WASHINGTON ― The Internal Revenue Service today issued a consumer alert about possible scams taking place in the wake of Typhoon Haiyan. On Nov. 8, 2013, Typhoon Haiyan – known as Yolanda in the Philippines – made landfall in the central Philippines, bringing strong winds and heavy rains that have resulted in flooding, landslides, and widespread damage.

Following major disasters, it is common for scam artists to impersonate charities to get money or private information from well-intentioned taxpayers. Such fraudulent schemes may involve contact by telephone, social media, email or in-person solicitations.

The IRS cautions people wishing to make disaster-related charitable donations to avoid scam artists by following these tips:

• To help disaster victims, donate to recognized charities.
• Be wary of charities with names that are similar to familiar or nationally known organizations. Some phony charities use names or websites that sound or look like those of respected, legitimate organizations. The IRS website at IRS.gov has a search feature,Exempt Organizations Select Check, through which people may find legitimate, qualified charities; donations to these charities may be tax-deductible. Legitimate charities may also be found on the Federal Emergency Management Agency (FEMA) website at fema.gov.
• Don’t give out personal financial information — such as Social Security numbers or credit card and bank account numbers and passwords — to anyone who solicits a contribution from you. Scam artists may use this information to steal your identity and money.
• Don’t give or send cash. For security and tax record purposes, contribute by check or credit card or another way that provides documentation of the gift.
• If you plan to make a contribution for which you would like to claim a deduction, see IRS Publication 526, Charitable Contributions, to read about the kinds of organizations that can receive deductible contributions.

Bogus websites may solicit funds for disaster victims. Such fraudulent sites frequently mimic the sites of, or use names similar to, legitimate charities, or claim to be affiliated with legitimate charities in order to persuade members of the public to send money or provide personal financial information that can be used to steal identities or financial resources.   Additionally, scammers often send e-mail that steers the recipient to bogus websites that appear to be affiliated with legitimate charitable causes.

Taxpayers suspecting disaster-related frauds should visit IRS.gov and search for the keywords “Report Phishing.” More information about tax scams and schemes may be found at IRS.gov using the keywords “scams and schemes.”

The IRS announced on Tuesday a delay of one or two weeks in the start of the 2014 filing season as a result of the 16-day government shutdown to allow adequate time for the IRS to prepare and test systems. The return filing start date was originally going to be Jan. 21, 2014, but the IRS said it will now start accepting 2013 individual tax returns no earlier than Jan. 28 and no later than Feb. 4. The IRS says it hopes to shorten the delay and will announce the official start date in December.

The government shutdown came at an inopportune time of year. Most of the work the IRS does to program, test, and deploy its return processing systems is done in the fall. “The adjustment to the start of the filing season provides us the necessary time to program, test, and validate our systems so that we can provide a smooth filing and refund process for the nation’s taxpayers,” Danny Werfel, the acting IRS commissioner, said in a news release. “We want the public and tax professionals to know about the delay well in advance so they can prepare for a later start of the filing season.”

No paper returns will be processed before the IRS begins accepting electronic filings.

Despite the delay in the beginning of filing season, the IRS also reiterated that the April 15 tax return filing and payment deadline is statutory and cannot be changed by the IRS but that six-month extensions to file can be obtained by filing Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return, electronically or on paper.

The IRS is apparently struggling to catch up after the shutdown. It says it received 400,000 pieces of correspondence during the shutdown, on top of the 1 million items that were already being processed. The IRS is urging taxpayers who need to contact it to wait if it is not urgent or to try to use automated systems on its website.

The IRS announced on Oct. 17 that 2014 renewals of preparer tax identification numbers (PTINs) are also being delayed because of the government shutdown. The IRS will notify current PTIN holders when the renewal season will start.

This will be the second tax season in a row to have a delayed start. Last year’s filing season was significantly delayed because Congress passed the American Taxpayer Relief Act of 2012, P.L. 112-240, which contained many retroactive provisions, in January 2013 and the IRS needed time to update forms and program and test its processing systems.

