that employers that continued to offer such HRAs would be subject to a $100-per-day, per-employee penalty, up to $36,500 for the year per employee. The IRS also implied that reimbursements for premiums to non-ACA-compliant health plans, whether pre-tax or not, would be subject to the penalty if tied to compensation.

Although small businesses were not exempt from this dis-allowance rule, the consensus was that this posed a hidden trap for many small businesses that did not exactly have Affordable Care Act compliance on their radar, especially since the employer mandate did not apply to them. As an accommodation, Notice 2015-17 was issued earlier this year to provide transition relief from the excise tax through June 30, 2015, for employers that were not applicable large employers, or ALEs. Once June 30 rolled by, however, concern continued to be voiced that many small businesses were still unaware of their non-compliance, especially as it involved such a draconian penalty.

A bipartisan group of lawmakers recently introduced companion legislation in both chambers, the Small Business Healthcare Relief Bill (HR 2911; Senate 1697), that would roll back an IRS rule imposing fines on small businesses providing HRAs. The legislation would ensure that small businesses and local municipalities with fewer than 50 employees are allowed to continue using pre-tax dollars to give employees a defined contribution for health care expenses. It would also protect employers from being financially penalized for providing HRAs to employees. In addition, the measure would allow employees to use HRA funds to purchase health coverage on the individual market.


Notice 2015-43, issued last month, provides interim guidance and continuation of transition relief issued in March 2013 from the application of the Affordable Care Act with respect to expatriate health plans. Under the guidance, pending the issuance of proposed regulations, employers, plan sponsors, and individuals may apply the requirements of the Expatriate Health Coverage Clarification Act of 2014 using a reasonable good-faith interpretation. At year-end 2014, Congress passed and President Obama signed the EHCCA. Under the new law, expatriate health plans are generally exempt from the ACA. Additionally, the EHCCA treats coverage under an expatriate plan as minimum essential coverage for ACA purposes. The EHCCA applies to expatriate health plans issued or renewed on or after July 1, 2015. This new law applies whether the plan is sponsored by any employer, large or small.

* Minimum essential coverage. Coverage provided under an expatriate group health plan is a form of minimum essential coverage that satisfies the individual shared responsibility requirements under the individual mandate of Code Sec. 5000A. For purposes of the relief, an “expatriate health plan” is an insured group health plan with respect to which enrollment is limited to primary insureds who reside outside of their home country for at least six months of the plan year and any covered dependents, and its associated group health insurance coverage.


The Supreme Court decision in King v. Burwell preserves nationwide use of the Affordable Care Act’s Sec. 36B credit. However, it does not end questions of interpretation and applicability of certain rules. Particularly for small businesses and their employees, additional guidance from the IRS is anticipated, both to lessen the negative impact of those provisions and to help coordinate them as Congress intended.


Ten Things to Know about Identity Theft and Your Taxes

Originally Published in IRS.GOV

Learning you are a victim of identity theft can be a stressful event. Identity theft is also a challenge to businesses, organizations and government agencies, including the IRS. Tax-related identity theft occurs when someone uses your stolen Social Security number to file a tax return claiming a fraudulent refund.

Many times, you may not be aware that someone has stolen your identity. The IRS may be the first to let you know you’re a victim of ID theft after you try to file your taxes.

The IRS combats tax-related identity theft with a strategy of prevention, detection and victim assistance. The IRS is making progress against this crime and it remains one of the agency’s highest priorities.

Here are ten things to know about ID Theft:

