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IRS Reports ‘Steep Upswing’ In Taxpayer Data Thefts From Tax Preparer Offices

IRS Reports ‘Steep Upswing’ In Taxpayer Data Thefts From Tax Preparer Offices

We’d appreciate your vote!

We would greatly appreciate it if you would consider voting for us for Best of Portsmouth.  There are two ways to vote:

1.  Text CTKK to 21333, OR

2.  Vote online at http://bestof.hamptonroads.com/

Better yet, do both!

MANY THANKS!

Tax Preparer Penalties

Many times folks ask us why we ask so many questions or require so much documentation.  Of course, the biggest reason is that we want to be sure to prepare a totally accurate tax return.  But we’re also wanting to make sure we don’t incur any of the many penalties that we could get hit with if we accidentally omit something.  Take a look at what potential penalties we could face.

IRC § 6694 – Understatement of taxpayer’s liability by tax return preparer.

IRC § 6694(a) – Understatement due to unreasonable positions.  The penalty is the greater of $1,000 or 50% of the income derived by the tax return preparer with respect to the return or claim for refund.

IRC § 6694(b) – Understatement due to willful or reckless conduct.  The penalty is the greater of $5,000 or 50% of the income derived by the tax return preparer with respect to the return or claim for refund.

IRC § 6695 – Other assessable penalties with respect to the preparation of tax returns for other persons.

IRC § 6695(a) – Failure to furnish copy to taxpayer.  The penalty is $50 for each failure to comply with IRC § 6107 regarding furnishing a copy of a return or claim to a taxpayer. The maximum penalty imposed on any tax return preparer shall not exceed $25,500 in a calendar year.

IRC § 6695(b) – Failure to sign return.  The penalty is $50 for each failure to sign a return or claim for refund as required by regulations.  The maximum penalty imposed on any tax return preparer shall not exceed $25,500 in a calendar year.

IRC § 6695(c) – Failure to furnish identifying number.  The penalty is $50 for each failure to comply with IRC § 6109(a)(4) regarding furnishing an identifying number on a return or claim.  The maximum penalty imposed on any tax return preparer shall not exceed $25,500 in a calendar year.

IRC § 6695(d) – Failure to retain copy or list.  The penalty is $50 for each failure to comply with IRC § 6107(b) regarding retaining a copy or list of a return or claim.  The maximum penalty imposed on any tax return preparer shall not exceed $25,500 in a return period.

IRC § 6695(e) – Failure to file correct information returns.  The penalty is $50 for each failure to comply with IRC § 6060.  The maximum penalty imposed on any tax return preparer shall not exceed $25,500 in a return period.

IRC § 6695(f) – Negotiation of check.  The penalty is $510 for a tax return preparer who endorses or negotiates any check made in respect of taxes imposed by Title 26 which is issued to a taxpayer.

IRC § 6695(g) – Failure to be diligent in determining eligibility for earned income credit.  The penalty is $510 for each failure to comply with the EIC due diligence requirements imposed in regulations.

IRC § 6700 – Promoting abusive tax shelters

The penalty is for a promoter of an abusive tax shelter and is generally equal to $1,000 for each organization or sale of an abusive plan or arrangement  (or, if lesser, 100 percent of the income derived from the activity).

IRC § 6701 – Penalties for aiding and abetting understatement of tax liability.

The penalty is $1000 ($10,000 if the conduct relates to a corporation’s tax return) for aiding and abetting in an understatement of a tax liability.  Any person subject to the penalty shall be penalized only once for documents relating to the same taxpayer for a single tax period or event.

IRC § 6713 – Disclosure or use of information by preparers of returns.

The penalty is $250 for each unauthorized disclosure or use of information furnished for, or in connection with, the preparation of a return.  The maximum penalty on any person shall not exceed $10,000 in a calendar year.

IRC § 7206 – Fraud and false statements.

Guilty of a felony and, upon conviction, a fine of not more than $100,000 ($500,000 in the case of a corporation), imprisonment of not more than three years, or both (together with the costs of prosecution).

IRC § 7207 – Fraudulent returns, statements, or other documents.

Guilty of a misdemeanor and, upon conviction, a fine of not more than $10,000 ($50,000 in the case of a corporation), imprisonment of not more than one year, or both.

IRC § 7216 – Disclosure or use of information by preparers of returns.

Guilty of a misdemeanor for knowingly or recklessly disclosing information furnished in connection with a tax return or using such information for any purpose other than preparing or assisting in the preparation of such return.  Upon conviction, a fine of not more than $1,000, imprisonment for not more than 1 year, or both (together with the costs of prosecution).

IRC § 7407 – Action to enjoin tax return preparers.