October 15th Tax Deadline has Come and Gone!
The October 15th, 2012 deadline for 2012 tax extensions has come and gone.  What does this mean for you?  If you have not filed yet, you could be subject to penalties and fines from the IRS.  If you have any questions regarding potential penalties or you have not filed a tax return yet do not hesitate to call!

What’s Next?
As each year seems to become shorter and shorter, why not start planning for the 2013 tax season?  Get ahead of the game and start planning for the 2013 tax season. By doing this you will find the 2013 tax season relaxing .

Give us a call today to start planning ahead! (864) 375-1040

The Internal Revenue Service today reminded taxpayers that the Oct. 15 deadline remains in effect for people who requested a six-month extension to file their tax return.

The current lapse in federal appropriations does not affect the federal tax law, and all taxpayers should continue to meet their tax obligations as normal. Individuals and businesses should keep filing their tax returns and making deposits with the IRS, as required by law.

Many of the more than 12 million individuals who requested an automatic six-month extension earlier this year have yet to file their Form 1040 for 2012.

Though Oct. 15 is the last day for most people to file, some groups still have more time, including members of the military and others serving in Afghanistan or othercombat zone localities who typically have until at least 180 days after they leave the combat zone to both file returns and pay any taxes due. People with extensions in parts of Colorado affected by severe storms, flooding, landslides and mudslides also have more time, until Dec. 2, 2013, to file and pay.

The IRS offered several reminders for taxpayers during the current appropriations lapse:

Taxpayers are encouraged to file their returns electronically using IRS e-file or the Free File system to reduce the chance of errors.

Taxpayers can file their tax returns electronically or on paper.  Payments accompanying paper and e-filed tax returns will be accepted and processed as the IRS receives them.  Tax refunds will not be issued until normal government operations resume.

IRS operations are limited during the appropriations lapse, with live assistors on the phones and at Taxpayer Assistance Centers unavailable. However, IRS.gov and most automated toll-free telephone applications remain operational.

Tax software companies, tax practitioners and Free File remain available to assist with taxes during this period.

Check Out Tax Benefits

Before filing, the IRS encourages taxpayers to take a moment to see if they qualify for these and other often-overlooked credits and deductions:

Benefits for low-and moderate-income workers and families, especially the Earned Income Tax Credit. The special EITC Assistant can help taxpayers see if they’re eligible.
Savers credit, claimed on Form 8880, for low-and moderate-income workers who contributed to a retirement plan, such as an IRA or 401(k).

American Opportunity Tax Credit, claimed on Form 8863, and other education tax benefits for parents and college students.

Same-sex couples, legally married in jurisdictions that recognize their marriages, are now treated as married, regardless of where they live. This applies to any return, including 2012 returns, filed on or after Sept. 16, 2013. This means that they generally must file their returns using either the married filing jointly or married filing separately filing status. Further details are on IRS.gov.

E-file Now: It’s Fast, Easy and Often Free

The IRS urged taxpayers to choose the speed and convenience of electronic filing. IRS e-file is fast, accurate and secure, making it an ideal option for those rushing to meet the Oct. 15 deadline. The tax agency verifies receipt of an e-filed return, and people who file electronically make fewer mistakes too.

Everyone can use Free File, either the brand-name software, offered by IRS’ commercial partners to individuals and families with incomes of $57,000 or less, or online fillable forms, the electronic version of IRS paper forms available to taxpayers at all income levels.

Taxpayers who purchase their own software can also choose e-file, and most paid tax preparers are now required to file their clients’ returns electronically.

Anyone expecting a refund can get it sooner by choosing direct deposit. Taxpayers can choose to have their refunds deposited into as many as three accounts. SeeForm 8888 for details.

Of the nearly 141.6 million returns received by the IRS so far this year, 83.5 percent or just over 118.2 million have been e-filed.

