The 2014 tax breaks you’ll be able to take

Originally Posted on CNN Money

Well, finally.

Congress on Tuesday night extended dozens of expired “temporary” tax breaks for 2014.

It took the Senate, by a 76 to 16 vote, until the week after Congress was supposed to adjourn to pass the bill, which the House had already approved.

The bill will now be sent to President Obama, who is expected to sign it.

The majority of tax breaks in the bill pertain to businesses, but a handful will affect individuals.

Among those who will benefit from the retroactive extension to January 1, 2014: Teachers who buy classroom supplies, mass-transit commuters, residents of states with no income tax, parents with kids in college, some homeowners and some retirees with IRAs.

The bill also includes a new provision that will benefit disabled adults.

What’s not clear yet is whether passage of the tax extenders bill so late in the year will force the IRS to delay when you can start filing your 2014 taxes, which typically begins in mid-January.

But whenever tax season starts, here are the extended tax breaks that you can take on your 2014 tax return:

Deduction for teachers’ expenses: This measure lets school teachers deduct up to $250 for the costs of classroom supplies that they buy with their own money. It’s available to all teachers, whether they itemize or not.

Equal treatment of commuting costs: All commuters may reduce their pre-tax income to account for their commuting costs. Under the law, however, those who drive to work and pay for parking are allowed to exclude more ($250 per month) than those who use mass transit ($130 per month). This measure again provides parity by also allowing mass transit riders to exclude $250 per month.

State and local sales tax deduction: If you itemize your taxes, this measure lets you deduct the state and local sales taxes you’ve paid in lieu of state income taxes.

The deduction can be a boon for itemizers who live in Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming. Those are the seven states that don’t impose an income tax but where residents pay sales taxes, either at the state or local levels.

Tuition deduction: Among the many education tax breaks on the books, this one is available to all tax filers, whether you itemize or not. With it, you may deduct up to $4,000 in qualified tuition, fees and related expenses for post-secondary education, such as college and graduate school. The deduction may be taken for yourself, your spouse or your dependents.

But there are income limitations, and if you take it you may not take other types of education tax breaks, such as the Lifetime Learning Credit. Your deduction also is reduced by any grants and scholarships received to pay for school, as well as any money withdrawn from tax-advantaged, education savings accounts.

Deduction for mortgage insurance premiums: If you only put down a small amount to buy a home you may be required to pay for mortgage insurance to protect the lender against default. This tax break lets you deduct the cost of your premiums if you itemize your deductions.

Income exclusion for mortgage debt that’s been forgiven: When you sell your home for less than what you owe the bank or your home is foreclosed, the bank may agree to forgive the remaining debt you owe. But the IRS typically treats that forgiven debt as taxable income to you. This tax break lets you exclude it from your income.

Tax-free IRA withdrawals for charity: With this measure, anyone over 70-1/2 may take tax-free distributions of up to $100,000 from a traditional IRA if the money is distributed directly to an eligible charity.

While retirees can’t also take a deduction for that contribution, the money won’t count as income. So it won’t hurt when it comes to other taxes, such as those imposed on Social Security benefits when income exceeds a certain level, said Mark Luscombe, principal federal tax analyst for tax publisher WoltersKluwer, CCH.

Tax-free savings for people with disabilities: Attached to the extender bill is the Achieving a Better Life Experience (ABLE) Act. That act will permit people who were disabled before the age of 26 — as well as their family and friends — to contribute up to a combined total of $14,000 a year to an ABLE account.

Earnings would grow tax free and the money would not disqualify the disabled person from receiving federal assistance benefits such as Medicaid and Supplemental Security Income so long as it is used to pay for housing, transportation, education and wellness.


Obamacare Tax Problems to Watch Out For

Originally Published in ACCOUNTINGTODAY.COM

Affordable Care Act-related tax issues await CPAs and those who prepare their own returns this upcoming tax season, according to the National Conference of CPA Practitioners.

Medical Mysteries

There has been very little clarity about many ACA policies, leaving significant opportunities for error as people try to carve out their own interpretations. Businesses and individuals will be required to be compliant, but the reality remains that many may not know how to go about achieving this goal. Here are some ACA tax issues that NCCPAP feels CPAs and their business and individual clients should know about now.

Employer Shared Responsibility

Effective Jan. 1, 2015, one of the main provisions of the Affordable Care Act—employer shared responsibility—will begin. This means all employers with 100 or more employees are required to offer health insurance. Further, all employers will have required reporting for 2015. All employers will need to file the Form 1095-C with both the IRS and their employees by the end of January 2016. This form will provide essential information for employees to prepare their taxes. Specifically, it will verify the months that each employee had minimum essential coverage.

