Yearly Archives: 2020

A group of 25 Democrats in the House wrote to congressional leaders asking them to provide $12.1 billion in funding for the Internal Revenue Service, including $5.2 billion for enforcement, with an eye toward cracking down on high-income tax cheats.

The letter, written by Rep. Judy Chu, D-California, a member of the House Ways and Means Oversight Subcommittee, and Bill Pascrell, D-N.J., who chairs the subcommittee, said that maintaining the funding amount, which has already been passed in the House but not yet in the Senate, would help the agency pursue wealthy tax scofflaws and safeguard tax dollars from fraud.

“The Strength of IRS Enforcement Activities Must Be A Priority For Congress, Especially Considering The Additional Measures Congress Enacted Under The CARES Act To Lessen The Financial Burden Of The COVID-19 Pandemic,”
They Wrote In A Letter Last Week.

They pointed to an article last year from the investigative news organization ProPublica showing that the IRS disproportionately pursues audits of poorer Americans, including Earned Income Tax Credit recipients, while overlooking tax fraud by the wealthy.

IRS commissioner Charles Rettig strenuously denied those accusations during a subcommittee hearing this month, pointing to information from the annual IRS Data Book, noting that the audit rate for EITC claimants is 1.1 percent, while for taxpayers earning over $10 million it’s 8.16 percent.

“There is no focus on lower-income taxpayers, but to the extent that people indicate the EITC is focused on lower-income individuals, whoever is in that population is in the audit selection process." said Rettig. Annually in fiscal ’19, in the EITC world, there were about 25 million people claiming $63 billion of the EITCs, and there was a 25 percent improper payment rate, which means that the Internal Revenue Service paid for fiscal ’19 $17.4 billion to that group that we were unable to verify that they were entitled to it.

The Congressional Budget Office has found that increasing the IRS’s budget to investigate high-income Americans would more than pay for itself, the lawmakers noted.

Increasing The Examinations and Collections Budget by $20 Billion Over a Decade’s Time Would Increase Revenues by $61 Billion, and if The Budget is Raised by $40 Billion Over 10 Years it Would Increase Revenues By $103 Billion.

They pointed to $2.3 billion in tax fraud in fiscal year 2020 identified by the IRS’s Criminal Investigation division, an increase of $500 million, or nearly 28 percent, from FY 2019. 

They contend that IRS enforcement resources should not be targeted at lower-income taxpayers, whose earnings are usually simpler to track from W-2 and 1099 forms and compare against the 1040 forms they file, as opposed to the more complex returns of wealthier taxpayers.

 “We urge you to preserve the $5.2 billion level of funding from the House-passed FSGG appropriations bill in order to ensure IRS can effectively collect taxes, including those owed by the top 1 percent of taxpayers.”

Have IRS Tax Problems?

 Contact the Tax Lawyers at
Marini & Associates, P.A. 

Read more at: Tax Times blog

The Taxpayer First Act (TFA) of 2019 requires the IRS to provide digital signature options for Form 2848, Power of Attorney, and Form 8821, Tax Information Authorization.

These improvements will help individual taxpayers, business taxpayers, and the tax professionals who serve them. These authorization forms are critical for tax professionals to either represent clients before the IRS or to prepare prior year tax returns. By signing the forms, taxpayers are giving tax professionals or other third parties permission to access or view their tax information.

Currently, submitting and processing these authorization forms is a paper operation. Tax professionals typically complete the forms and taxpayers sign them with a pen. The forms are mailed or faxed to the IRS. The faxed forms are printed or distributed electronically to the staff in the Centralized Authorization File (CAF) Unit. These teams review the forms for accuracy and fraud before adding the information to the CAF database.

Even before COVID-19, the IRS was working on CAF improvements and making the TFA requirements a reality. Here’s an important look at what’s ahead:

• In January, the IRS plans to launch a new IRS.gov secure submission platform and a new page, “Submit Forms 2848 and 8821 Online,” that will allow tax professionals to upload third-party authorization forms electronically.
• Tax professionals will enter their Secure Access username and password or complete a Secure Access registration to authenticate their identities.
• Taxpayers and tax professionals can sign the forms electronically or with ink, and then upload the image of the form to the IRS.