Payment Options

Taxpayers can e-pay what they owe, either online or by phone, through the Electronic Federal Tax Payment System (EFTPS), by electronic funds withdrawal or with acredit or debit card. There is no IRS fee for any of these services, but for debit and credit card payments only, the private-sector card processors do charge a convenience fee. For those who itemize their deductions, these fees can be claimed on next year’sSchedule A Line 23. Those who choose to pay by check or money order should make the payment out to the “United States Treasury”.

Taxpayers with extensions should file their returns by Oct. 15, even if they can’t pay the full amount due. Doing so will avoid the late-filing penalty, normally five percent per month, that would otherwise apply to any unpaid balance after Oct. 15. However, interest, currently at the rate of 3 percent per year compounded daily, and late-payment penalties, normally 0.5 percent per month, will continue to accrue.

Fresh Start for Struggling Taxpayers

In many cases, those struggling to pay taxes qualify for one of several relief programs. Most people can set up a payment agreement with the IRS on line in a matter of minutes. Those who owe $50,000 or less in combined tax, penalties and interest can use the Online Payment Agreement to set up a monthly payment agreement for up to 72 months or request a short-term extension to pay. Taxpayers can choose this option even if they have not yet received a bill or notice from the IRS.

Taxpayers can also request a payment agreement by filing Form 9465. This form can be downloaded from IRS.gov and mailed along with a tax return, bill or notice.

Alternatively, some struggling taxpayers qualify for an offer-in-compromise. This is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed. Generally, an offer will not be accepted if the IRS believes the liability can be paid in full as a lump sum or through a payment agreement. The IRS looks at the taxpayer’s income and assets to make a determination regarding the taxpayer’s ability to pay. To help determine eligibility, use the Offer in Compromise Pre-Qualifier, a free online tool available on IRS.gov.

Details on all filing and payment options are on IRS.gov.

Don’t Take My Word For It…

Mid-summer is a good time to take a break and share what others are saying about Reasonable Compensation. This month I have assembled some of the most recent and poignant reports on Reasonable Compensation for Shareholder-Employees of S Corps from some big name publications, your peers and our government – Enjoy…

The IRS Targets Income Tricks (The Wall Street Journal)
‘Tom Ochsenschlager, former head of tax for the American Institute of CPAs, says pay and payroll tax issues are a frequent source of friction with clients: ‘Sometimes you have to take them to the woodshed and say, ‘You need to report more income as pay for personal services.’ Read the article…

S Corporation Shareholder Compensation: How Much Is Enough? (The Tax Advisor)
S corporation shareholder-employees and their tax advisers often find themselves with differing goals when setting the shareholder-employee’s compensation. Typically, the shareholder-employee prefers to minimize compensation in favor of distributions to reduce payroll taxes. Tax advisers, however, are faced with a body of governing authority providing that the shareholder-employee cannot avoid the imposition of payroll taxes by forgoing reasonable compensation. Read the Article…

Taxes from A to Z: U Is For Unreasonable Compensation (Forbes)
I don’t love S corporations. I know that my CPA friends love, love them but I don’t. While I agree that they have advantages in terms of flexibility, many shareholders struggle with compliance putting the S status at risk. And even more concerning? The IRS isn’t a fan. And by isn’t a fan, I mean that they’re looking at S corporation returns with increased scrutiny. Read the Article…

Reasonable salary for S corporation owners (Journal of Accountancy)
The U.S. Government Accountability Office reported in 2009 on employment tax noncompliance among S corporation shareholders. The IRS has been pursuing this perceived abuse of inadequate compensation in favor of dividend distributions to shareholder-employees and has won a number of cases. Read the Article…

Reasonable compensation for S corp shareholders (Accounting Today)
One of the continuing advantages of the S corporation format over taxation of partnerships and LLCs is the ability to treat a portion of payments from an S corporation as being return on invested capital not subject to employment taxes. Studies continue to indicate that many S corporations are fairly aggressive in the amount of S corporation earnings that are treated as shareholder distributions, rather than employee compensation. Read the Article…