Minimum Essential Coverage

There are no mandatory ACA employer filing requirements for 2014. The IRS is telling CPAs to use their best judgment to determine if a person had minimum essential coverage, which is a bronze plan, but also requires an individual to have had coverage for all 12 months.

Careful Before Checking the Box

If taxpayers are preparing their own returns, many may mistakenly check the box that affirms they did have minimal essential coverage, even in cases when that is not accurate. This is because individuals either don’t know what minimal essential coverage entails, or are intentionally trying to avoid a penalty

Avoid the Penalty

For example, those who had insurance for half the year with an employer, but who were unemployed for half the year without health insurance, might think they had minimal essential coverage. In this situation they would be wrong since each person is required to have coverage for all 12 months to avoid paying a penalty. 

Truth or Dare

There is no way the government will be able to verify whether or not a person is telling the truth because employers have no mandatory reporting requirements for 2014. Even if someone had purchased an individual plan on their own, since the health insurance companies have no reporting requirements for 2014, there is no way for the government to verify whether someone had an individual plan or had no insurance at all.

Watch the Timeframe

If someone purchased health insurance on the exchange, the government would be able to prove the months they were covered with the exchange-purchased insurance through Form 1095-A. For example, if an individual were uninsured for six months and covered with exchange-purchased insurance for six months, the government would only be able to see the timeframe the individual had exchange-purchased coverage. Essentially this person would not meet the minimal essential coverage guidelines and would be subject to a financial penalty—that is if the government had documentation to prove the gap in coverage, which it doesn’t.

Religious Exemptions

There is a lot of concern and confusion regarding all of the various ACA exemptions. Some are very clear: if you’re a member of a religious sect, such as the Amish, or a member of a federally recognized Native American tribe, you are exempt from minimal essential coverage. Some Catholic religious orders like nuns don’t need to have contraception coverage. Those are the basic and obvious exemptions.

Fuzzy Wording

Not all exemptions are that easy to interpret, according to Stephen Mankowski, CPA, who is the Tax Policy Chair for NCCPAP, and a partner in the Bryn Mawr, Pa., accounting practice, EP Caine & Associates. “Here is where it gets fuzzy,” Mankowski said. “You may be eligible for an exemption if you had financial difficulties, received shut-off notices, experienced the death of a close family member or were in prison for part or all of the year. In these situations, so much is left up to the taxpayer for interpretation. For example, how does one define financial difficulties, or a ’close’ family member?  If you claim either of those, it could land you a cushy three-year exemption, according to ACA guidelines. Of course proving these in the event of an IRS audit could cause problems down the road.” Mankowski said. “There are many more exemptions beyond what I’ve listed here that will cause confusion to CPAs and the American taxpayer.”

Federal Repayments

“The repayment of premium tax credits is starting to get more attention,” said NCCPAP President Sandra G. Johnson, CPA, who runs a practice under her name out of Bellmore, N.Y.  ”This is a conflict that has been underreported for a long time,” Johnson stated. “Now people are realizing for the first time that they had a premium discount for the health insurance premiums they paid in 2014 because their premium cost was based on their 2012 income. When their income increased in 2014, their premium tax credit decreased. These individuals are now going to owe the government money, and payback will occur through their 2014 federal tax return. More and more taxpayers will be faced with this sad reality.” Johnson is referring to how many taxpayers did not understand that their reasonable premiums were due to a government-offered discount based on the income they stated on their application (in many cases from their 2012 taxes). A higher 2014 income means taxpayers must now pay the government back for that premium discount that was initially credited to them if they are found ineligible.


Prosecutors Drop IRS Civil Forfeiture Case

Originally Published in ACCOUNTINGTODAY.COM

Federal prosecutors in Iowa have agreed to drop a controversial civil asset forfeiture case in which the Internal Revenue Service seized nearly $33,000 from the owner of a Mexican restaurant whose cash deposits at her bank had aroused suspicion of criminal activity.

The government moved to drop its case against Carole Hinders, who owned Mrs. Lady’s Mexican Food in Arnolds Park, Iowa, after hearing her sworn testimony last week, according to the Institute for Justice, a libertarian law firm that represented her in the case.

The Institute for Justice is the same group that won another high-profile case against the IRS last year, convincing a federal judge and an appeals court that the IRS’s effort to require mandatory testing and continuing education of tax preparers exceeded its statutory authority.

