For quite some time large businesses have been able to expedite audits through the Fast Track Settlement (FTS) program. Last week the IRS announced this program will now be available for Small Business owners and self-employed taxpayers. Here is part of the announcement:
The Fast Track Settlement (FTS) program is designed to help small businesses and self-employed individuals who are under examination by the Small Business/Self Employed (SB/SE) Division of the IRS. Modeled on a similar program long available to large and mid-size businesses (those with more than $10 million in assets), FTS uses alternative dispute resolution techniques to help taxpayers save time and avoid a formal administrative appeal or lengthy litigation. As a result, audit issues can usually be resolved within 60 days, rather than months or years. Plus, taxpayers choosing this option lose none of their rights because they still have the right to appeal even if the FTS process is unsuccessful.
The business owners this would impact is those served by the SB/SE Division of the IRS:
SB/SE serves taxpayers who file Form 1040, Schedules C, E, F or Form 2106, as well as small businesses with assets under $10 million.
If you receive and audit letter from the IRS I would contact them immediately to see if the Fast Track Settlement program can be utilized. It may save a lot of time and money doing so.
The IRS released a statement warning taxpayers of a recent wave a phone scams using the IRS as a cover. I have posted the statement below. I would also remind people this scam is also conducted via email quite often as well. It is important to remember that anyone owing taxes usually receives multiple letters before any contact is made by phone or in-person.
Here is the IRS Statement:
IRS Warns of Phone Scam
The IRS is warning the public about a phone scam that targets people across the nation, including recent immigrants. Callers claiming to be from the IRS tell intended victims they owe taxes and must pay using a pre-paid debit card or wire transfer. The scammers threaten those who refuse to pay with arrest, deportation or loss of a business or driver’s license.
The callers who commit this fraud often:
- Use common names and fake IRS badge numbers.
- Know the last four digits of the victim’s Social Security number.
- Make caller ID appear as if the IRS is calling.
- Send bogus IRS emails to support their scam.
- Call a second time claiming to be the police or DMV, and caller ID again supports their claim.
The truth is the IRS usually first contacts people by mail – not by phone – about unpaid taxes. And the IRS won’t ask for payment using a pre-paid debit card or wire transfer. The agency also won’t ask for a credit card number over the phone.
If you get a call from someone claiming to be with the IRS asking for a payment, here’s what to do:
- If you owe federal taxes, or think you might owe taxes, hang up and call the IRS at 800-829-1040. IRS workers can help you with your payment questions.
- If you don’t owe taxes, call and report the incident to the Treasury Inspector General for Tax Administration at 800-366-4484.
- You can also file a complaint with the Federal Trade Commission at FTC.gov. Add “IRS Telephone Scam” to the comments in your complaint.
Be alert for phone and email scams that use the IRS name. The IRS will never request personal or financial information by email, texting or any social media. You should forward scam emails to email@example.com. Don’t open any attachments or click on any links in those emails.
Read more about tax scams on the genuine IRS website, IRS.gov.
Additional IRS Resources:
- Treasury Inspector General for Tax Administration
- FTC Complaint Assistant
- Report Phishing
- Protect Yourself from the Dirty Dozen Tax Scams
IRS YouTube Video:
Earlier this month the IRS announced the 2014 filing season (for Tax Year 2013) will be delayed due to the government slowdown that occurred at the beginning of October. This from their release:
WASHINGTON — The Internal Revenue Service today announced a delay of approximately one to two weeks to the start of the 2014 filing season to allow adequate time to program and test tax processing systems following the 16-day federal government closure.
The IRS is exploring options to shorten the expected delay and will announce a final decision on the start of the 2014 filing season in December, Acting IRS Commissioner Danny Werfel said. The original start date of the 2014 filing season was Jan. 21, and with a one- to two-week delay, the IRS would start accepting and processing 2013 individual tax returns no earlier than Jan. 28 and no later than Feb. 4.
This is similar to the delayed start that began the 2013 filing season as result of ATRA being passed so late. The good news is there should not be a long list of forms that could be delayed until February or March again.