A federal district court may enjoin a tax return preparer from engaging in certain proscribed conduct, or in extreme cases, from continuing to act as a tax return preparer altogether.  (My added comment – “In other words, we lose our livelihood since we lose our ability to prepare tax returns altogether.”)

IRC § 7408 – Action to enjoin specified conduct related to tax shelters and reportable transactions

A federal district court may enjoin a person from engaging in certain proscribed conduct (including any action, or failure to take action, which is in violation of Circular 230).  (My added comment – “In other words, we lose our livelihood since we lose our ability to prepare tax returns altogether.”)

Note:  Please see the Internal Revenue Code, corresponding Treasury Regulations, and other related published guidance for additional information on each penalty section.

Reminder for those of you who use your vehicle for business use

Reminder for those of you who use your vehicle for business use.  It is always a good idea to write down your mileage for the end of the year. And the beginning of the new year.  Then save the numbers with your other tax papers.

Important update related to new tax law

THIS IS BRAND NEW INFORMATION THAT REQUIRES

IMMEDIATE ACTION

FOR THOSE WHO WISH TO BENEFIT FROM THIS POSSIBLE TAX SAVINGS OPPORTUNITY!

 

The House and Senate just passed the biggest change in tax laws since the Tax Reform Act of 1986.  The president has already said he will sign it.  We’ll not discuss the politics of whether it is good or bad here but will explore a possible benefit for us on our 2017 tax return.

You may have already heard that these new tax laws for tax years 2018 and beyond will increase the standard deduction to $12,000 for a single person and $24,000 for a married couple filing jointly. This is approximately double the current levels. In addition to this, some itemized deductions that were available in previous years will no longer be deductible.  These two changes may mean that many people who have always itemized their deductions may find that they will no longer need to do so.  While they may have had enough deductions to reach the old lower threshold, they may not have enough to reach the new $12,000 / $24,000 threshold.

With that in mind, let’s talk to those who make sizable charitable contribution on a yearly basis.  While they will still benefit you in 2017, they may not benefit you in 2018 since you may not reach the new larger standard deduction levels.

Here is something you may wish to consider to save you some tax dollars in 2017 while not losing anything in 2018.

If you have access to the funds to do so, you might want to consider doubling your contributions in 2017 and then NOT making any contributions in 2018 (unless you wish to do so).  You still get to take the new larger standard deduction in 2018 while having gotten the benefit of the donation in 2017.

I know this may sound confusing so here is an example:

Let’s say a person normally gives $10,000 per year to charity.  (You can substitute whatever number you normally give to charity here.)  They have already done that throughout 2017. Now, right here at the end of the year, they decide to go ahead and donate another $10,000 which is what they normally would give in 2018. That would mean that they would not make any charitable contribution in 2018 because they already pre-gave it in 2017.  They could still give for something special in 2018 if they wished to. Their total contributions for 2017 would end up being $20,000 which they can fully deduct (in most cases) on their 2017 tax return. For 2018, they would still be able to take the $12,000 / $24,000 standard deduction which means they will still be getting a huge deduction, in many cases more than ever before.

Allow me to make two points related to this:

  1. This only works for those who have free funds available to do this.
  2. The contributor / taxpayer tax savings can be significant.  Using the example above of donating $20,000 instead of $10,000 in 2017, the additional $10,000 in contributions could mean the following savings.
    1. 20% tax bracket – $2000 savings
    2. 30% tax bracket – $3000 savings
    3. If they gave half that, the savings would be half.  If they gave twice that, the savings would be twice also.
    4. Please note that we have used round numbers here for illustration purposes, that every situation is different, and that there may be exceptions in certain situations.

Since your donations must be completed by December 31, 2017 and we are almost already there, it is important to move quickly on this if you desire to take advantage of this situation.

We would greatly appreciate it if you would consider voting for us for Best of Portsmouth.

We would greatly appreciate it if you would consider voting for us for Best of Portsmouth.  There are two ways to vote:

  1. Text CNRZ TO 21333, OR
  2. Vote online at http://bestof.hamptonroads.com/

Better yet, do both!

MANY THANKS!

HERITAGE INCOME TAX SERVICE INC

4303 PORTSMOUTH BLVD

PORTSMOUTH, VA 23701

(757) 488-7232

IRS Can Audit 6 Tax Years Not 3, So Be Careful

IRS Can Audit 6 Tax Years Not 3, So Be Careful

See this article from Forbes magazine – https://www.forbes.com/sites/robertwood/2017/02/09/irs-can-audit-6-tax-years-not-3-so-be-careful/#2e6101695994

SCAMMERS!!!

Scammers are now sending out bills that look EXACTLY like an IRS bill in almost every respect.

NEVER pay any bill that you are not expecting or that you have not verified with us first.

Please call us if you have any questions whatsoever about the legitimacy of any bill from the IRS!  There is NO charge for this call.