In the new case, the government will return all of the nearly $33,000 it seized from Hinders in 2013. The Institute for Justice teamed up with her in October to clear her name of any wrongdoing and get her money back.

However, the firm said the IRS is asking the court for the right to refile the case in the future and repeated its claim that the case was justified. The Institute for Justice plans to file a response, asking the court to deny the government any right to refile its case and clear the way for Hinders to get interest on the money that was seized.

“I actually wanted a trial, which would have cleared my name and helped to protect others, but it is good to get the money back,” Hinders said in a statement. “My fight is far from over, though. I am willing to tell my story to Congress to help change forfeiture laws so that no one else has to go through what I suffered.”

She may already have some support in Congress. Last week, the Republican and Democratic leaders of the tax-writing House Ways and Means Committee filed legislation to protect taxpayers against the inappropriate use of civil asset forfeitures by the IRS (see Congressmen Introduce Bill to Curb IRS Civil Asset Forfeitures).

Sen. Chuck Grassley, R-Iowa, the ranking member of the Judiciary Committee, also plans to introduce legislation in the Senate to curb the practice. Grassley is expected to become chairman of the Judiciary Committee in the next Congress. He is a senior member and former chairman and ranking member of the Finance Committee, with jurisdiction over the IRS.

“I’m working on civil asset forfeiture reform legislation to introduce in the new Congress,” he said in a statement Monday. “News reports including those in The Washington Post have detailed aggressive seizures of cash and property from drivers. In the case of the Iowa restaurant owner and others like it, the IRS has now adopted an enforcement policy under which it won’t seize assets under the structuring law without evidence of underlying criminal activity unless there are extenuating circumstances. I’m looking at ways to make sure the IRS and other federal agencies’ use of these statutes are reformed permanently going forward. Since the IRS changed its approach in these cases, it could change its approach again, and the same is true for other agencies. It’s important to look at getting the right policies set in statute going forward. The government’s power to seize assets should be used fairly and with common sense. The reforms I’m developing are meant to curb instances in which government power unfairly infringes on the rights of motorists, small business owners and other Americans.”

The IRS had seized Hinders’ money under the assumption that she had structured her restaurants bank deposits to keep them under $10,000 to avoid federal bank reporting requirements. Banks are required to file Suspicious Activity Reports if they see large cash deposits coming in over $10,000, but law enforcement also looks for patterns where depositors seem to be attempting to keep the deposits under the level required for the reporting. However, the IRS has indicated that it will not pursue new cases so aggressively.

The case has received significant attention from the press, including The New York Times and Des Moines Register. Hinders owned and operated Mrs. Lady’s Mexican Food for 38 years. The restaurant only accepted cash, which meant she made frequent cash deposits at the bank. Federal law requires banks to report cash deposits larger than $10,000. Since her deposits were less than $10,000, the government claimed she was deliberately making small deposits to evade the reporting requirement.

The IRS seized Hinders’ money using civil forfeiture, which allows law enforcement agencies to take cash, cars and other property without even charging the property owner with a crime. Carole has not been charged with a crime. The government has never claimed that any of the money that it seized from Hinders’ restaurant is the proceeds of illegal activity—only that civil forfeiture law allows them to seize money merely suspected of being involved in crime.

“The IRS should not be raiding the bank accounts of innocent Americans, and it should not take a team of lawyers more than 18 months to get it back when they do,” said Institute for Justice attorney Larry Salzman in a statement. “This case again shows why civil forfeiture laws have become one of the most serious threats to private property rights in the nation.”

“Instead of simply returning the money with interest and an apology to Carole for the nightmare they put her through, the IRS is shamefully attempting to mask their retreat by insisting on the right to refile the case in the future,” said IJ attorney Wesley Hottot. “This was an outrageous abuse from the start and the government should recognize that.”


Obama Threatens Veto of Emerging Tax-Break Agreement in Congress

Originally Published in ACCOUNTINGTODAY.COM

(Bloomberg) President Barack Obama would veto a tax-break agreement being negotiated in Congress by Senate Democrats and House Republicans.

“The president would veto the proposed deal because it would provide permanent tax breaks to help well-connected corporations while neglecting working families,” Jen Friedman, a White House spokeswoman, said in an e-mail today.

Lawmakers are nearing an agreement on extending U.S. tax breaks that lapsed at the end of 2013 and making others permanent. The proposal would add about $450 billion to the budget deficit over the next decade, said a Democratic aide.

A veto would require an override by two-thirds of lawmakers in the House and Senate, a high barrier for a deal that could draw opposition from some Democrats.