On May 8, 2013, the Department of Labor issued Technical Release No 2013-2, which provided guidance about the Affordable Care Act’s (ACA) employer notice to employees under the Fair Labor Standards Act (FLSA). As part of ACA employers are required to let all existing employees know about the ACA marketplace exchanges or face $100 per day fine for being out of compliance with the law. It also required all new employees hired after that point be notified of the ACA marketplace exchanges. The Obama administration extension of the employer mandate does not extend this requirement. It is therefore important all businesses distribute this information to their employees.
Here is a cliff-note version of the DOL guidance:
- A notice must go out to all employees for employers that FLSA applies to. Generally this means any company with 1 or more employees and $500,000 or more in yearly revenue. However there are a lot of exemptions to the $500,000 guidance. If in doubt it is best for employers to send out the notice.
- It doesn’t matter if employees are full-time or part-time. All employees must receive the notice.
- October 1, 2013, is considered the deadline to give this notice to current employees.
- Employers will have 14 days from a new employees start date to provide this notice in the future.
- The notice may be distributed via paper or electronically (such as by email).
DOL has provided two model notices; one for employees that offers a health plan and one for employees that do not offer a health plan. Using these models will satisfy the employer requirement to notify their employees of the ACA marketplace exchange. The forms must be filled out by the employers before passing them out to employees. It has the information that employees will provide to the marketplace exchange if they wish to utilize it.
You may also want to send a letter with the form explaining to employees why they are receiving it. The American Small Business Center has provided two template letters to assist with this. It is recommended all employers use a template such as this (along with the DOL model form) and save a copy of it with the date to show compliance.
As noted back back in January, many IRS forms were not released when the tax season started January 30th. Two of the most common forms that were not available during the start of the season were released during the month of February. These two forms were:
- Form 4562 – Depreciation and Amortization (Including Information on Listed Property) – Released on February 10, 2013. We were happy to see depreciation released. Since most of our customers are farmers or business owners this form affected almost all of our clients.
- Form 8863 – Education Credits – Released on February 14, 2013. This form was not originally listed by the IRS, but was later added. It is also good this form was released, it affected a LOT of taxpayers.
The IRS has updated its list of forms being held. During this upcoming week the IRS will allow e-filing of these forms (after they have completed testing). The forms that should be released this week include:
- Form 3800 General Business Credit
- Form 4136 Credit for Federal Tax Paid on Fuels
- Form 5074 Allocation of Individual Income Tax to Guam or the Commonwealth of the Northern Mariana Islands
- Form 5471 Information Return of U.S. Persons With Respect to Certain Foreign Corporations
- Form 5695 Residential Energy Credits
- Form 5735 American Samoa Economic Development Credit
- Form 5884 Work Opportunity Credit
- Form 6478 Credit for Alcohol Used as Fuel
- Form 6765 Credit for Increasing Research Activities
- Form 8396 Mortgage Interest Credit
- Form 8582 Passive Activity Loss Limitations
- Form 8820 Orphan Drug Credit
- Form 8834 Qualified Plug-in Electric and Electric Vehicle Credit
- Form 8839 Qualified Adoption Expenses
- Form 8844 Empowerment Zone and Renewal Community Employment Credit
- Form 8845 Indian Employment Credit
- Form 8859 District of Columbia First-Time Homebuyer Credit
- Form 8864 Biodiesel and Renewable Diesel Fuels Credit
- Form 8874 New Markets Credits
- Form 8900 Qualified Railroad Track Maintenance Credit
- Form 8903 Domestic Production Activities Deduction
- Form 8908 Energy Efficient Home Credit
- Form 8909 Energy Efficient Appliance Credit
- Form 8910 Alternative Motor Vehicle Credit
- Form 8911 Alternative Fuel Vehicle Refueling Property Credit
- Form 8912 Credit to Holders of Tax Credit Bonds
- Form 8923 Mine Rescue Team Training Credit
- Form 8932 Credit for Employer Differential Wage Payments
- Form 8936 Qualified Plug-in Electric Drive Motor Vehicle Credit
Of this list I am hoping they get the Form 8903 (DPAD), Form 8582 (PALL), Form 4136 (Fuel Tax Credit), and Form 5695 (Residential Energy Credit) released the quickest. These forms are holding up the vast majority of our clients that are waiting on forms to be released (especially our farmers, even though the IRS extended the “farmer deadline” it doesn’t mean we want to keep holding all of these returns).
