Tax & Notary - Topics of Interest

IRS Analyzes Tax Preparer Data Looking for Fraud

Internal Revenue Service Commissioner Doug Shulman described in a speech how the agency is using information from its tax preparer regulation initiative to identify practitioners who are showing patterns of tax fraud.

“Given the importance of paid return preparers to the integrity of our tax system, we’re now well into the process of ensuring a basic competency level for tax return preparers and focusing our enforcement efforts on rooting out unscrupulous preparers, “ Shulman said in a speech at the National Press Club. “We have registered over 840,000 return preparers and have begun administering a competency test for any preparer who is not a CPA, attorney or enrolled agent. These individuals also have to complete 15 hours of continuing education each year from IRS-approved providers.”

He added that the agency’s next key long-term priority is an initiative the IRS started three years ago to look at how the agency interacts with paid tax return preparers.

“One of the most important tasks millions of Americans have been tackling, and will be tackling over the next two weeks, is preparing an accurate and timely tax return,” he said. “However, over the past 20 to 30 years, the way that taxpayers go about filing their taxes has dramatically changed. Today, more than 9 out of 10 taxpayers use a paid tax preparer or tax software. Despite the fact that paying taxes is one of the largest financial transactions that the average American family has each year, when I arrived at the IRS, there were no basic competency requirements for tax return preparers. In fact, while in most states you need a license to cut someone’s hair, just a few years ago almost anyone could prepare a federal tax return for any other person for a fee, regardless of their level of experience or knowledge of the tax law.”

Shulman said that the IRS has “shifted from a retail to a wholesale approach.” Instead of dealing with taxpayers one-by-one, the IRS is now dealing with the intermediaries who deal with a hundred or a thousand taxpayers at a time. He noted that 95 million individual and business income tax returns were prepared by paid preparers in 2011, accounting for $5.7 trillion of income reported.

“Given the importance of paid return preparers to the integrity of our tax system, we’re now well into the process of ensuring a basic competency level for tax return preparers and focusing our enforcement efforts on rooting out unscrupulous preparers,” he said. “We have registered over 840,000 return preparers and have begun administering a competency test for any preparer who is not a CPA, attorney or enrolled agent. These individuals also have to complete 15 hours of continuing education each year from IRS-approved providers.”

Shulman said the IRS’ s next major priority is leveraging data analytics in order to continually improve the agency’s operations.  

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Study Finds Charities’ Tax Returns Expose Social Security Numbers

A new study has found that the Form 990 tax returns filed by tax-exempt organizations frequently expose the Social Security numbers of tax preparers, donors, employees, scholarship recipients and others to the public.

The study, released by Identity Finder LLC, used its Identity Finder DLP 6.0 software to search through 2,892,475 Form 990s from tax years 2001 through 2006 for personally identifiable information such as Social Security numbers.

Even though SSNs are not generally required on a Form 990, Identity Finder found that 132,362 organizations published 472,866 SSNs, of which 171,005 were unique.

Between 2001 and 2006, more than 18 percent of all nonprofit organizations or their tax preparers published at least one SSN on their public tax return, the study found. In all, 287,238 Form 990 returns contained at least one SSN.

All Form 990s are “open to public inspection,” and are regularly published by the Internal Revenue Service and multiple third parties, the company noted. High school and college scholarship recipients, tax preparers, directors, employees, trustees, and donors were the primary groups whose SSNs were exposed. At least 35 percent of the SSNs belonged to tax preparers who identified themselves by their SSN instead of a Preparer Tax Identification Number, or PTIN.

“Organizations and tax preparers must understand the risks of including Social Security numbers on public documents, such as the IRS 990 form,” said Identity Finder CEO Todd Feinman in a statement. “Unlike a credit card number, Social Security numbers cannot easily be revoked. Given the seriousness and ubiquity of identity fraud, tax preparers should avoid including SSNs on Form 990s.”