The biggest beneficiaries of the breaks would include corporations that conduct research, residents of states such as Washington and Texas that lack an income tax, and wind-energy producers concerned that their tax benefit would end all at once instead of being phased out. Tax breaks for low-income families that lapse at the end of 2017 wouldn’t be extended.

The tax break for corporate research, which would be expanded and made permanent, benefits companies including Intel Corp. and Johnson & Johnson. A benefit for small-business investments also would be locked in.

The plan would make permanent a provision allowing individuals to deduct state sales taxes, an issue important to Senate Democratic Leader Harry Reid of Nevada. In that state 22 percent of tax filers take advantage of the break, the second- highest percentage in the U.S., according to the Pew Charitable Trusts.

Wind Energy
The production tax credit for wind energy would be phased out over several years, said the aide, who spoke on condition of anonymity because the package wasn’t yet public.

A tax break for mass-transit commuters would be permanently extended as would a tax credit for college tuition, the aide said. Those are items championed by Senator Charles Schumer of New York, the third-ranking Senate Democrat.

Other breaks that may be made permanent include incentives for landowners to donate conservation easements and for individuals to make charitable donations directly from tax- advantaged retirement accounts.

Dozens of other tax breaks that expired at the end of 2013 would be continued through 2015. Among those that have lapsed are a provision that lets home sellers exclude from income the forgiven debt from short sales, as well as accelerated depreciation for motorsports tracks.

Child Credit
After reports of an emerging agreement yesterday, the Obama administration issued a statement signaling that it opposed a package that doesn’t extend expansions of the child tax credit and earned income tax credit that lapse at the end of 2017.

“An extender package that makes permanent expiring business provisions without addressing tax credits for working families is the wrong approach, at the expense of middle-class families,” Treasury Secretary Jacob J. Lew said yesterday. “Any deal on tax extenders must ensure that the economic benefits are broadly shared.”

Congress returns on Dec. 1 to finish its post-election session, and lawmakers want to leave Washington by Dec. 11.

That time frame might make it difficult for Obama to veto any plan, especially because the Internal Revenue Service has warned that waiting could delay tax refunds next year.

If this proposal falls apart, House Republicans’ fallback plan is to extend the lapsed breaks through Dec. 31, 2014, Ways and Means Committee Chairman Dave Camp said yesterday.

That approach would require lawmakers to return to the issue next year, when Republicans will control the House and the Senate.


IRS Offers Rules on Hardship Exemptions from ACA Individual Mandate

Originally Published in ACCOUNTINGTODAY.COM

The Internal Revenue Service has issued a notice, regulations and other guidance related to the Affordable Care Act, including information on getting a hardship exemption from the individual mandate for health insurance coverage.

Notice 2014-76 provides a list of the hardship exemptions that taxpayers can claim on a federal income tax return without obtaining a hardship exemption certification from the health insurance marketplace.

Under the Affordable Care Act, for each month beginning after Dec. 31, 2013, Section 5000A of the Tax Code requires individuals to either have minimum essential health coverage for themselves and any nonexempt family member whom the taxpayer can claim as a dependent, qualify for an exemption, or include an individual shared responsibility payment with their federal income tax return.

An individual is exempt from the requirements for a month if he or she has a hardship exemption certification issued by the health insurance marketplace certifying that the person has suffered a hardship affecting their ability to obtain minimum essential coverage that month.

The IRS simultaneously released Revenue Procedure 2014-62, which announces the indexed applicable percentage table for calculating an individual’s premium tax credit for taxable years beginning after 2015. The document also announces the indexed required contribution percentage for determining whether an individual is eligible for affordable employer-sponsored minimum essential coverage for plan years beginning after 2015.

The same Revenue Procedure cross-references the required contribution percentage, as determined under guidance issued by the Department of Health and Human Services, for determining whether an individual is eligible for an exemption from the individual shared responsibility payment because of a lack of affordable minimum essential coverage, beginning after 2015.

In addition, the IRS issued TD 9705, finalizing its regulations for minimum essential coverage and other rules regarding the individual shared responsibility payment, also known as the individual mandate.


Budget Cuts Hit IRS’s Ability to Collect Delinquent Taxes

Originally Published in ACCOUNTINGTODAY.COM

Years of budget cuts are having a negative impact on the ability of the Internal Revenue Service to collect delinquent taxes, according to a new government report.