The Recommended Adjustments From S Corporation Audits Are Substantial… (TIGTA)
IRS statistics show that in FYs 2007 through 2011, SB/SE Division examiners completed 53,544 audits of S corporation returns and recommended $5.7 billion in adjustments to items reported on those returns. This was a 54 percent increase over the number of S corporation returns the IRS audited in the previous five-year period (FYs 2002 through 2006). For each return audited in FYs 2007 through 2011, examiners generated about $105,534 in recommended adjustments… Read the Article…

The Top Ten Tax Cases Of 2012, #4: S Corporation Shareholder Reasonable Compensation (Forbes)
#4: Watson v. Commissioner, 668 F.3d 1008 (8th Cir., 2012). The courts offer a guide to determining an S corporation shareholder/employee’s “reasonable compensation.” Read the Article…

Wage Compensation for S Corporation Officers (IRS)
Corporate officers are specifically included within the definition of employee for FICA (Federal Insurance Contributions Act), FUTA (Federal Unemployment Tax Act) and federal income tax withholding under the Internal Revenue Code. Read the Article…

Eight Small Business IRS Audit Areas to Watch Through 2013 #7 S Corps… (IRS Nationwide Tax Forum)
The IRS continually analyzes compliance levels for entities, issues and industries by conducting hundreds of compliance projects and initiatives each year. Leading up to the start of the government’s fiscal year on Oct. 1, the IRS has announced emerging or significant areas that it will prioritize for the coming year. When it comes to compliance, the IRS has increasingly focused on small business underreporting, which is responsible for 84% of the $450 billion tax gap. Read the Article…

New Requirement To Provide Notice

Starting January 1, 2014, individuals, families, and employees of small businesses will have access to affordable health care coverage through a new competitive private insurance market called the Health Insurance Marketplace.  The Affordable Care Act (ACA) requires many employers to provide written notice to their employees (by October 1, 2013) about the health insurance options available through the new Health Insurance Marketplace.
Companies covered by the Fair Labor Standards Act (FLSA) should provide this notice to their employees.  In general, the FLSA covers employers (with at least one employee) who are engaged in, or produce goods for, interstate commerce. For most companies, a test of not less than $500,000 in annual dollar volume of business applies.
Current employees must be provided with written notice no later than October 1, 2013. Employees hired after October 1, 2013, must be provided with notice at the time of hire. For 2014, notice is considered provided at the time of hire if it is provided to the employee within 14 days of the hire date.
The Department of Labor (DOL) has provided model notices to help employers comply.  The DOL specifically indicates on its website that there is no fine or penalty under the law for failing to provide the notice.

Some people are surprised to learn they’re due a large federal income tax refund when they file their taxes. Others are surprised that they owe more taxes than they expected. When this happens, it’s a good idea to check your federal tax withholding or payments. Doing so now can help avoid a tax surprise when you file your 2013 tax return next year.

Here are some tips to help you bring the tax you pay during the year closer to what you’ll actually owe.

Wages and Income Tax Withholding

• New Job.   Your employer will ask you to complete a Form W-4, Employee’s Withholding Allowance Certificate. Complete it accurately to figure the amount of federal income tax to withhold from your paychecks.
• Life Event.  Change your Form W-4 when certain life events take place. A change in marital status, birth of a child, getting or losing a job, or purchasing a home, for example, can all change the amount of taxes you owe. You can typically submit a new Form W–4 anytime.
• IRS Withholding Calculator.  This handy online tool will help you figure the correct amount of tax to withhold based on your situation. If a change is necessary, the tool will help you complete a new Form W-4.