His company is advising nonprofit organizations that have published SSNs to warn those affected that they may be at increased risk of identity fraud. Organizations should avoid placing personal information, especially SSNs, on public documents such as Form 990s and court documents. College foundations should determine whether exposure of their students’ personally identifiable information on tax returns violates provisions of the Family Educational Rights and Privacy Act of 1974. Donors should not share their SSN with charities, the company warned.

Scholarship applicants should review the most recent Form 990 of any foundation prior to applying to verify that they do not publish SSNs, the report recommended. In addition, individuals should always require any organization to justify a request for his or her SSN.

Tax preparers should provide their PTIN rather than their SSN on tax documents, the report advised. They also should ensure that no personally identifiable information is unnecessarily disclosed on IRS forms they approve.

The report recommended that the IRS should publish explicit guidance explaining that SSNs are not to be published on Form 990s. The IRS and other stewards of past 990 filings should only provide redacted copies of the forms, according to the study. 

Platinum Tax School and Notary School is an approved provider to offer notary and tax classes such as the IRS Registered Tax Return Preparer Test Prep Course, IRS CE courses, CTEC Qualifying Tax Courses, CTEC CE, Oregon Licensed Tax Preparer  Tax Course, Oregon CE courses as well as Notary classes. For more information visit our website PlatinumProStudies.com.

 

IRS Commissioner Shulman Warns Congressional Inaction Risks 2013 Tax ‘Disaster’

The commissioner of the Internal Revenue Service warned on Thursday of "a real disaster" for taxpayers next year should Congress miss a December 31 deadline to decide on billions in major tax provisions.

Congress is expected to wait until after Election Day, November 6, to take up whether to extend the individual income tax cuts passed under former president George W. Bush that expire at the end of 2012.

Most Democrats and President Barack Obama want to extend all but the top two tax brackets, allowing taxes to increase for high-income earners. Republicans want to extend the lower rates for all income groups.

A 2010 "lame duck" session deadlock to extend the Bush tax cuts delayed the start of the tax filing season in early 2011.

Allowing the pending tax decisions to lapse into 2013 will cause confusion for taxpayers, said IRS commissioner Douglas Shulman, speaking at the National Press Club in Washington.

"We're going to have real risk in the system" if Congress delays, Shulman said.

"You could have a real disaster in the filing season where there's total confusion," especially for the alternative minimum tax "patch," he said.

The alternative minimum tax is a parallel tax system that applies to higher-income taxpayers. A legislative fix to index it for inflation must be approved before year's end to prevent the tax from hitting taxpayers in lower income brackets.

In the absence of congressional action by January 1, the IRS might be forced to delay the tax-filing season, which begins promptly with the New Year, Shulman said.

As it is, Congress faces a huge workload for the two-month lame-duck period after the elections when about $650 billion of tax and spending provisions expire.

Shulman, appointed by President George W. Bush and now in the last year of a five-year term, defended the IRS's regulation of 501(c)4 groups, including Tea Party organizations, which have received IRS letters asking questions about their political work.

For any nonprofit groups that raise red flags, the IRS will "go out and do an audit and gather more facts," Shulman said in response to a question about IRS investigations into the nonprofit groups.

Shulman also touted stronger IRS international enforcement efforts for businesses and individuals.

The agency has hired private-sector experts to better catch businesses that aggressively shift assets and profits offshore.

The new enforcers will help the IRS keep pace with corporations' evolving tax strategies, Shulman said.

Tax professionals have doubted whether the IRS has the muscle to enforce these "transfer pricing" disputes.

Transfer pricing is a booming field of global tax law. It involves multinational corporations moving goods, services and assets from one subsidiary to another in different countries and how they account for these "transfers."

Platinum Tax School and Notary School is an approved provider to offer notary and tax classes such as the IRS Registered Tax Return Preparer Test Prep Course, IRS CE courses, CTEC Qualifying Tax Courses, CTEC CE, Oregon Licensed Tax Preparer  Tax Course, Oregon CE courses as well as Notary classes. For more information visit our website PlatinumProStudies.com.