The IRS’s Automated Collection System is responsible for answering incoming taxpayer calls and working the inventory of taxpayer delinquent accounts, the report from the Treasury Inspector General for Tax Administration noted. Since fiscal year 2010, the ACS workforce has declined by 39 percent due to attrition or reassignment, TIGTA found. Because those resources are needed to answer telephone calls, fewer resources are available to work on the inventory of past-due taxes.

This has contributed to unfavorable trends in several ACS business results, the report noted, including the amount of new inventory of cases of uncollected taxes outpacing closures of such cases; the inventory of delinquent tax cases taking longer to close; more cases being closed as uncollectible; fewer enforcement actions being taken; and more aged cases being transferred to a holding file queue that the IRS maintains of uncollected taxes.

In addition, the IRS has not established performance metrics to measure the effect that answering incoming calls has had on compliance business results, TIGTA pointed out. Capturing such data would allow ACS management to assess the impact of prioritizing call handling.

“IRS management should take steps to ensure that inventory routing and ACS resource capabilities are aligned with overall IRS tax administration priorities and their vision for the role of the ACS in the Collection enforcement strategy,” said TIGTA Inspector General J. Russell George in a statement.

TIGTA recommended that the IRS re-examine the ACS’s role in the collection workflow process, including inventory delivery to the ACS as well as case retention criteria, and align ACS resources accordingly. The IRS should also request a study to determine the impact of the policy change to not require Notice of Federal Tax Lien determinations on certain unpaid balances, according to TIGTA. The IRS should also establish performance metrics for ACS call handling data to measure the impact that answering taxpayer calls has on compliance business results, the report suggested.

IRS officials agreed with the recommendations and plan to take corrective actions. “We recognize the critical role ACS plays in our Collection program and, while it is our intent that ACS’s role not be diminished going forward, the current budget environment requires us to continually evaluate our programs and priorities in light of declining resources,” wrote Karen Schiller, commissioner of the IRS’s Wage & Investment Division, in response to the report. “To that end, the Wage & Investment and Small Business/Self-Employed Divisions are currently realigning our compliance programs. As part of this effort, we are creating a single Collection organization within the Small Business/Self-Employed Division. The executive lead of this new Collection organization will have end-to-end accountability for the Collection program and will be responsible for reducing redundancies in our Collection processes and improving taxpayer services while identifying emerging Collection issues. While we are continuing to develop the structure and the concept of operations for this new Collection organization, ACS will be a key component. And, as part of our work on the concept of operations for the new Collection organization, we will be reviewing our ACS program to determine whether the Collection responsibilities and authorities currently assigned to our ACS employees need to be enhanced. We are proud of ACS’s contributions to our Collection program and it is our intent that ACS’s role be enhanced going forward.”

In further response to the report, the IRS pointed out that budget cuts are havin g an impact on its ability to collect revenue and taxes. “This report dramatically illustrates the bottom-line impact that IRS budget reductions have on revenue collection and unpaid taxes,” the IRS said in a statement emailed to Accounting Today. “With the IRS funding down by $850 million since Fiscal 2010 and priority programs such as identity theft requiring more resources, staffing for Automated Collection System fell from 2,824 in 2010 to 1,730 in 2013. At the same time, the report notes that tax collection in this program fell by $400 million. This is a clear example that deep cuts to the IRS budget hurts tax collection and threatens the nation’s revenue collection.”


IRS Prodded to Fix Search and Seizure Process

Originally Published in ACCOUNTINGTODAY.COM

The Internal Revenue Service’s Criminal Investigation unit needs to improve its search and seizure warrant process to ensure that the evidence it seizes is properly secured and controlled, according to a new government report.

The report, from the Treasury Inspector General for Tax Administration, found that the IRS does not always follow all procedures to ensure that evidence it seizes is properly stored and controlled.

The report comes in the wake of a recent high-profile exposé in The New York Times of abuses in IRS Criminal Investigation’s civil asset forfeiture practices. The Times investigation identified cases in which the IRS had seized large sums of money from business people who had been depositing cash in their bank accounts in amounts under $10,000, prompting the banks to send suspicious activity reports to the IRS. In some cases, innocent business people had thought that keeping the deposits under $10,000 would make it easier for the banks to process the deposits without needing to do the extra paperwork that is required for reporting any deposits over $10,000. But the practice also fits a pattern known as “structuring” that could be a sign of illegal activity, prompting the IRS to seize the assets without needing to file criminal charges. The IRS now plans to change its policy in such cases.

The new TIGTA report pointed out that each IRS Criminal Investigation, or CI, special agent has the authority to perform all duties under all laws and regulations administered by the IRS, including the authority to conduct searches and issue search and seizure warrants.