  1. Protect your Records.  Do not carry your Social Security card or other documents with your SSN on them. Only provide your SSN if it’s necessary and you know the person requesting it.Protect your personal information at home and protect your computers with anti-spam and anti-virus software. Routinely change passwords for Internet accounts.
  2. Don’t Fall for Scams.  The IRS will not call you to demand immediate payment, nor will it call about taxes owed without first mailing you a bill. Beware of threatening phone calls from someone claiming to be from the IRS. If you have no reason to believe you owe taxes, report the incident to the Treasury Inspector General for Tax Administration (TIGTA) at 1-800-366-4484.
  3. Report ID Theft to Law Enforcement.  If your SSN was compromised and you think you may be the victim of tax-related ID theft, file a police report. You can also file a report with the Federal Trade Commission using the FTC Complaint Assistant. It’s also important to contact one of the three credit bureaus so they can place a freeze on your account.
  4. Complete an IRS Form 14039 Identity Theft Affidavit.  Once you’ve filed a police report, file an IRS Form 14039 Identity Theft Affidavit.  Print the form and mail or fax it according to the instructions. Continue to pay your taxes and file your tax return, even if you must do so by paper.
  5. Understand IRS Notices.  Once the IRS verifies a taxpayer’s identity, the agency will mail a particular letter to the taxpayer. The notice says that the IRS is monitoring the taxpayer’s account. Some notices may contain a unique Identity Protection Personal Identification Number (IP PIN) for tax filing purposes.
  6. IP PINs.  If a taxpayer reports that they are a victim of ID theft or the IRS identifies a taxpayer as being a victim, they will be issued an IP PIN. The IP PIN is a unique six-digit number that a victim of ID theft uses to file a tax return. In 2014, the IRS launched an IP PIN Pilot program. The program offers residents of Florida, Georgia and Washington, D.C., the opportunity to apply for an IP PIN, due to high levels of tax-related identity theft there.
  7. Data Breaches.  If you learn about a data breach that may have compromised your personal information, keep in mind not every data breach results in identity theft.  Further, not every identity theft case involves taxes. Make sure you know what kind of information has been stolen so you can take the appropriate steps before contacting the IRS.
  8. Report Suspicious Activity.  If you suspect or know of an individual or business that is committing tax fraud, you can visit and follow the chart on How to Report Suspected Tax Fraud Activity.
  9. Combating ID Theft.  Over the past few years, nearly 2,000 people were convicted in connection with refund fraud related to identity theft. The average prison sentence for identity theft-related tax refund fraud grew to 43 months in 2014 from 38 months in 2013, with the longest sentence being 27 years.During 2014, the IRS stopped more than $15 billion of fraudulent refunds, including those related to identity theft.  Additionally, as the IRS improves its processing filters, the agency has also been able to halt more suspicious returns before they are processed. So far this year, new fraud filters stopped about 3 million suspicious returns for review, an increase of more than 700,000 from the year before.
  10. Service Options.  Information about tax-related identity theft is available online. We have a special section on devoted to identity theft and a phone number available for victims to obtain assistance.

For more on this Topic, see the Taxpayer Guide to Identity Theft.


Six Tips to Help You Pay Your Tax Bill this Summer

Originally Published in IRS.GOV

If you get a tax bill from the IRS, don’t ignore it. The longer you wait the more interest and penalties you will have to pay. Here are six tips to help you pay your tax debt and avoid extra charges:

1. Reply promptly.  After tax season, the IRS typically sends out millions of notices. Read it carefully and follow the instructions. If you owe, the notice will tell you how much and give you a due date. You should respond to the notice promptly and pay the bill to avoid additional interest and penalties.

2. Pay online.  Using an IRS electronic payment method to pay your tax is quick, accurate and safe. You also get a record of your payment. Options for electronic payments include:

Direct Pay and EFTPS are free services. If you pay by credit or debit card, the payment processing company will charge a fee.

3. Apply online to make payments.  If you are not able to pay your tax in full, you may apply for an installment agreement. Most people and some small businesses can apply using the Online Payment Agreement Application on If you are not able to apply online, or you prefer to do so in writing, use Form 9465, Installment Agreement Request to apply. The best way to get the form is on You can download and print it at any time.

4. Check out a direct debit plan.  A direct debit installment agreement is the lower-cost hassle-free way to pay. The set-up fee is less than half of the fee for other plans. The direct debit fee is $52 instead of the regular fee of $120. With a direct debit plan, you pay automatically from your bank account on a day you set each month. There is no need for you to write a check and make a trip to the post office. There are no reminder notices from the IRS and no missed payments. For more see the Payment Plans, Installment Agreements page on

5. Pay by check or money order.  Make your check or money order payable to the U.S. Treasury. Be sure to include:

  • Your name, address and daytime phone number
  • Your Social Security number or employer ID number for business taxes
  • The tax period and related tax form, such as “2014 Form 1040”

Mail it to the address listed on your notice. Do not send cash in the mail.

6. Consider an Offer in Compromise.  With an Offer in Compromise, or OIC, you may be able to settle your tax debt with the IRS for less than the full amount you owe. An OIC may be an option if you are not able to pay your tax in full. It may also apply if full payment will create afinancial hardship. Not everyone qualifies, so you should explore all other ways to pay before submitting an OIC. To see if you may qualify and what a reasonable offer might be, use the IRS Offer in Compromise Pre-Qualifiertool.

Find out more about the IRS collection process on


Revenue Ruling 2015-13: 2016 Tax Deadline will be April 18 for Most Taxpayers

The Internal Revenue Service today issued guidance regarding the filing deadline for individual tax returns next year. The guidance clarifies the effect Emancipation Day and Patriots’ Day have on the filing deadline for individuals filing their returns in April 2016.

