IRS is expanding Fresh Start Progam

IRS expands Fresh Start Program giving new penalty relief to struggling taxpayers. Certain taxpayers who have been unemployed for 30 days or longer will be able to avoid failure-to-pay penalties. A six month grace period on failure-to-pay will be made available to certain wage earners and self-employed individuals.  Self-employed individuals who have experienced a 25 percent or greater reduction in business income in 2011 due to the economy would qualify. The IRS is also doubling the dollar threshold for taxpayers eligible for installment agreements to help more people qualify for the program.  It has been raised from $25,000 to $50,000. The maximum term for streamline installment agreements has also been raised from 60 month to 72 months.

Offers in Compromise has also been changed. An Offer in Compromise is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount. The IRS now has more flexibility with financial analysis for determining reasonable collection potential for distressed taxpayers. Generally, an offer will not be accepted if the IRS believes that the liability can be paid in full as a lump sum or through a payment agreement. The IRS looks at the taxpayer’s income and assets to make a determination regarding the taxpayer’s ability to pay.

A collection of videos on the IRS web site, www.irs.gov, entitled “Owe Taxes? Understanding IRS Collections Efforts.” is available to help taxpayers understand the process better. There are eight short videos currently available. Direct link is the following: http://www.irsvideos.gov/OweTaxes/

Free tax help for returning combat veterans

April 19, 2012

Press release:

American Society of Tax Problem Solvers Offers Pro Bono Representation to

Returning Combat Veterans Facing Tax Problems

Today, the American Society of Tax Problem Solvers (ASTPS) has launched a program to help returning combat veterans (RCVs) with IRS problems. ASTPS members have volunteered to represent the RCVs for no fee as a way of expressing our appreciation for their service.

In early March, ASTPS sent a request to members to participate in the program. Despite the fact that they were in the height of the tax season, seventy member firms committed in the first two hours, by the next morning, the number was over one hundred had committed. More firms signed on through the remainder of tax season and ASTPS expects more as soon as the practitioners catch up on reading their mail from ASTPS.

Locally, Emerald Tax & Financial Services, LLC has joined the program. They will accept pro bono cases from our area that have enrolled at the ASTPS website located at ASTPS.org. Applicants must be RCVs with documentation of their deployment location and dates.

ASTPS members have tired of disreputable firms tarnishing the reputation of the industry. ASTPS practitioners are committed to demonstrating that they are dedicated professionals with a deep concern for the well-being of their clients. Of late, the only press coverage about the tax problem resolution industry has focused on the few firms guilty of consumer abuse. ASTPS members are determined to demonstrate that they are not like the abusers.

A recent article in USA Today reported that many of the RCVs return home only to face their government’s tax collectors. ASTPS found this unconscionable and by offering free representation hope to make the vets aware of our appreciation for their sacrifices. We also hope to put the proper face on our industry.

You may contact me for further comment or questions. Additionally, here is the link to the press release by the American Society of Tax Problem Solvers that is posted on the internet.

Respectfully submitted,

Kevin O’Reilly, Enrolled Agent

Following is my contact information:

Kevin O’Reilly, EA

Emerald Tax & Financial Services

3 Bethesda Metro Center, Suite 700

Bethesda, Maryland 20814

(301) 883-1040 Phone

Kevin.oreilly@emeraldtaxfinancial.com

(800) 783-4767 Fax

Where’s my refund?

How quickly will taxpayers get refunds?

• Following technology improvements, the IRS will issue refunds to more taxpayers in as few as 10 days this year. But taxpayers should keep in mind that many variables can affect the speed of a tax refund.
• The IRS issues more than 90 percent of refunds within 21 days

Why can’t the IRS tell me the exact date I will get my refund?

• The IRS reminds taxpayers that refund time frames provided by the “Where’s My Refund?” IRS2Go smartphone application (app) and tax providers are projected time frames and are subject to revision. Many different factors can affect the timing of the refund after the IRS receives the return for processing.
• Also, keep in mind that the date “Where’s My Refund“ provides is the estimated date the IRS will issue the refund, not the date the taxpayer will get the refund. It may take up to five additional days for the financial institution to post the refund to your account, or for mail delivery.