For its report, TIGTA requested 152 closed search and/or seizure warrant cases from the IRS to review. However, CI management did not provide 91 of these cases. According to CI management, the cases contained grand jury information, were part of an ongoing investigation or had been sealed by the court.

For 70 of the cases, CI management could not provide any documentation to support the contention that the cases contained grand jury information, were part of an ongoing investigation or were sealed. Instead, TIGTA had to rely on CI management’s verbal statements. TIGTA noted this constitutes a significant “scope impairment” on its audit because it prevented TIGTA from fully evaluating CI’s processing of search and seizure warrants and from determining whether the IRS is following established legal requirements to prevent the abuse of taxpayer rights.

However, TIGTA was able to review the remaining 61 closed search and/or seizure warrant cases provided by the IRS and found that 14 cases were missing documentation of the Criminal Tax Counsel’s post-search warrant inventory review, were missing signed affidavits, and/or contained errors on their search warrants.

“Our report found that procedures were not always followed to ensure that seized evidence was properly stored and/or controlled,” said TIGTA Inspector General J. Russell George in a statement. “Without maintaining proper documentation and following evidence procedures, evidence may be inappropriately disclosed, lost, tampered with, or stolen.”

TIGTA recommended that the IRS ensure that the required documentation is maintained in the case files, including the Criminal Tax Counsel’s post-search warrant inventory reviews, as well as signed copies of the affidavits. TIGTA also recommended that the IRS reinforce the need for physical controls over seized evidence, study the physical space needs for evidence storage, and improve access controls over evidence.

In response to the report, the IRS agreed with all five recommendations and plans to take corrective actions on four of them. While the IRS said it agreed with the fifth recommendation, IRS officials stated that they do not have the capability to have a designated evidence custodian in each post of duty due to resource constraints. Instead, the IRS will issue a reminder to managers and special agents of the proper procedures for preserving the chain of custody.

“We take the findings in this report very seriously, and appreciate and agree with your recommendations for ensuring proper documentation and proper storage of all evidence,” wrote J. Donald Fort of IRS Criminal Investigation. “Reductions in our administrative resources have necessitated that special agents maintain the administrative files and evidence for their individual cases; however, we are in the process of working on an improved system of maintaining and storing documents such as search and seizure warrant files. In addition to implementing your recommendations, we intend to add additional procedures and measures of our own to further improve and strengthen our current procedures. First, the policies for proper case file documentation for search and seizure warrants and proper storage of the evidence will be reinforced to all Special Agents. Second, through management and national reviews, we will ensure that the policies and procedures for properly maintaining administrative documentation related to search and seizure warrants are being properly followed. In addition, we are actively working on securing sufficient space for all seized evidence. As you are aware, evidence can only be stored in Criminal Investigation (CI) space, which is restricted secured-access space that is accessible only by CI employees. CI is cognizant of, respects and is sensitive to the rights of taxpayers, when utilizing the authority to conduct searches and obtain search and seizure warrants in accordance with the Fourth Amendment to the United States Constitution. We stress to our special agents to consider all other investigative tools before deciding that a search warrant is the least intrusive means to acquire evidence for an investigation.”

The IRS further elaborated on the steps it is taking in a statement emailed to Accounting Today. “The IRS takes the findings of this report very seriously and notes that TIGTA had no findings of any improper search or seizure warrants served,” the IRS said. “While the IRS’s Criminal Investigation division currently emphasizes proper documentation and storage of evidence, it will pro-actively address the areas where improvements can be made. IRS agrees with all five TIGTA recommendations and is taking corrective action on four of them. The fifth recommendation, to have a designated evidence custodian at each post-of-duty, requires staffing and other resource costs that the current budget environment cannot support. However, CI case agents are the official evidence custodians for the evidence obtained in their investigations and as such maintain the chain of custody.”

“It is important to note that IRS Criminal Investigation facilities are themselves in secure space, which is not accessible by the general public or unauthorized persons,” the IRS pointed out. “We are working with Facility Management and Security Services to secure space to address CI space needs to increase storage capacity.”

The IRS also pointed to the impact of budget cuts on its enforcement efforts. “Since 2010, the IRS budget has been reduced nearly $850 million,” said the IRS. “At the same time, we have 13,000 fewer employees today than we did in 2010. Specifically for our enforcement efforts, we have experienced a decrease of nearly 10 percent in the number of Special Agents during the same time period, falling from 2,780 in 2010 to 2,549 in 2013.”