 

 

 

Tax School 101: Eight Tips to Determine if Your Gift is Taxable

If you gave money or property to someone as a gift, you may owe federal gift tax. Many gifts are not subject to the gift tax, but the IRS offers the following eight tips about gifts and the gift tax.

1. Most gifts are not subject to the gift tax. For example, there is usually no tax if you make a gift to your spouse or to a charity. If you make a gift to someone else, the gift tax usually does not apply until the value of the gifts you give that person exceeds the annual exclusion for the year. For 2011 and 2012, the annual exclusion is $13,000. 
2. Gift tax returns do not need to be filed unless you give someone, other than your spouse, money or property worth more than the annual exclusion for that year.
3. Generally, the person who receives your gift will not have to pay any federal gift tax because of it. Also, that person will not have to pay income tax on the value of the gift received.
4.. Making a gift does not ordinarily affect your federal income tax. You cannot deduct the value of gifts you make (other than deductible charitable contributions).
5. The general rule is that any gift is a taxable gift. However, there are many exceptions to this rule. The following gifts are not taxable gifts:
• Gifts that are do not exceed the annual exclusion for the calendar year,
• Tuition or medical expenses you pay directly to a medical or educational institution for someone,
• Gifts to your spouse,
• Gifts to a political organization for its use, and
• Gifts to charities.
6. You and your spouse can make a gift up to $26,000 to a third party without making a taxable gift. The gift can be considered as made one-half by you and one-half by your spouse. If you split a gift you made, you must file a gift tax return to show that you and your spouse agree to use gift splitting. You must file a Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, even if half of the split gift is less than the annual exclusion.
7. You must file a gift tax return on Form 709, if any of the following apply: 
• You gave gifts to at least one person (other than your spouse) that are more   
      than the annual exclusion for the year.
• You and your spouse are splitting a gift.
• You gave someone (other than your spouse) a gift of a future interest that he
or she cannot actually possess, enjoy, or receive income from until some time in the future. 
• You gave your spouse an interest in property that will terminate due to a future event.
8. You do not have to file a gift tax return to report gifts to political organizations and gifts made by paying someone’s tuition or medical expenses.  

WANT TO LEARN MORE?

Platinum Professional Services' Tax School offers an IRS Registered Tax Return Preparer Tax Class to provide you with the tax knowledge needed to pass the IRS Registered Tax Preparer Competency Test and become an IRS Registered Tax Return Preparer RTRP.   Platinum is also proud to offer IRS CE to fulfill the annual 15 hour requirement for IRS Registered Tax Return Preparers.  In California or Oregon?  Platinum is an approved provider to offer the CTEC Registered Tax Preparer Qualifying Course as well as the Oregon Licensed Tax Preparer Course.

 

 

Taxpayers Get More Time to Contribute to IRAs in 2012

You have two extra days this year to make contributions to your Individual Retirement Arrangements. That’s because April 15 falls on a weekend and Emancipation Day, a legal holiday in the District of Columbia, will be observed on Monday, April 16. That means the due date for filing your tax return and making contributions to your 2011 IRA is Tuesday, April 17.

Here are the top 10 things the IRS wants you to know about setting aside retirementmoney in a traditional IRA.

1. You may be able to deduct some or all of your contributions to your IRA. You may also be eligible for the Savers Credit, formally known as the Retirement Savings Contributions Credit.

2. Contributions can be made to your traditional IRA at any time during the year or by the due date for filing your return for that year, not including extensions. For most people, this means you must make contributions for 2011 by April 17, 2012. If you contribute between Jan. 1 and April 17, you should designate the year targeted for the contribution.

3. The funds in your IRA are generally not taxed until you receive distributions from it.

4. Use the worksheets in the instructions for either Form 1040A or Form 1040 to figure your deduction for your IRA contributions. 