Why did my refund date on “Where’s My Refund”change?

Refund dates change in “Where’s My Refund” as a tax return moves through IRS processing. A date change is not a sign of a problem for a person’s tax return. No action is needed by the taxpayer, unless “Where’s My Refund” specifically indicates that an action is needed.

The estimated refund date initially provided via “Where’s My Refund” is just that, an estimate based on a best-case scenario in which the tax return was filed accurately and there are no corrections or reviews required. However, there are many factors that could affect the processing of a taxpayer’s return that may also change the estimated date the refund will be issued. These could include:

• The IRS balances customer service and tax compliance by reviewing tax returns to prevent fraudulent and erroneous refunds. These critical reviews could add time to refund processing, even for some legitimate returns.
• The IRS may need time to fix a simple error, like a math error.
• Refund timeframes can also be affected by such factors as bankruptcy, an open audit or a balance due on a related account such as a different tax year.

If a tax return is affected by one of these factors or by an IRS processing system delay, “Where’s My Refund” will generally provide updated information as that return is processed and/or an updated estimate as the actual refund date becomes more clear.

The date “Where’s My Refund” provided is different than the date my tax preparer or tax software provided. What should I do?

• The IRS reminds taxpayers that refund time frames provided by “Where’s My Refund” and tax providers are projected time frames and are subject to change. Many different factors can affect the timing of the refund after the IRS receives the return for processing.
• The IRS issues the vast majority of refunds in 21 days or less so even though the issue date provided to you may have changed, it’s very likely that your refund is on its way.
• There is no need to call unless you get a specific message indicating that you should. If the IRS needs more information to process your return, they will contact you by mail. The telephone assistors do not process refunds and will not be able to provide additional information.

Will calling the IRS give me additional information or speed my refund?

• No, calling the IRS won’t do anything to speed your refund. The IRS processes more than 140 million tax returns each year, and our telephone assistors are not the people who actually process tax returns.
• The best option for taxpayers is to check “Where’s My Refund” or IRS2Go and remember the vast majority of tax refunds will be issued within 21 days.
• More information about the refund process is available in our YouTube video, When Will I Get My Refund?, and an IRS fact sheet.

Is the estimated date provided by my tax preparer, tax software or “Where’s My Refund” a guarantee of when I will get my refund?

Unfortunately, the IRS cannot guarantee a taxpayer will get their refund on a certain date. While estimates are provided as the return is processed, the IRS emphasizes these are “best-case scenarios” where tax returns are filed accurately and no corrections or review are required.

What might cause a taxpayer’s return to take longer to process?

• Common errors can delay processing and extend refund timelines. Ensure your refund arrives as expected by submitting an error-free return. Use the correct Social Security or taxpayer identification numbers, address, and bank and routing numbers if electing direct deposit.
• To balance taxpayer service, quick refunds and tax compliance, the IRS must review refunds to prevent fraudulent and erroneous refunds. These critical reviews can add time to refund processing, even for some legitimate tax returns.
• The IRS also periodically adjusts its technology systems during the filing season, which can also factor into short refund delays.

What is the best way to file for an accurate return and a fast refund?

• Using e-file with direct deposit remains the fastest option for taxpayers.
• E-file remains the best way to ensure an error-free return. However, certain taxpayers, like those claiming the adoption credit, must file paper tax returns so that they can submit required documentation. Paper returns take longer to process.
• Ensure your refund arrives as expected by submitting an error free return. Use the correct Social Security or taxpayer identification numbers, address, and bank and routing numbers if electing direct deposit.

What’s the best way for taxpayers to check on the status of their refund?

• You don’t need to call and wait on the telephone. The fastest and best way to check the status of your refund is through the “Where’s My Refund” tool on IRS.gov and the IRS2Go smartphone app.
• Generally, information about refund status is available about three days after the IRS acknowledges receipt of your e-filed return, or four weeks after you mailed a paper return.
• The IRS works hard to issue refunds as quickly as possible. But the IRS cautions taxpayers not to tie major financial decisions to the receipt of their tax refund by a specific date.

How does the IRS’s Refund Cycle Chart used by tax professionals differ from general refund timelines?