I will also remind you that the IRS will NEVER call you unless it is prearranged.  So if someone calls you claiming to be from the IRS, it also is a scam.

PLEASE VOTE FOR US FOR THE BEST OF PORTSMOUTH

PLEASE VOTE FOR US FOR THE BEST OF PORTSMOUTH

I would greatly appreciate it if you would vote for us for BEST OF PORTSMOUTH this year.  There are 2 ways to vote.  You can either:

  1. Vote online at http://www.hamptonroads.com/bestof or
  2. Text the code “CCXZ” to 21333

Better yet, please do both!

You can vote between March 8th and March 22nd

We will greatly appreciate your vote!

MANY THANKS!

Lennox C. (Len) Boush, EA

Heritage Income Tax Service, Inc.

IRS Warns Of Delayed Refunds, Long Waits For Taxpayers & Possible Shutdown

IRS Warns Of Delayed Refunds, Long Waits For Taxpayers & Possible Shutdown

 

Kelly Phillips Erb, Contributor, Forbes.com

 

With a week to go before tax season opens, taxpayers were already bracing for a potentially “miserable” filing season. It turns out that it could live up to the hype.

Internal Revenue Service (IRS) Commissioner Koskinen has advised employees that the budget cuts will result in reduced services to taxpayers. In an email to employees sent earlier today, Commissioner Koskinen advised that “realistically we have no choice but to do less with less.”

What does that mean for taxpayers?

  • Identity theft could increase. Despite the need for increased taxpayer protections against identity theft, the implementation of additional measures will be delayed. That’s bad news for taxpayers since, despite the efforts of IRS and other agencies to stem the tide of identity theft, scammers have grown more bold. TIGTA reported that
  • telephone scammers, posing as IRS representatives, managed to steal more than $5 million from taxpayers last year. And as quickly as the scams are picked up, theychange. IRS-Criminal Investigation has responded to what has been termed an “epidemic” of identity theft by ramping up investigations – but with wholesale cuts to IRS, expect those investigations to dip, too.
  • Refund delays. It turns out that satirical piece on tax refunds making the rounds might have had some merit after all. According to the Commissioner, taxpayers who file paper tax returns may have to wait an extra week or longer to see their refund. In the email, the Commissioner didn’t specifically address whether delays would affect refunds for taxpayers who e-file, though a few weeks again he refused to say that refunds would not be delayed.
  • Lags in correspondence. Those of us in the field have already become familiar with those letters from IRS that begin “We need more time…” It looks like those are about to kick up even more. With fewer employees on staff, IRS expects “lengthy delays” to answer correspondence.
  • Fewer resolutions. Those taxpayers who have legitimate gripes but can’t find a resolution will be out of luck. The Commissioner says that the Taxpayer Advocate Service, normally the next step when cases aren’t resolved through normal channels, won’t be able to obtain a new case management system to oversee taxpayer hardship cases.
  • Unanswered calls. Predictions weren’t terrific for answered call rates before. Now, the Commissioner is warning of “an even lower level of telephone service.” Specifically, he notes the “real possibility that fewer than half of taxpayers trying to call us will actually reach us.” Those calls that are answered, he says, “will face extended wait times that are unacceptable to all of us.”
  • Shutdowns. Although the Commissioner wavered on saying yes to furloughs last month, temporary shutdowns look to be the case after all. The Commissioner indicated that the agency is planning for at least one shutdown this fiscal year; he suggested there might be two furlough days. There was no word on when those dates might be other than later in the fiscal year (read: not during tax season).
  • Fewer Audit Closures. The silver lining – if you can call it that – is that the reduction in staffing means
  • fewer taxpayer audits will be closed in 2015 (no word on how that will affect selection of new matters). Collections case closures will also be reduced. That might be good news for those under the audit gun but not so great for the Treasury. Commissioner Koskinen estimates that the government will, as a result, lose at least $2 billion in revenue.

Quite frankly, none of this information is earth-shattering. I think many of us – tax professionals and taxpayers alike – have been hoping for the best but bracing for the worst this tax season. It looks like we’re getting the latter.

Tax season is still slated to open on January 20, 2015 (those pesky rumors suggesting the date has been pushed out further are just that: rumors). For the latest word on the 2015 tax season, keep checking back.

 

2002-2017 Best of Portsmouth

Heritage Income Tax Service, Inc. | 4303 Portsmouth Blvd., Portsmouth, VA 23701
(757) 488-7232 | Fax (877) 488-7232

Heritage Income Tax offers a full range of tax preparation services. Located in Portsmouth, Virginia, we serve the entire Hampton Roads area including the cities of Chesapeake, Virginia Beach, Norfolk, Suffolk, Newport News and Hampton.