5. For 2011, the most you can contribute to your traditional IRA is generally the smaller of the following amounts: $5,000 for most taxpayers, $6,000 for taxpayers who were 50 or older at the end of 2011 or the amount of your taxable compensation for the year..

6. Use Form 8880, Credit for Qualified Retirement Savings Contributions, to determine whether you are also eligible for a tax credit equal to a percentage of your contribution.

7. You must use either Form 1040A or Form 1040 to deduct your IRA contribution or claim the Credit for Qualified Retirement Savings Contributions.

8. You must be under age 70 1/2 at the end of the tax year in order to contribute to a traditional IRA.

9. To contribute to an IRA, you must have taxable compensation, such as wages, salaries, commissions, tips, bonuses, or net income from self-employment. If you file a joint return, generally only one spouse needs to have taxable compensation. However, see Spousal IRA Limits in IRS Publication 590, Individual Retirement Arrangements, for additional rules.

10. Refer to IRS Publication 590 for more information on contributing to your IRA account.

 

WANT TO LEARN MORE?

Platinum Professional Services' Tax School offers an IRS Registered Tax Return Preparer Tax Class to provide you with the tax knowledge needed to pass the IRS Registered Tax Preparer Competency Test and become an IRS Registered Tax Return Preparer RTRP.   Platinum is also proud to offer IRS CE to fulfill the annual 15 hour requirement for IRS Registered Tax Return Preparers.  In California or Oregon?  Platinum is an approved provider to offer the CTEC Registered Tax Preparer Qualifying Course as well as the Oregon Licensed Tax Preparer Course.

 

 

Tax School 101: Injured or Innocent Spouse Tax Relief

You may be an injured spouse if you file a joint tax return and all or part of your portion of a refund was, or is expected to be, applied to your spouse’s legally enforceable past due financial obligations.

Here are seven facts about claiming injured spouse relief:

1. To be considered an injured spouse; you must have paid federal income tax or claimed a refundable tax credit, such as the Earned Income Credit or Additional Child Tax Credit on the joint return, and not be legally obligated to pay the past-due debt.

2. Special rules apply in community property states. For more information about the factors used to determine whether you are subject to community property laws, see IRS Publication 555, Community Property.

3. If you filed a joint return and you're not responsible for the debt, but you are entitled to a portion of the refund, you may request your portion of the refund by filing Form 8379, Injured Spouse Allocation.

4. You may file form 8379 along with your original tax return or your may file it by itself after you receive an IRS notice about the offset.

5. You can file Form 8379 electronically.. If you file a paper tax return you can include Form 8379 with your return, write "INJURED SPOUSE" at the top left of the Form 1040, 1040A or 1040EZ. IRS will process your allocation request before an offset occurs.

6. If you are filing Form 8379 by itself, it must show both spouses' Social Security numbers in the same order as they appeared on your income tax return. You, the "injured" spouse, must sign the form.

7. Do not use Form 8379 if you are claiming innocent spouse relief. Instead, file Form 8857, Request for Innocent Spouse Relief. This relief from a joint liability applies only in certain limited circumstances. However, in 2011 the IRS eliminated the two-year time limit that applies to certain relief requests. IRS Publication 971, Innocent Spouse Relief, explains who may qualify, and how to request this relief.

 

WANT TO LEARN MORE?

Platinum Professional Services' Tax School offers an IRS Registered Tax Return Preparer Tax Class to provide you with the tax knowledge needed to pass the IRS Registered Tax Preparer Competency Test and become an IRS Registered Tax Return Preparer RTRP.   Platinum is also proud to offer IRS CE to fulfill the annual 15 hour requirement for IRS Registered Tax Return Preparers.  In California or Oregon?  Platinum is an approved provider to offer the CTEC Registered Tax Preparer Qualifying Course as well as the Oregon Licensed Tax Preparer Course.