In most years, the filing deadline is April 15. In some years, the District of Columbia’s observation of Emancipation Day can affect the nation’s filing deadline (District of Columbia holidays impact tax deadlines in the same way that federal holidays do). Because Emancipation Day falls on Saturday, April 16, in 2016 it will be observed on Friday, April 15, which pushes the tax filing deadline to the next business day – Monday, April 18, 2016. Although most individual taxpayers will have until April 18, 2016 to file and pay their taxes, Patriots’ Day will be observed next year on Monday, April 18 in Maine and Massachusetts. This means individual taxpayers in Maine and Massachusetts will have until April 19, 2016 to file and pay their taxes.

Revenue Ruling 2015-13 will be published in Internal Revenue Bulletin 2015-22 on June 1, 2015.


Thieves access IRS Get Transcript app, 100,000 accounts compromised

Originally Published in Journal of Accountancy

The IRS announced on Tuesday that criminals have used taxpayer-specific information to gain access to approximately 100,000 taxpayers’ accounts through the IRS’s Get Transcript online application and steal those taxpayers’ data. The Get Transcript app has been shut down temporarily.

The IRS says the criminals obtained enough taxpayer-specific information from outside sources that they were able to get through the Get Transcript authentication process. The IRS became aware of the problem late last week when it noticed unusual activity taking place in the application. The hacking apparently started in February and involved approximately 200,000 attempts to access the Get Transcript app. The Get Transcript app is not hosted on the IRS computer system that handles tax return filing submissions, and the IRS says that the filing submission system remains secure.

Both the Treasury Inspector General for Tax Administration (TIGTA) and the IRS’s Criminal Investigation unit are investigating the matter. As for a motive, the IRS said in its announcement of the breach, “It’s possible that some of these transcript accesses were made with an eye toward using them for identity theft for next year’s tax season.”

The IRS says it will provide a free credit monitoring service for those taxpayers whose accounts were hacked. It is also notifying all 200,000 taxpayers whose accounts were the targets of the unauthorized access attempts. Those letters will start going out this week.


Supreme Court: Maryland has been wrongly double-taxing residents who pay income tax to other states

Originally Published in The Washington Post

A divided Supreme Court ruled Monday that Maryland’s income tax law is unconstitutional because it does not provide a full tax credit to residents for income tax paid outside the state, a ruling likely to cost Maryland counties and localities across the country millions of dollars in revenue.

The court voted 5 to 4 to affirm a 2013 Maryland Court of Appeals ruling that the state’s practice of withholding a credit on the county segment of the state income tax wrongly exposes some residents with out-of-state income to double taxation. Justices said the provision violated the Constitution’s commerce clause because it might discourage individuals from doing business across state lines.

In most states, income from elsewhere is taxed both where the money is made and where tax­payers live. To guard against double taxation, states usually give residents a full credit for income taxes paid on out-of-state earnings.

Maryland residents are permitted to deduct income taxes paid to other states from what they pay in Maryland income tax. But the state did not allow the same deduction to be applied to a “piggyback” tax that is collected by the state for counties and the city of Baltimore.

The ruling affects about 55,000 Maryland taxpayers, according to the state comptroller’s office.

Those who tried to claim the credit on their county income tax returns between 2006 and 2014 are likely to be eligible for refunds, which officials estimate could total $200 million with interest.

Going forward, certain small-business owners who pay income taxes to another state on income earned in that state will be able to claim a credit for both the state and county portions of the Maryland tax, costing Maryland an estimated $42 million a year in revenue.

Montgomery County, which has the highest share of residents with out-of-state income, stands to be hardest hit. State officials estimate that the county is on the hook for about $115 million in refunds and interest, plus a loss of $24 million a year in tax revenue.

“I was hoping we would avoid this,” said County Executive Isiah Leggett (D), warning that the loss of revenue increases the likelihood of a major property tax increase next year. “This case cannot be overstated in terms of its significance.”

The ruling in Comptroller of the Treasury of Maryland v. Wynne also potentially affects thousands of other cities, counties and states with similar tax laws, including New York, Indiana, Pennsylvania and New York.

The case was brought by a Howard County couple, Brian and Karen Wynne, who reported $2.7 million in 2006 income, about half from their stake in Maxim Healthcare Services, a Columbia-based home-care and medical staffing company that does business in more than three dozen states.

The Wynnes paid $123,363 in Maryland state income tax and claimed an $84,550 Maryland credit for taxes paid in other states on income from Maxim.