Report: IRS’s English not always plain

Originally Published in The Hill

The IRS needs to do a better job keeping it simple with taxpayers, according to a new federal audit.

Treasury’s inspector general for tax administration found that the IRS generally did a good job complying with the Plain Writing Act, a 2010 law that requires federal agencies to make official communications easy to understand.

But the inspector general also found that the IRS doesn’t have a full list of all the letters and messages it sends to taxpayers, making it difficult to know how clearly the agency is communicating.

The watchdog also said that half the letters and two-thirds of the notices it examined either weren’t written clearly or didn’t give enough information.

“The IRS mails more than 200 million letters and notices each year to individual and business taxpayers to help them understand and meet their tax obligations,” Russell George, the tax administration inspector general, said in a statement.

“Not only does it make good business sense, but the law requires clear government communications that the public can understand and use.”

Agency officials say they have tried to inventory all the messages they send out, but that the sheer number makes that difficult. The IRS office that corresponds with taxpayers also has 44 separate systems it uses to craft letters or notices to taxpayers.

Even so, the IRS said it would be a waste of limited resources for the agency to try to catalog all the different types of correspondences.

The inspector general did say that the IRS had made strides in some areas to comply with the Plain Writing Act, including by increasing training for staffers and corresponding differently with taxpayers and tax professionals.


Job Openings in U.S. Increase to Highest Level Since 2001

Originally Published in BLOOMBERG

Job openings rose in June to the highest level in more than 13 years, firming up the U.S. labor market picture for the second half of the year.

The number of unfilled positions climbed by 94,000 to 4.67 million, the most since February 2001, from a revised 4.58 million in May, a report from the Labor Department showed today.

Today’s figures are among those on Federal Reserve Chair Janet Yellen’s employment “dashboard,” which she uses to help guide monetary policy. The increase in openings, combined with the highest readings on the number of people hired and leaving their jobs since 2008, means the healing in the labor market is broadening, albeit at a measured rate.

“There’s improvement, but it’s still slow and uneven,” said Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York. Hiring, firings and quits will need to be closer to pre-recession levels “before Yellen and Co. get concerned that maybe the economy might be overheating.”

Stocks fell after the biggest two-day rally in the Standard & Poor’s 500 Index since April, depressed by a drop in energy shares as the price of crude oil retreated. The S&P 500 declined 0.3 percent to 1,930.79 at 11:16 a.m. in New York.

The Job Openings and Labor Turnover Survey, or JOLTS, contextualizes monthly payrolls figures by measuring dynamics including resignations, help-wanted ads and the pace of hiring.

Although it lags the Labor Department’s other jobs data by a month, Yellen follows the report as a measure of labor-market tightness and worker confidence.

Openings, Jobless

Today’s figures indicate there are about 2 unemployed people vying for each opening. The ratio when the last recession began in December 2007 was 1.8 job seekers per opening.

Payrolls expanded by 209,000 workers in July, following a 298,000 gain the prior month, Labor Department figures showed last week. Gains have exceeded 200,000 for six straight months, the first time that’s happened since 1997.

The improving conditions drew more job seekers into the labor force, pushing up the unemployment rate to 6.2 percent from 6.1 percent.

Two-thirds of Yellen’s dashboard measures are still shy of their pre-recession levels, including the share of jobless Americans who have been out of work for 27 weeks or longer, and the portion of the working-age population in the labor force.

In today’s report, the number of people getting jobs rose to 4.83 million in June, the most since April 2008, from 4.74 million, pushing the hiring rate to 3.5 percent from 3.4 percent. The metric is calculated by dividing the number of monthly hires by the number of employees who worked or received pay during that period. It averaged 2.8 percent during the previous expansion.

Help Wanted

Job openings in June increased at factories, retailers and professional and business services. The rate of openings rose to 3.3 percent, the highest since June 2007, from 3.2 percent.

Some 2.53 million people quit their jobs in June, the most since June 2008, up from the prior month’s 2.49 million.

The quits rate, which shows the willingness of workers to leave their jobs and may gauge the degree of optimism in finding a new position, held at 1.8 percent. It read 2.1 percent when the recession started at the end of 2007.

Separations rose to 4.55 million in June from 4.53 million, today’s report showed. Dismissals, which exclude retirements and voluntary departures, decreased to 1.62 million from 1.66 million a month before.

In the 12 months ended in June, the economy generated a net 2.4 million jobs, which included 55.7 million hires and 53.3 million separations.

Propel Incomes

Hiring gains could catalyze enough income growth to drive up consumer spending, which accounts for almost 70 percent of the economy.

