The headline reads “People Jailed for Owing Less Taxes than Al Sharpton” That is absolutely false. All of the people mentioned in the article were convicted and jailed for committing tax fraud, not for just owing taxes. Unlike willful tax evasion, owing taxes is not a criminal offense. The IRS has authority to do many things to a delinquent taxpayer such as, levying wages and bank accounts, or even seizing assets but they cannot send you to jail simply for owing taxes. Mr. Sharpton once pleaded guilty to a misdemeanor charge for failing to file a state tax return, but he has not been convicted in court of tax evasion.
What if you receive a notice from the IRS that you owe back taxes? You should never ignore such a notice because the longer you procrastinate in dealing with the issue, the more serious your consequences can become. You should respond promptly to either dispute the liability or address it. Enrolled Agents are licensed to represent taxpayers before the IRS in various matters including collections. If you need help, they can be your advocate in reaching the best resolution to your tax problem.
Guilty until proven innocent
/3 Comments/in Blog /by lstaxservices_i8x1k2Wait, that can’t be how things work in this country. Well, that is how it works when dealing with the IRS. In most cases a determination by the IRS is presumed correct unless proven wrong by the taxpayer. That’s why I like this recent case about a bartender beating the IRS. His daily tip records were good enough to beat the IRS in court. This case demonstrates the power of good record keeping.
Bogus Education Credits?
/0 Comments/in Blog /by lstaxservices_i8x1k2Many news sources today have reported that IRS may have issued 5.6 billion in bogus education credits. This comes from a report from the Inspector General after reviewing statistics from the 2012 tax year. They reached this conclusion because total education credits claimed on returns exceeds the total amount of eligible expenses reported on Form 1098-T by roughly 5.6 billion dollars. Everyone likes to complain about government incompetence, especially when it involves the IRS, but I see a couple of problems with the report. The main problem is that Form 1098-T (issued be eligible educational institutions) routinely does not include all of the costs that are eligible for one or more of the education credits. There are 3 types of education benefits available for college expenses. There is the tuition and fees deduction, the Lifetime Learning Credit, and the American Opportunity Credit. The qualifications for who can claim the credits and what expenses qualify vary depending on which credit/deduction you are claiming. A detailed discussion of this can be found in Publication 970, but I wanted to point out one key difference which applies to the 1098-T. The Lifetime Learning Credit explained in IRC §25A(f)(1) is for qualified tuition and fees related to enrollment or attendance at an eligible educational institution. For the American Opportunity Credit found in IRC§ 25A(I)(3) in addition to the above expenses you can also include course materials such as textbooks and other required supplies. The Form 1098-T usually only shows the tuition paid and frequently does not include textbooks etc. So, for those eligible for the AOC, you could be short changing yourself if you only show the amount from the 1098-T. There are clearly people who file their returns and claim incorrect education credits: some because of lack of understanding of the requirements and others who perhaps are deliberately cheating. But, simply comparing 1098-T forms to the total education credits claimed does not create an accurate picture of how many credits may have been claimed incorrectly.
IRS Penalty Relief
/1 Comment/in Blog /by lstaxservices_i8x1k2Are you one of the over 800,000 taxpayers who received an incorrect 1095-A to file your taxes? IRS Notice 2015-30 offers penalty relief to those taxpayers who qualify that received incorrect or late 1095-A forms regarding their health insurance purchased through a federal exchange which caused errors on their 2014 tax returns.
Marco Rubio’s tax plan
/0 Comments/in Blog /by lstaxservices_i8x1k2Tax reform is a frequent item mentioned by candidates, but most simply use slogans not actual ideas. Here is a link to the plan put forth by Marco Rubio. What do you think of it?
IRS Customer Service?
/0 Comments/in Blog /by lstaxservices_i8x1k2Here is yet another story about the great customer service taxpayers are receiving this year with over 60% of their calls being ignored by the agency.
ABLE Act
/0 Comments/in Blog /by lstaxservices_i8x1k2Late last year congress passed the ABLE act to allow for tax advantaged savings accounts to care for the future needs of disabled children. ABLE accounts (Achieving a Better Life Experience) will be set up by the states and will be funded in a similar manner to 529 plans. There is no deduction for putting money into the account, but the earnngs in the account are tax free as long as they are spent on qualified expenses. More information on the ABLE act can be found here.
Obamacare enrollment
/0 Comments/in Blog /by lstaxservices_i8x1k2What happens if you missed the enrollment deadline of February 15th to enroll in Obamacare for 2015? A new enrollment period has just been announced so that those who qualify can avoid the larger penalties imposed on those without health insurance in 2015. Click here for details of the announcement.
Where’s my Refund?
/3 Comments/in Blog /by lstaxservices_i8x1k2Will IRS budget cuts affect your tax refund? IRS Commissioner John Koskinen testified before congress earlier this year and warned that the recent budget cuts to his agency would affect tax refunds this year. But, in a recent interview with USA Today he said “It’s possible that the level of service won’t be as bad as we worry about it.”
So, here’s a view from the front lines. So far, for my clients, the efiing system is working well and I haven’t had any complaints about delayed refunds with efiled returns. There has been a slight slow down in refunds from paper filed returns. If you need to file an amended return, all I can say is “Be Patient”. There was a significant slow down in the processing of amended returns last year and I expect that will continue this year. If you want to check the status of your federal refund. You can use the Where’s my Refund feature at irs.gov.
Fox Business Headline – Wrong!
/0 Comments/in Blog /by lstaxservices_i8x1k2The headline reads “People Jailed for Owing Less Taxes than Al Sharpton” That is absolutely false. All of the people mentioned in the article were convicted and jailed for committing tax fraud, not for just owing taxes. Unlike willful tax evasion, owing taxes is not a criminal offense. The IRS has authority to do many things to a delinquent taxpayer such as, levying wages and bank accounts, or even seizing assets but they cannot send you to jail simply for owing taxes. Mr. Sharpton once pleaded guilty to a misdemeanor charge for failing to file a state tax return, but he has not been convicted in court of tax evasion.
What if you receive a notice from the IRS that you owe back taxes? You should never ignore such a notice because the longer you procrastinate in dealing with the issue, the more serious your consequences can become. You should respond promptly to either dispute the liability or address it. Enrolled Agents are licensed to represent taxpayers before the IRS in various matters including collections. If you need help, they can be your advocate in reaching the best resolution to your tax problem.
Taxing the Super Bowl
/0 Comments/in Blog /by lstaxservices_i8x1k2There’s an article on Fox Business which explores the hefty tax bill that the IRS gets to collect from Tom Brady as a result of winning the Super Bowl. There is a lot of accurate information in that article, but there is a point on gift tax which is incomplete at best. Forbes has an article which gives a much more thorough explanation of gift tax and the tax treatment of prizes and awards. Although most of you do not have to worry about what taxes you will owe because of winning the Super Bowl, anyone interested in gift tax can learn some basics from those articles. I would be happy to answer any questions on the topic or you can contact a competent professional in your area such as an Enrolled Agent or CPA.