 

 

IRS Has $1 Billion for People Who Have Not Filed a 2008 Income Tax Return

Refunds totaling more than $1 billion may be waiting for one million people who did not file a federal income tax return for 2008, the Internal Revenue Service announced today. However, to collect the money, a return for 2008 must be filed with the IRS no later than Tuesday, April 17, 2012.

The IRS estimates that half of these potential 2008 refunds are $637 or more.

Some people may not have filed because they had too little income to require filing a tax return even though they had taxes withheld from their wages or made quarterly estimated payments. In cases where a return was not filed, the law provides most taxpayers with a three-year window of opportunity for claiming a refund. If no return is filed to claim a refund within three years, the money becomes property of the U.S. Treasury.

For 2008 returns, the window closes on April 17, 2012. The law requires that the return be properly addressed, mailed and postmarked by that date. There is no penalty for filing a late return qualifying for a refund.

The IRS reminds taxpayers seeking a 2008 refund that their checks may be held if they have not filed tax returns for 2009 and 2010. In addition, the refund will be applied to any amounts still owed to the IRS, and may be used to offset unpaid child support or past due federal debts such as student loans.

By failing to file a return, people stand to lose more than refunds of taxes withheld or paid during 2008. Some people, especially those who did not receive an economic stimulus payment in 2008, may qualify for the Recovery Rebate Credit. In addition, many low-and moderate-income workers may not have claimed theEarned Income Tax Credit (EITC). The EITC helps individuals and families whose incomes are below certain thresholds. The thresholds for 2008 were:

• $38,646 ($41,646 if married filing jointly) for those with two or more qualifying children,
• $33,995 ($36,995 if married filing jointly) for people with one qualifying child, and
• $12,880 ($15,880 if married filing jointly) for those with no qualifying children.

For more information, visit the EITC Home Page on IRS.gov.

Current and prior year tax forms and instructions are available on the Forms and Publications page of IRS.gov or by calling toll-free 800-TAX-FORM (800-829-3676). Taxpayers who are missing Forms W-2, 1098, 1099 or 5498 for 2008, 2009 or 2010 should request copies from their employer, bank or other payer. If these efforts are unsuccessful, taxpayers can get a free transcript showing information from these year-end documents by ordering it on IRS.gov, filing Form 4506-T, or by calling 800-908-9946.

 

Tax School 101: Deducting Charitable Contributions: Eight Essentials

Donations made to qualified organizations may help reduce the amount of tax you pay. 

The IRS has eight essential tips to help ensure your contributions pay off on your tax return.

1. If your goal is a legitimate tax deduction, then you must be giving to a qualified organization. Also, you cannot deduct contributions made to specific individuals, political organizations or candidates. See IRS Publication 526, Charitable Contributions, for rules on what constitutes a qualified organization.
2. To deduct a charitable contribution, you must file Form 1040 and itemize deductions on Schedule A. If your total deduction for all noncash contributions for the year is more than $500, you must complete and attach IRS Form 8283, Noncash Charitable Contributions, to your return.
3. If you receive a benefit because of your contribution such as merchandise, tickets to a ball game or other goods and services, then you can deduct only the amount that exceeds the fair market value of the benefit received. 
4. Donations of stock or other non-cash property are usually valued at the fair market value of the property. Clothing and household items must generally be in good used condition or better to be deductible. Special rules apply to vehicle donations.
5. Fair market value is generally the price at which property would change hands between a willing buyer and a willing seller, neither having to buy or sell, and both having reasonable knowledge of all the relevant facts.
6. Regardless of the amount, to deduct a contribution of cash, check, or other monetary gift, you must maintain a bank record, payroll deduction records or a written communication from the organization containing the name of the organization and the date and amount of the contribution. For text message donations, a telephone bill meets the record-keeping requirement if it shows the name of the receiving organization, the date of the contribution and the amount given.
7. To claim a deduction for contributions of cash or property equaling $250 or more, you must have a bank record, payroll deduction records or a written acknowledgment from the qualified organization showing the amount of the cash, a description of any property contributed, and whether the organization provided any goods or services in exchange for the gift. One document may satisfy both the written communication requirement for monetary gifts and the written acknowledgement requirement for all contributions of $250 or more. 
8. Taxpayers donating an item or a group of similar items valued at more than $5,000 must also complete Section B of Form 8283, which generally requires an appraisal by a qualified appraiser.