Self-Employment and Other Income

• Estimated tax.  This is how you pay tax on income that’s not subject to withholding. Examples include income from self-employment, interest, dividends, alimony, rent and gains from the sale of assets. You also may need to pay estimated tax if the amount of income tax withheld from your wages, pension or other income is not enough. If you expect to owe a thousand dollars or more in taxes and meet other conditions, you may need to make estimated tax payments.
• Form 1040-ES.  Use the worksheet in Form 1040-ES, Estimated Tax for Individuals, to find out if you need to pay estimated taxes on a quarterly basis.
• Change in Estimated Tax.  After you make an estimated tax payment, some life events or financial changes may affect your future payments. Changes in your income, adjustments, deductions, credits or exemptions may make it necessary for you to refigure your estimated tax.
• Additional Medicare Tax.  A new Additional Medicare Tax went into effect on Jan. 1, 2013. The 0.9 percent Additional Medicare Tax applies to an individual’s wages, Railroad Retirement Tax Act compensation and self-employment income that exceeds a threshold amount based on the individual’s filing status. For additional information on the Additional Medicare Tax, see our questions and answers.
• • Net Investment Income Tax.  A new Net Investment Income Tax went into effect on Jan. 1, 2013. The 3.8 percent Net Investment Income Tax applies to individuals, estates and trusts that have certain investment income above certain threshold amounts. For additional information on the Net Investment Income Tax, see our questions and answers.

See Publication 505, Tax Withholding and Estimated Tax, for more on this topic.

Are you thinking about taxes while you’re enjoying the warm summer months? Not likely! But the IRS wants you to know that scammers ARE thinking about taxes and ways to dupe you out of your money.

Tax scams can happen anytime of the year, not just during tax season. Three common year-round scams are identity theft, phishing and return preparer fraud. These schemes are on the top of the IRS’s “Dirty Dozen” list of scams this year. They’re illegal and can lead to significant penalties and interest, even criminal prosecution.
Here’s more information about these scams that every taxpayer should know.

1. Identity Theft.  Tax fraud by identity theft tops this year’s Dirty Dozen list. Identity thieves use personal information, such as your name, Social Security number or other identifying information without your permission to commit fraud or other crimes. An identity thief may also use another person’s identity to fraudulently file a tax return and claim a refund.

The IRS has a special identity protection page on IRS.gov dedicated to identity theft issues. It has helpful links to information, such as how victims can contact the IRS Identity Theft Protection Specialized Unit, and how you can protect yourself against identity theft.

2. Phishing.  Scam artists use phishing to trick unsuspecting victims into revealing personal or financial information. Phishing scammers may pose as the IRS and send bogus emails, set up phony websites or make phone calls. These contacts usually offer a fictitious refund or threaten an audit or investigation to lure victims into revealing personal information. Phishers then use the information they obtain to steal the victim’s identity, access their bank accounts and credit cards or apply for loans. The IRS does not initiate contact with taxpayers by email to request personal or financial information. Please forward suspicious scams to the IRS at phishing@irs.gov. You can also visit IRS.gov and select the link “Reporting Phishing” at the bottom of the page.

3. Return Preparer Fraud.  Most tax professionals file honest and accurate returns for their clients. However, some dishonest tax return preparers skim a portion of the client’s refund or charge inflated fees for tax preparation. Some try to attract new clients by promising refunds that are too good to be true.

http://content.govdelivery.com/accounts/USIRS/bulletins/88c9bd?reqfrom=share

The Internal Revenue Service has issued final regulations for the shared responsibility payment for not maintaining minimum essential coverage under the Affordable Care Act, also known as the individual mandate.

The final regulations largely finalize the rules in a notice of proposed rulemaking that was published in February. The individual mandate differs from the employer mandate, which was delayed last month until January 2015 (see Obama Administration Delays Employer Mandate for Affordable Care Act).

The individual mandate in contrast is still scheduled to take effect in 2014, when individuals who choose not to enroll in a health insurance program will have to pay a penalty of $95 per person per year, or 1 percent of their income, whichever is larger. The penalty will gradually increase in 2015 to $325, or 2 percent of income, and in 2016 to $695, or 2.5 percent of income, whichever is bigger.