• The IRS Refund Cycle Chart is a tool provided to help tax professionals provide a best-case estimate when the IRS may issue a refund based on when the return is accepted by the IRS. The refund time frames provided by the Refund Cycle Chart are best-case estimates and subject to revision as many different factors can affect the timing of the refund after the IRS receives the return for processing.
• The times listed on the Refund Cycle Chart are the best-case scenarios for refunds. These refund times routinely differ from those listed on Where’s My Refund and the IRS2Go smartphone app.
• It’s important to note that the chart is only for electronically filed returns, but it does show timelines for both direct deposit and mailed checks. The dates on the Refund Cycle Chart are the best-case estimate date the IRS will issue the refund, not the date the taxpayer will receive it. Also, remember many factors can extend refund receipt timelines, including IRS reviews, banking practices and speed of mail delivery.

Missing W2?

What to Do If You Are Missing a W-2

IRS Tax Tip 2012-20, January 31, 2012Make sure you have all the needed documents, including all your Forms W-2, before you file your 2011 tax return. You should receive an IRS Form W-2, Wage and Tax Statement, from each of your employers. Employers have until Jan. 31, 2012 to issue your 2011 Form W-2 earnings statement.If you haven’t received your W-2, follow these four steps: Contact your employer  If you have not received your W-2, contact your employer to inquire if and when the W-2 was mailed.  If it was mailed, it may have been returned to the employer because of an incorrect or incomplete address.  After contacting the employer, allow a reasonable amount of time for them to resend or issue the W-2. Contact the IRS If you do not receive your W-2 by Feb. 14, contact the IRS for assistance at 800-829-1040. When you call, you must provide your name, address, Social Security number, phone number and have the following information: •  Employer’s name, address and phone number •  Dates of employment •  An estimate of the wages you earned, the federal income tax withheld, and when you worked for that employer during 2011. The estimate should be based on year-to-date information from your final pay stub or leave-and-earnings statement, if possible. File your return  You still must file your tax return or request an extension to file by April 17, 2012, even if you do not receive your Form W-2. If you have not received your Form W-2 in time to file your return by the due date, and have completed steps 1 and 2, you may use Form 4852, Substitute for Form W-2, Wage and Tax Statement. Attach Form 4852 to the return, estimating income and withholding taxes as accurately as possible.  There may be a delay in any refund due while the information is verified. File a Form 1040X  On occasion, you may receive your missing W-2 after you file your return using Form 4852, and the information may be different from what you reported on your return. If this happens, you must amend your return by filing a Form 1040X, Amended U.S. Individual Income Tax Return. Form 4852, Form 1040X and instructions are available at www.irs.gov or by calling 800-TAX-FORM.

Foreign Account Tax Compliance Act Summary

The Foreign Account Tax Compliance Act (FATCA), enacted in 2010 as part of the Hiring Incentives to Restore Employment (HIRE) Act, is an important development in U.S. efforts to combat tax evasion by U.S. persons holding investments in offshore accounts.

Under FATCA, certain U.S. taxpayers holding financial assets outside the United States must report those assets to the IRS. In addition, FATCA will require foreign financial institutions to report directly to the IRS certain information about financial accounts held by U.S. taxpayers, or by foreign entities in which U.S. taxpayers hold a substantial ownership interest.

Reporting by U.S. Taxpayers Holding Foreign Financial Assets

FATCA requires certain U.S. taxpayers holding foreign financial assets with an aggregate value exceeding $50,000 to report certain information about those assets on a new form (Form 8938) that must be attached to the taxpayer’s annual tax return.  Reporting applies for assets held in taxable years beginning after March 18, 2010. For most taxpayers this will be the 2011 tax return they file during the 2012 tax filing season.  Failure to report foreign financial assets on Form 8938 will result in a penalty of $10,000 (and a penalty up to $50,000 for continued failure after IRS notification).  Further, underpayments of tax attributable to non-disclosed foreign financial assets will be subject to an additional substantial understatement penalty of 40 percent.