Want to learn more?

Platinum Professional Services' Tax School offers an IRS Registered Tax Return Preparer Tax Class to provide you with the tax knowledge needed to pass the IRS Registered Tax Preparer Competency Test and become an IRS Registered Tax Return Preparer RTRP.   Platinum is also proud to offer IRS CE to fulfill the annual 15 hour requirement for IRS Registered Tax Return Preparers.  In California or Oregon?  Platinum is an approved provider to offer the CTEC Registered Tax Preparer Qualifying Course as well as the Oregon Licensed Tax Preparer Course.

 

Tax School 101: Eight Tax-Time Errors To Avoid

If you make a mistake on your tax return, it can take longer to process, which in turn, may delay your refund. Here are eight common errors to avoid.

1. Incorrect or missing Social Security numbers When entering SSNs for anyone listed on your tax return, be sure to enter them exactly as they appear on the Social Security cards.

2. Incorrect or misspelling of dependent’s last name When entering a dependent’s last name on your tax return, make sure to enter it exactly as it appears on their Social Security card.

3.. Filing status errors Choose the correct filing status for your situation. There are five filing statuses: Single, Married Filing Jointly, Married Filing Separately, Head of Household and Qualifying Widow(er) With Dependent Child. See Publication 501, Exemptions, Standard Deduction and Filing Information, to determine the filing status that best fits your situation.

4. Math errors When preparing paper returns, review all math for accuracy. Or file electronically; the software does the math for you!

5. Computation errors Take your time. Many taxpayers make mistakes when figuring their taxable income, withholding and estimated tax payments, Earned Income Tax Credit, Standard Deduction for age 65 or over or blind, the taxable amount of Social Security benefits and the Child and Dependent Care Credit.

6. Incorrect bank account numbers for direct deposit Double check your bank routing and account numbers if you are using direct deposit for your refund.

7. Forgetting to sign and date the return An unsigned tax return is like an unsigned check – it is invalid. Also, both spouses must sign a joint return.

8. Incorrect adjusted gross income If you file electronically, you must sign the return electronically using a Personal Identification Number. To verify your identity, the software will prompt you to enter your AGI from your originally filed 2010 federal income tax return or last year's PIN if you e-filed. Taxpayers should not use an AGI amount from an amended return, Form 1040X, or a math-error correction made by IRS.

Want to learn more?

Platinum Professional Services' Tax School offers an IRS Registered Tax Return Preparer Tax Class to provide you with the tax knowledge needed to pass the IRS Registered Tax Preparer Competency Test and become an IRS Registered Tax Return Preparer RTRP.   Platinum is also proud to offer IRS CE to fulfill the annual 15 hour requirement for IRS Registered Tax Return Preparers.  In California or Oregon?  Platinum is an approved provider to offer the CTEC Registered Tax Preparer Qualifying Course as well as the Oregon Licensed Tax Preparer Course.

 

IRS Offers Renewal Extension for Enrolled Agents

The IRS acknowledged Friday in an email to tax professionals that some enrolled agents are still experiencing delays in the processing of renewal applications. For those individuals who filed a renewal application on time and have an enrollment card with an expiration date of March 31, 2012, the IRS said the card would be valid for another 60 days, or until they receive a new card. Enrollment will not expire due to this IRS delay.

The IRS explained on its Web site that there was a seven-month moratorium on application processing for enrolled agents, and the moratorium is still affecting the agency’s ability to process renewal applications on a timely basis for Social Security numbers ending in 7, 9, 9 and null.

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