There were several changes from the proposed regulations. The Treasury Department and the IRS received comments asking whether medical coverage offered to employees by an organization acting on behalf of an employer qualifies as an eligible employer-sponsored plan. For example, commentators asked whether a multiemployer plan or a single-employer collectively bargained plan, such as a union-sponsored health plan, is an eligible employer-sponsored plan for the employees covered by the collective bargaining arrangement and eligible to participate in the plan.

In addition, commentators asked whether a plan offered to an employer’s employees by a third party, such as a professional employer organization or leasing company, is an eligible employer-sponsored plan for the employees eligible to participate in the plan. The final regulations are revised to provide that a plan offered by an employer to an employee includes a plan offered to an employee on behalf of an employer. No inference is intended from this treatment that the third party is the employer for this or any other provision of the Code or related laws.

The Defense Department’s Nonappropriated Fund Health Benefits Program also now qualifies as a government-sponsored program and an eligible employer-sponsored plan that meets the definition of minimum essential coverage. The Treasury Department and the IRS are considering whether other government-sponsored programs qualify as eligible employer-sponsored plans.

The preamble to the proposed regulations explains that a self-insured group health plan is an eligible employer-sponsored plan. Several commentators requested additional clarification concerning the treatment of a self-insured group health plan because these plans are not offered in a large or small group market within a state. The rule in the proposed regulations is revised to clarify that a self-insured group health plan is an eligible employer-sponsored plan, regardless of whether the plan could be offered in the large or small group market in a state.

The Internal Revenue Service plans to fix a glitch that was discovered with its system for issuing tax levies that allow it to seize the assets of delinquent taxpayers.

When taxpayers do not pay their delinquent taxes, the IRS has the authority to work directly with financial institutions and other third parties to seize taxpayers’ assets as part of a tax levy. The IRS Restructuring and Reform Act of 1998 requires the IRS to notify taxpayers of the intent to levy at least 30 calendar days before initiating any levy action to give taxpayers an opportunity to formally appeal the proposed levy.

“Taxpayers’ rights are potentially violated if they are not notified within the 30-day period and a levy is issued,” said a new report issued Tuesday by the Treasury Inspector General for Tax Administration.

TIGTA is responsible for annually determining whether the IRS complied with the IRS Restructuring and Reform Act of 1998 requirement to notify taxpayers prior to issuing levies. In its fifteenth annual audit report on this subject, TIGTA determined whether the IRS has complied with law providing for a notice and opportunity for a hearing before a levy is issued. The report found that the IRS is protecting most taxpayers’ rights when issuing systemically generated and manually prepared levies.

TIGTA reviewed 15 systemically generated and 30 manual levies identified through the IRS’s Automated Collection System and determined that controls were effective to ensure that taxpayers were given notice of their appeal rights at least 30 calendar days prior to the issuance of the levies.

In addition, TIGTA reviewed 27 systemically generated and 18 manual levies identified through the Integrated Collection System and determined that taxpayers were given notice of their appeal rights at least 30 calendar days prior to issuance of the levies.  However, three systemically generated levies had additional tax assessments in which a new notice of intent to levy was not sent prior to issuing the levies, as required, TIGTA noted.

TIGTA recommended that the IRS determine the feasibility of updating the systemic Integrated Collection System programming to prevent levies from being issued on modules in which a new notice of intent to levy has not been sent after there has been an additional assessment.
IRS officials agreed with the recommendation. The IRS plans to continue to implement a change to the Integrated Collection System programming for systemic levies to prevent levy issuance on modules where an additional assessment had been made and a new Notice of Intent to Levy/Notice of a Right to a Hearing has not been sent to the taxpayer.

“We initiated efforts to update the Integrated Collection System (ICS) to address the required levy notices on subsequent assessments,” said IRS official Ruth Perez, writing on behalf of Faris Fink, the commissioner of  the IRS’s Small Business/Self-Employed division. “In addition, we will provide training on this topic to revenue officers during this year’s Continuing Professional Education.”