Businesses expanding their talent pools include Union Pacific Corp. (UNP) The largest publicly traded railroad expects to hire a total of 5,000 people in 2014, of which 4,000 are expected to cover attrition. Cognizant Technology Solutions Corp. (CTSH), one of the largest providers of outsourcing services, netted 8,800 new hires in the second quarter, the most since 2011.

The overall progress in the economy and labor market has allowed Fed policy makers to further reduce their bond-buying while keeping interest rates at record lows. The Federal Open Market Committee announced July 30 that it would trim monthly asset purchases by $10 billion, to $25 billion. The central bankers repeated that they’ll probably reduce purchases in “further measured steps,” while keeping interest rates low for a “considerable time.”


Senators Introduce Bill to Prevent Tax Refund Theft

Originally Published in ACCOUNTINGTODAY.COM

Leaders of the Senate Finance Committee have introduced bipartisan legislation to improve protection for taxpayers against fraudulent tax refund claims made with stolen identities.

Sen. Orrin Hatch, R-Utah, ranking member of the Senate Finance Committee, and Ron Wyden, D-Ore., who chairs the Senate Finance Committee, introduced theTax Refund Theft Prevention Act of 2014, S. 2736, on Thursday.

The bill includes new assistance for taxpayers who have been victims of identity theft and requires the Internal Revenue Service to establish a new security feature that individuals can use to protect their tax return filings.

“Tax refund fraud is a one-two punch for taxpaying individuals,” Hatch said in a statement. “Millions of taxpayers’ identities are compromised, and all taxpayers have their tax dollars wasted. Our bill aims to address such fraud by enhancing the IRS’s capabilities in detecting fraud and by giving victims the assistance and safeguards they need to repair the damage done by tax theft criminals. In order to further deter this crime, we make tax refund fraud a specific category of a felony offense and enhance security features for filers. Hard-working American families deserve a government that protects both their tax dollars and their sensitive taxpayer information. I am pleased Chairman Wyden has joined me in this advancing this effort.”

“We have to better protect lawful taxpayers from this nightmare issue,” Wyden said. “Earlier this year, I made it clear that taxpayer consumer protection must be at the heart of improving the American tax system. This bill offers a comprehensive, commonsense solution to a growing problem that will help prevent fraud and also provide assistance to those who have been victimized. Senator Hatch and I remain committed to protecting the integrity of our tax system.”

Under the bill, businesses would be required to report both employee compensation and certain non-employee compensation to the government earlier in tax season. The change would improve the IRS’s ability to identify and prevent fraudulent refund claims.“We have to better protect lawful taxpayers from this nightmare issue,” Wyden said. “Earlier this year, I made it clear that taxpayer consumer protection must be at the heart of improving the American tax system. This bill offers a comprehensive, commonsense solution to a growing problem that will help prevent fraud and also provide assistance to those who have been victimized. Senator Hatch and I remain committed to protecting the integrity of our tax system.”

Paid tax preparers would be required to file individual income tax returns and most information returns electronically under the proposed legislation. In addition, the electronic filing requirement for preparers who file over 250 tax returns would be scaled back to 20 returns, over a three-year period, to improve the IRS’s ability to identify and prevent fraudulent refund claims.

The existing access that the Treasury Department has to the National Directory of New Hires database would be expanded for the purpose of identifying and preventing fraudulent tax filings and refund claims.

Victims of tax refund theft would be assigned a single contact person within the IRS for help with correcting their tax records and receiving their tax refunds.

Under the bill, the list of aggravated identity theft crimes that are classified as felonies would be expanded to include tax refund theft. Tax preparers would also face significant new penalties if they inappropriately disclosed taxpayer information in connection with an identity theft crime.Victims of tax refund theft would be assigned a single contact person within the IRS for help with correcting their tax records and receiving their tax refunds.

Individual taxpayers would be able to add password security to their tax filings under the legislation. If a tax return filer elected to add this security measure, then a valid tax return could not be filed without also using the correct password.

Under the bill, due diligence requirements imposed on tax preparers with respect to the Earned Income Tax Credit would be expanded to include a requirement that the preparer verify the tax filer’s identity. The senators’ office noted that many fraudulent returns falsely claim the EITC in order to generate a tax refund.

Under the proposed legislation, he IRS would be prohibited, with limited exceptions, from issuing multiple tax refunds to the same account or address. Annual tax statements received by employees for wages earned would be required to use a truncated Social Security number in order to protect the number from identity theft.