Don't Mess With Taxes

The United States' tax system depends on voluntary compliance by taxpayers. But Uncle Sam is no fool. He and his tax collectors are believers of the adage "trust, but verify." The Internal Revenue Service also follows up on that verification with penalties when it finds taxpayers — and the professionals we pay to take care of our taxes — aren't fulfilling our tax responsibilities on our own. The most severe punishments come via criminal tax prosecutions. The IRS also employs civil actions to get due taxes. And many of us are familiar with the various fines and fees that are... Read more →

Tyle Perry working on one of his many productions. (Facebook photo) Most of us would celebrate getting a $9 million refund from the Internal Revenue Service. But then, most of us aren't billionaire media mogul and philanthropist Tyler Perry. When an IRS audit resulted in Uncle Sam handing over the multimillions, Perry fired his accounting team. "I'll let you make a million mistakes, but you can't do the same thing over and over again. That's how I run my business. Here's the mistake. Let's fix it; let's move forward," Perry told the audience at a recent Earn Your Leisure Conference.... Read more →

Don't look now, but tax filing season is just three months away. The Internal Revenue Service is working on getting ready, both staff and system wide, for the influx of 2022 tax returns in 2023. The agency also is counting on its usual cadre of volunteers to help filers meet their tax obligations. To do that, the IRS has awarded $41 million in grants to 348 groups that support Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) programs. Nationwide help sites: VITA and TCE sites are nationwide, and offer tax preparation and filing help to underserved... Read more →

If you must have follow-up discussions with the Internal Revenue Service, one of the rights guaranteed under the Taxpayer Bill of Rights is the option to hire an authorized representative. That can be anyone, from a relative to a paid tax professional. However, in some cases, your representative must be authorized to practice before the IRS. You also need to make sure to officially designate your chosen tax representative, or as it's known in tax-speak, third-party authorization. That's done by filing a written declaration with the IRS — Form 2848 (more on this later) can be used here — stating... Read more →

You have lots of choices when it comes to helping your neighbors and community. There's even an option if taxes are of particular interest to you. Hey, it happens. You are, after all, reading my tax blog right now. If that's you, then the Internal Revenue Service wants you to fill up your free time by helping people prepare and file their tax returns next year. The IRS and its community partners are recruiting people to be a part of the Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) programs during the coming 2023 tax season.... Read more →

Huell (right) and Patrick, henchmen for AMC's "criminal" criminal lawyer Saul Goodman, take a short break in a Breaking Bad episode to enjoy the comfort of a huge pile of ill-gotten cash. (Photo courtesy AMC TV) Remember earlier this summer when a South American worker got a paycheck of more than $165 million Chilean pesos, or nearly $184,000 in U.S. dollars? It was a mistake. And while the man reported the overpayment to his supervisors, he also decided to take the money and run. As far as I can tell by surfing the Google machine, the guy's still out there... Read more →

UPDATE, Jan. 11, 2023: Computer incidents made today a bad day to fly in the United States and Canada, or try to send international mail in the United Kingdom. But those crashes make it a good day to double check your personal and business cyber security plans. The IRS has some tips and guidance for tax professionals' data reliability and protection. The Internal Revenue Service relies on taxpayers and tax professionals to help ensure that our national tax system is secure. These efforts are particularly critical as the federal tax agency goes more electronic. It's also a legal requirement for... Read more →

One of the most common tax scam practices is to take a bit of truth and twist it. Con artists tweak tax forms, create fraudulent online presences that mimic real tax sites, and impersonate tax officials. The latest report of criminals honing their nefarious tax techniques involves the IRS' Tax Exempt and Governmental Entities (TEGE) division and tax-exempt bonds. As part of the way the IRS audits tax-exempt bonds, the agency's TEGE unit uses its own secure electronic messaging service to transmit and receive data. That communication system now is being used as a hook in a new phishing scheme.... Read more →

One of these things is different from the rest: IRS Warns Donors about Charity Scams Following Recent Tragedies in Boston and Texas (2013) Fake charities make 2018 'Dirty Dozen list (2018) IRS cautions taxpayers about fake charities and scammers targeting immigrants (2021) IRS "Dirty Dozen" list warns people to watch out for tax-related scams involving fake charities, ghost preparers and other schemes (2021) Be aware of scammers who use fake charities to get sensitive information (2021) Bogus charities are always a problem. (2022) 76 Fake Charities Shared a Mailbox. The I.R.S. Approved Them All. (2022) The first six items above... Read more →

All graphics courtesy IRS Tax Pros Twitter account Benjamin Franklin wasn't quite correct. There are three constants in life: death, taxes, and tax scams. For more than two decades, the Internal Revenue Service has annually highlighted the 12 worst recent scams. This year's Dirty Dozen includes questionable tax arrangement touted by con artists, pandemic-related schemes to steal people's identities and refund money, dubious tax payment options, and unscrupulous tax preparers. For the last few years, the IRS has shifted from a single list of a dozen tax scams to multiple alerts with more details on the various scams. Those new... Read more →