Reporting by Foreign Financial Institutions

FATCA will also require foreign financial institutions (“FFIs”) to report directly to the IRS certain information about financial accounts held by U.S. taxpayers, or by foreign entities in which U.S. taxpayers hold a substantial ownership interest. To properly comply with these new reporting requirements, an FFI will have to enter into a special agreement with the IRS by June 30, 2013. Under this agreement a “participating” FFI will be obligated to:

(1) undertake certain identification and due diligence procedures with respect to its accountholders;
(2) report annually to the IRS on its accountholders who are U.S. persons or foreign entities with substantial U.S. ownership; and
(3) withhold and pay over to the IRS 30-percent of any payments of U.S. source income, as well as gross proceeds from the sale of securities that generate U.S. source income, made to (a) non-participating FFIs, (b) individual accountholders failing to provide sufficient information to determine whether or not they are a U.S. person, or (c) foreign entity accountholders failing to provide sufficient information about the identity of its substantial U.S. owners.

Notice 2011-53 provides the phased-in timeline of key FATCA implementation dates for FFIs. It is important to note that many details of the new reporting and withholding requirements pertaining to FFIs must be developed through Treasury regulations that are expected to be proposed by December 31, 2011.

One tax break lost means opportunity for other

U.S. firms enjoyed having their home office in Puerto Rico for years. The tax breaks for doing this have now gone away. How do the companies react to this loss? They simply shift their home office location to the Cayman Islands. Problem solved. This was assuredly not the intent of the law changes, but there are many instances where the ripple effect of new laws is not fully thought out or realized until it is too late. These offshore tax deferred earnings total at least $1.38 trillion according to a report from J.P. Morgan Chase.

Companies legally move profits offshore using the system of allocating income between units in different countries. This lets the corporations profit from a product that has earning in the Cayman Islands even though it was made in Puerto Rico and sold in the states. The profit shifting costs the U.S. government an estimated $90 billion a year. Read more at http://www.washingtonpost.com/business/2011/12/20/gIQAJ8o9DP_story.html

IRS Identity Protection PIN

Later this month, the IRS  will be sending letters out to approximately 250,000 taxpayers that  contains their 6-digit “Identity Protection PIN.” Taxpayers will  receive this letter because they have informed the IRS that they were  the victims of identity theft which the IRS has confirmed after  reviewing documentation provided by the taxpayer.

The Identity Protection  PIN must be entered on the affected taxpayer’s Federal return in  order to avoid a delay in processing the return and receipt of their  refund.

If you learn that one of  your customers has been a victim of identity theft, you should ask  them if they received a letter from the IRS. If they have, ask them  to bring it with them when they come in to have their 2011 Federal  return prepared.

Things to know about the  Identity Protection PIN:

• If the taxpayer  received an Identity Protection PIN and it is not entered on their  return, the IRS will reject the return if it is filed  electronically.
• The Identity  Protection PIN received by the taxpayer this month is only valid for  use on their TY 2011 return.
• For an affected  taxpayer, if the Identity Protection PIN is entered incorrectly, the  processing of their return will be delayed.
• If the taxpayer  misplaces their letter and cannot remember their Identity Protection  PIN, they cannot obtain a new one from the IRS. In this case, they  will have to file their return on paper and the processing of their  return will be delayed while the IRS validates that the return filed  is the taxpayer’s.
• If both the taxpayer  and spouse receive an Identity Protection PIN, only the taxpayer’s  should be entered on the return.
• When the Identity  Protection PIN is entered in the CrossLink program, the PIN will be  transmitted to the IRS as part of Form 1040. It will also print on  Form 1040 in the area designated for this purpose in the signature  area of Form 1040.
• An affected taxpayer  will receive a unique 6-digit PIN each year for 3 years following  verification by the IRS.
• The Identity  Protection PIN should not be confused with the 5-digit  taxpayer/spouse electronic self-select PIN.

Read more about the IRS  Identity Protection PIN program.

If one of your customers  informs you that they have been a victim of identity theft and they  have not contacted the IRS you should do one of the following:

• See the IRS  Identity Theft website.This  site contains information such as what documents the IRS requires the  taxpayer to submit for the IRS to validate their claim, where to send  the information, and how the taxpayer can contact the IRS Identity  Protection unit; or
• Have the taxpayer  contact the IRS Identity Protection Unit at 1-800-908-4490. Their  hours of operation are Monday – Friday 8:00 am – 8:00 pm your  local time.