This last week the IRS made the following announcement:
As of Friday, Jan. 18, 2013, the United States District Court for the District of Columbia has enjoined the Internal Revenue Service from enforcing the regulatory requirements for registered tax return preparers. In accordance with this order, tax return preparers covered by this program are not currently required to register with the IRS, to complete competency testing or secure continuing education. The ruling does not affect the regulatory practice requirements for CPAs, attorneys, enrolled agents, enrolled retirement plan agents or enrolled actuaries.
The Internal Revenue Service, working with the Department of Justice, continues to have confidence in the scope of its authority to administer this program. On Wednesday, Jan. 23, the IRS and Justice Department asked for the injunction to be lifted. Regardless of the outcome of that request, an appeal is planned within the next 30 days.
The IRS is continuing to evaluate the scope of the court’s order in determining consistent next steps. Please continue to check this site as additional information becomes available
This announcement is in relation to a victory in court for tax preparers (and tax payers) against the new licensing scheme from the IRS. At this time I do not expect the injunction to be lifted. When reading the ruling (pdf) it becomes quit clear the judge left very little (if any) wiggle room for the IRS.
The Institute for Justice will continue to fight on behalf of tax preparers and tax payers in this case. For some insight behind why the IRS will continue to fight this battle read this excerpt from the Institute for Justice press release:
The IRS’s legal brief in support of its motion admits that the agency has already received “over $100 million” in user fees from tax preparers, while only spending about $50 million to implement the regulations. Meanwhile, the IRS objects to spending the much smaller sum of $238,000 simply to notify tax preparers of the judge’s ruling in this case. The IRS also expresses concern that thousands of tax preparers might “demand refunds” and the government may face “class action lawsuits.” But lifting the injunction would do nothing to prevent such lawsuits, and would allow even more preparers to become ensnared in the IRS’s costly regulatory regime, potentially exposing the government to additional liability.
“This motion reveals that, rather than protecting the public interest, these regulations are really about collecting money for the IRS and enriching special interests by using government force to protect them from competition,” said Dan Alban, an attorney at the Institute for Justice (IJ), which represents the three independent tax-preparer plaintiffs challenging the regulations. “We will oppose the IRS’s groundless attempt to continue its unlawful licensing scheme, and will continue to fight to protect the rights of our clients and tens of thousands of independent preparers nationwide.”
If anything comes up in this case I’ll be sure to pass it on.
The following news was released on the IRS website yesterday: “IRS Provides Penalty Relief to Farmers and Fishermen“. According the IRS guidance will be released in the future extending tax payments until April 15, 2013.
This extension was deemed necessary because the American Taxpayer Relief Act was not passed until the first week of 2013. Due to this delay many of the forms used by Farmers and Fishermen may not be released until late February or March. Most notably Form 4562 (Depreciation and Amortization) is on the list of IRS forms that will be delayed.
For those unfamiliar with farmer and fishermen taxes they have a special treatment for paying taxes. Normally self-employed tax payers must make estimated tax payments throughout the year. However farmers and fishermen are exempt from this requirement if they pay their taxes due before March 1. Of course in order to pay the taxes that means their actual tax return must be completed and filed. This makes a mad rush for farmers to complete their taxes during the month of February. If this deadline is missed farmers must pay a penalty for not making estimated tax payments throughout the year.
Of course farmers always have the option of paying estimated tax payments throughout the year like any other self-employed tax payer. In that case they have a filing and payment deadline of April 15 just like everyone else.