NOTE: You can find an updated version in my Oct. 13, 2023, post about tax myths and eclipse superstitions pegged to the Oct. 14. 2023, annular eclipse. Here are this weekend's full Flower Moon eclipse stages. The moon moves right to left, passing through the penumbra and umbra, leaving in its wake an eclipse diagram with the times (Eastern time zone) at various stages of the eclipse. Visualizations by Ernie Wright, NASA Scientific Visualization Studio. Click here for the video version. And if it's cloudy where you live, you can livestream the eclipse. It's Friday the 13th, the only one... Read more →

House Oversight Committee members also investigating ID.me contracts, verification methods Photo by cottonbro In early February, the Internal Revenue Service announced plans to transition from ID.me's facial scanning identity verification system. The third-party service's scanning technology raised privacy concerns. A few weeks later, the IRS elaborated on its taxpayer identity process. It said the facial recognition would remain, but as an option, not a requirement. Taxpayers instead could participate in a live, virtual interview to prove they are legitimately opening their own online taxpayer account. The IRS also indicated that it eventually would join other federal agencies in using Login.Gov,... Read more →

Most U.S. taxpayers made it through Tax Day 2022. They either filed their 1040 forms, or they got an extension to submit their returns by Oct. 17. The Internal Revenue Service reported that by April 15, which usually is the annual filing deadline, but was pushed to the next business day by Washington, D.C.'s Emancipation Day holiday, it had received more than 122.5 million returns. That's around 73 percent of the people who filed in 2020 and 2021, when filings exceeded historical averages. The count was higher those years because people who normally weren't required to send in a return... Read more →

via GIPHY Getting fired is never fun. Most of us have been there or have a family member or close friend who's lost a job. Sometimes people get let go when they're paying for services. It happens every year at accounting and tax preparation offices across the United States. The reasons tax professionals cut some taxpayers loose are many and varied, as I blogged about years ago in my posts Are you a good or bad tax client? and Bad tax clients, revisited. All types of troublesome taxpayers: Sometimes, famous customers get dumped, too. Recent case in point, Donald J.... Read more →

New phishing scam targets tax pros, but everyone needs to be on guard The Internal Revenue Service today warned tax professionals about a new spearphishing scam. I'm surprised we made it into February before the latest tax scam appeared. This email scam uses the IRS logo. It also tries to ramp up the already urgent tax season by using a variety of subject lines, such as "Action Required: Your account has now been put on hold." The IRS provided bogus text of this scam below. Your account has now been put on hold ALL preparers are required to apply security... Read more →

Photo by Lamar Belina from Pexels After pressure from members of Congress, the National Taxpayer Advocate, and the Tax Professionals United for Taxpayer Relief Coalition, a group of organizations formed the to help make this third Covid-affected tax season a bit smoother, the Internal Revenue Service has decided to suspend sending of most taxpayer notices. This latest moratorium on taxpayer notices is the second in less than two weeks. It comes on the heels of the major taxpayer problems created by issuance of automated collection notices, or CP-80s. These alerts normally go out when a taxpayer owes tax, and the... Read more →

The Year of the Tiger arrived today. You might want to incorporate, as well as control, some of that big cat's tendencies this month as you approach the filing of your 2021 taxes. (Photo by Jiří Mikoláš from Pexels) February 1 brings us the shortest month of the year, the Lunar New Year of the Tiger, and the perfect time to take care of some tax tasks. Since we only have 28 days, let's get right to three tax matters you should take care of this month. 1. Tame your filing tiger: While you might think you're ready to pounce... Read more →

Today is EITC Awareness Day! OK, Jan. 28 isn't an official holiday to celebrate the Earned Income Tax Credit, usually referred to (at least in the tax world) by its acronym EITC. But it is an annual event promoted by the Internal Revenue Service. Every year in late January, the tax agency focuses on getting the word out about the EITC. The reason is simple. Millions of individuals regularly overlook the EITC and surrendering thousands of dollars they could use. The EITC itself, however, is not so easy to claim. That's why a lot of folks ignore it. The IRS... Read more →

The 2022 tax filing season officially begins on Monday, Jan. 24. Some people, however, are not convinced the Internal Revenue Service is ready. The concern isn't just about the millions of 2021 returns that will be flooding the IRS' system, but also the millions of returns the agency is still processing from the previous COVID-affected filing seasons. That backlog and continuing challenges prompted a coalition of tax practitioners and advocacy groups to write the IRS and Treasury Department, urging those leaders to "take steps to ameliorate the situation." Specifically, the representatives from 11 tax and public advocacy organizations want the... Read more →

Photo by Kay Bell I'm married to a procrastinator. The most infuriating thing about it is not that he puts off things, but that occasionally he's right to not rush to finish projects. And yes, projects is a euphemism for tasks I've asked him to do. Sometimes situations change, making moot what originally looked like the right move. Other times, the delay prevents making what would have been a wrong action. And in a few cases, if a job was done on my timetable, the changed circumstances would have meant redoing it. So over the many years we've been together,... Read more →