Maryland taxes personal income at up to 5.75 percent. It also collects and distributes a piggyback income tax of up to 3.2 percent for each of the 23 counties and Baltimore City. But Maryland until now has offered no credit for the piggyback tax — in this case, the 3.2 percent the Wynnes owed to Howard County. The Wynnes and their attorneys contended that this represented about $25,000 in illegal double taxation.

The court was sharply divided, although not along the usual ideological lines. Justice Samuel A. Alito Jr. wrote the opinion for a majority that comprised him, Chief Justice John G. Roberts Jr. and Justices Anthony M. Kennedy, Stephen G. Breyer and Sonia Soto­mayor.

Alito said the court has long recognized that the commerce clause has a “dormant” or underlying meaning. This holds that while the clause gives Congress the power to regulate commerce among the states, it also was intended to ensure that states would not pass laws to restrict interstate business.

Maryland’s tax law violates that implicit aspect of the commerce clause, Alito said.

State officials argued that under the due process clause of the Constitution, states have a historic right to tax the income of their residents, no matter where it is earned.

The piggyback segment is excluded from the tax credit, officials said, to ensure that all residents pay an equitable share for local government services such as schools and public safety.

But Alito said Maryland’s argument is flawed because states have long offered a similar credit for out-of-state taxes paid by corporations, who “also benefit heavily from state and local services.”

Alito called Maryland’s tax policy “inherently discriminatory,” saying it essentially operates as a tariff, or a tax designed to restrict trade.

Justices Ruth Bader Ginsburg, Antonin Scalia, Elena Kagan and Clarence Thomas dissented, with Ginsburg, Scalia and Thomas writing separate opinions.

Ginsburg, writing the principal dissent, said there was nothing in the Constitution that compelled Maryland — or any other state — to change its laws because of taxes paid by its residents elsewhere. .

In his dissent, Scalia called the dormant commerce clause “a judge-invented rule under which judges may set aside state laws that they think impose too much of a burden upon interstate commerce.” Scalia said he agreed that such a view of the clause has a long history. “So it does, like many weeds,” he wrote. “But age alone does not make up for brazen invention.”

Brian Wynne, who now lives in Carroll County and no longer works for Maxim, declined to comment Monday.

Michelle Parker, a spokeswoman for Comptroller Peter Franchot (D), said in a statement Monday that the office will “work diligently and in a timely manner to comply with the decision and enforce Maryland law consistent with the decision of the Supreme Court.” Parker added that the office is already reviewing about 8,000 refund claims dating back tjo 2006.

Money for the refunds will come from the state’s income tax reserve fund. The state will recoup that money by reducing state income tax revenue sent to localities each quarter over a period of two years, starting in June 2016.

Maryland’s General Assembly last year lowered the interest rate that applies to refunds from past years in order to cushion the blow in case the Supreme Court ruled against the state. The interest rate was reduced from 13 percent to the average prime rate during fiscal 2015, or about 3 percent.


Phishing Remains on the IRS “Dirty Dozen” List of Tax Scams for the 2015 Filing Season

Originally Published in IRS.GOV

WASHINGTON — The Internal Revenue Service today warned taxpayers to watch out for fake emails or websites looking to steal personal information. These “phishing” schemes continue to be on the annual IRS list of “Dirty Dozen” tax scams for the 2015 filing season.

“The IRS won’t send you an email about a bill or refund out of the blue. Don’t click on one claiming to be from the IRS that takes you by surprise,” said IRS Commissioner John Koskinen. “I urge taxpayers to be wary of clicking on strange emails and websites. They may be scams to steal your personal information.”

Compiled annually, the “Dirty Dozen” lists a variety of common scams that taxpayers may encounter anytime but many of these schemes peak during filing season as people prepare their returns or find people to help with their taxes.

Illegal scams can lead to significant penalties and interest and possible criminal prosecution. IRS Criminal Investigation works closely with the Department of Justice (DOJ) to shutdown scams and prosecute the criminals behind them.

Stop and Think before Clicking

Phishing is a scam typically carried out with the help of unsolicited email or a fake website that poses as a legitimate site to lure in potential victims and prompt them to provide valuable personal and financial information. Armed with this information, a criminal can commit identity theft or financial theft.

If you receive an unsolicited email that appears to be from either the IRS or an organization closely linked to the IRS, such as the Electronic Federal Tax Payment System (EFTPS), report it by sending it to

It is important to keep in mind the IRS generally does not initiate contact with taxpayers by email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels. The IRS has information online that can help you protect yourself from email scams.