This new online submission process will not eliminate the reviewing and processing time by the CAF staff. But it gives tax professionals and taxpayers a safe option to electronically sign and upload these critical documents without an in-person meeting. Especially in these uncertain times, keeping taxpayers and tax professionals safe is a top IRS priority.

Just as tax professionals are required to do for every electronically filed tax return, they’ll need to verify the taxpayer’s identity if there’s an electronic signature and the client is unknown to them. The IRS is planning on using a similar process as outlined by Publication 1345, Handbook for Authorized IRS e-File Providers PDF. This verification process should be familiar to tax professionals.

This New IRS.gov Third-Party Authorization Submission Process Will Not Be The Only Electronic Option For
Forms 2848 And 8821.

Next summer, the IRS plan on launching a platform called the Tax Pro Account. At launch, the Tax Pro Account will serve as the point of entry for tax professionals to electronically initiate and sign an online third-party authorization form.

That third-party authorization form will electronically transfer into the client’s IRS online account. Clients can access their personal IRS account and electronically sign the document. The document goes directly to the CAF, posting immediately. There’s no wait time, no backlog. The Tax Pro Account is an electronic operation from beginning to end.

When they’ve completed these projects next year, tax professionals will have four submission options: 

1. upload on IRS.gov, 
2. initiate electronically via Tax Pro Account, 
3. mail to IRS and 
4. fax to IRS. Because of the risk of fraud, we cannot accept electronic signatures on mailed or faxed authorization forms.

This electronic signature process is part of a larger effort underway at the IRS following the Taxpayer First Act.

Have IRS Tax Problems?

 Contact the Tax Lawyers at
Marini & Associates, P.A. 

Read more at: Tax Times blog

Before TCJA, individual taxpayers generally could deduct all state and local taxes (SALT) as itemized deductions. TCJA limited the individual SALT deduction to $10,000 for taxable years 2018 through 2025. Some states have been looking for a workaround to enable their resident taxpayers to avoid the $10,000 deduction limit. 

• IRS Has Approved a SALT Workaround for Pass-Through Entity (Notice 2020-75; IR-2020-252)
   
• Before TCJA, individual taxpayers normally could deduct all state and local taxes (SALT) as itemized deductions
   
• TCJA limited the individual SALT deduction to $10,000 for taxable years 2018 through 2025
   
• Some states have been looking for a workaround to enable their resident taxpayers to avoid the $10,000 deduction limit

• The IRS has approved the availability and functionality of this workaround in Notice 2020-75

Watch for legislation in your own state authorizing a PTE election for state taxes to be paid on behalf of the owner by the entity.

Have IRS Tax Problems?

 Contact the Tax Lawyers at
Marini & Associates, P.A. 

for a FREE Tax HELP Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888 8TAXAID (888-882-9243) 

Read more at: Tax Times blog

According to Procedurally Taxing, an Innocent Spouse Request does not stop a Levy during the 21-day period after the Levy, when the bank was holding the funds in the joint account after receipt of the levy. 

The case of Landers v. United States, 3:20-cv-00455-G (N.D. Tex. 2020) raises the issue of the timing of the injunction against collection vis a vis the completion of a bank levy.  

This case appears to break ground not previously broken, as Ms. Landers seeks to undo the levy because she filed her innocent spouse request during the 21-day period the bank was holding the funds in the joint account after receipt of the levy.  

The court decides that the language stopping collection resulting from the filing of an innocent spouse request does not stop the bank levy during the 21-day period.  

The opinion goes through an analysis of the Anti-Injunction Act to get there.

Have IRS Tax Problems?

 Contact the Tax Lawyers at
Marini & Associates, P.A. 

Read more at: Tax Times blog