Tax Talk - The 20/20 tax resolution blog

The current economic downturn was tough on many businesses in 2009.  The IRS’s 2009 collection statistics, which were released in January, bear this out.  In 2009, the IRS collected $48.9 billion, which represents a 13 percent decrease in collections from 2008 when the IRS collected $56.4 billion.  Although the amount collected in 2009 decreased, the level of enforced collection actually increased.  The number of liens issued by the IRS increased approximately 25 percent from 768,168 in 2008 to 965,618 in 2009.  Likewise, the number of levies issued by the IRS increased approximately 32 percent from 2,631,038 in 2008 to 4,478,181 in 2009.

As the effects of the economic downturn were felt by everyone, it appears the number of businesses and individuals that fell out of compliance with the IRS increased.  However, the ability to repay those liabilities decreased, despite the increase in enforced collection.  It is likely that the number of taxpayers owing money to the IRS and the number of liens filed in response will remain high and may even continue to increase through 2010.

According to the Associated Press:

Federal workers owed the government more than $3 billion in back income taxes in 2008, just as federal tax revenues started to suffer from the recession.

More than 276,000 federal employees and retirees owed back income taxes as of Sept. 30, 2008, according to data from the Internal Revenue Service. The $3.04 billion owed was up from $2.7 billion owed by federal employees and retirees in 2007.

Among cabinet agencies, the Department of Housing and Urban Development had the highest delinquency rate, at just over 4 percent. The Treasury Department, which includes the IRS, had the lowest delinquency rate, at 0.98 percent.

Overall, the 9.7 million federal workers included in the data had a delinquency rate of about 2.9 percent.

“It’s not right for a few to shirk their obligations, and it’s especially offensive that these tax delinquencies come from federal employees and contractors,” said Sen. Chuck Grassley of Iowa, the top Republican on the Senate Finance Committee.

The IRS doesn’t provide a comparable delinquency rate for income taxes paid by the public. The nation’s overall compliance rate, which includes taxes paid by small businesses and corporations, has hovered around 85 percent for decades, according to IRS statistics.

Most residents who owe back income taxes file returns but cannot pay the full amount at tax time, said IRS spokesman Anthony Burke. Others have their tax bills increased through audits and cannot pay the higher bill.

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Now is about the time that time of year that people begin thinking about all the things to do for filing a federal income tax return.

Have you ever wondered if there is a convenient one-stop resource to locate answers to all the questions you have regarding any new IRS changes in laws, regulations, credits, or deductions?

The good news is that the Internal Revenue Service has a comprehensive Publication 17, Your Federal Income Tax that highlights all the ways to take advantage of the newest tax credits available in 2009.  Specifically, you’ll find information on making work pay credits, American opportunity education credits, earned income credits, first-time home buyer credits, energy credits for homeowners, and numerous other credits that can help save money.

The downside is that this publication is over a whopping 300 pages. Publication 17 in its entirety can be accessed directly via the IRS website in PDF format.  However, we found that the best way to digest the information to ensure that you obtain all the necessary details is to use the IRS’ interactive guide that has over 6,000 links to answer all your questions.

Most importantly, it is recommended that you consult with an expert regarding all the planning necessary to complete your 2009 tax return.  If you have any questions about how these credits will be interpreted in the face of a back tax liability contact us at 20/20 for your free consultation.

We wish you well in this tax planning and holiday season!

The Internal Revenue Service announced that they are looking for taxpayers who are due a combined $123.5 million in the form of 107,831 refund checks that were returned to the IRS by the U.S. Postal Service.

IRS Commissioner Doug Shulman said, “We are eager to get this money into the hands of taxpayers, so don’t delay if you think you are missing a refund. The sooner you update your address information, the quicker you can get your refund.”

All a taxpayer has to do is update his or her address once. The IRS will then send out all checks due. Undeliverable refund checks average $1,148 this year, compared to $990 last year. Some taxpayers are due more than one check.

If a refund check is returned to the IRS as undeliverable, taxpayers can generally update their addresses with the “Where Is My Refund” tool on IRS.gov. The tool enables taxpayers to check the status of their refunds. A taxpayer must submit his or her social security number, filing status and amount of refund shown on their 2008 return. The tool will provide the status of their refund and in some cases provide instructions on how to resolve delivery problems.

Taxpayers checking on a refund over the phone will be given instructions on how to update their addresses. Taxpayers can access a telephone version of “Where’s My Refund?” by calling 1-800-829-1954.

Contrary to Commissioner Shulman’s statement, I’m not exactly sure how “eager” the IRS truly is to chase taxpayers down for their refunds.  However, if you happen to owe the IRS for back taxes and have any questions about whether or not you are entitled to your refund or how to obtain information about your refund please contact 20/20 for the answers to all your questions.

It seems like everyone is trying to tap into the social media lifeline these days.  Even the historically drab and sterile IRS is getting in on the act.  The Service recently launched a YouTube channel and podcasts on Itunes with the intention of presenting tax advice to its viewers.

The videos highlight the $8,000 first-time homebuyer’s credit for those who purchase a house this year, the sales or excise tax deduction on new car purchases and the expanded credits for education and energy conservation.

After reviewing the videos it’s apparent that the provided information is helpful and applicable to a broad base of taxpayers.  For example, included is a video on using the IRS Withholding Calculator. Many workers received the Making Work Pay tax credit in April through their tax withholding at work. However, people who have more than one job or working spouses should double-check their withholding to ensure neither too much nor too little is being withheld. Taxpayers can utilize the IRS calculator to help determine if they need to make adjustments to their withholdings or not.

It’s commendable that the IRS is reaching out to taxpayers using the newer social media avenues such as YouTube, but the jury is still out on the efficacy of this outreach.  After almost two months, there are a measly 315 subscribers and 32,543 channel views.  While this could be the start of a new, albeit unlikely, hip IRS it’s more likely that no matter how much promotion goes into their channel—the same drab IRS communication methods will remain.  Therefore, only time will answer the lingering question: Is this social media venture a step in the right direction for the IRS or a waste of time and resources?

The IRS has recently issued a warning regarding one of the most common recurring e-mail schemes circulating the Internet.

From the IRS website the following statement was issued:

“Phishing is a tactic used by Internet-based scam artists to trick unsuspecting victims into revealing personal or financial information. The criminals use the information to steal the victim’s identity, access bank accounts, run up credit card charges or apply for loans in the victim’s name.

Phishing scams often take the form of an e-mail that appears to come from a legitimate source, including the IRS. The IRS never initiates unsolicited e-mail contact with taxpayers about their tax issues.”

It is important to reiterate that these phishing e-mails typically have an “official” appearance with the IRS logos and false references to tax codes.  Please keep in mind that the IRS does NOT ask for personal identifying or financial information via unsolicited e-mail. Additionally, taxpayers do NOT have to complete a special form to obtain a refund.

If you ever have any doubt regarding the validity of an IRS correspondence or if you believe you have been the target of an identity thief please either contact your tax representative or the IRS.  There is a criminal enforcement unit of the IRS that handles these types of schemes.

Please be careful out there and don’t be afraid to contact an expert to help you navigate the tricky waters of taxation.

The IRS has announced that they will be extending certain filing and payment deadlines until Jan. 5, 2009 for those affected by Hurricane Gustav in Louisiana.

The IRS is postponing until Jan. 5, 2009 deadlines for taxpayers who reside or have a business in the disaster area. The postponement applies to return filing, tax payment and other time-sensitive acts otherwise due between Sept. 1, 2008 and Jan. 5, 2009. This includes:

Individual estimated tax payments due Sept. 15, 2008.

Corporate extended 1120 tax returns due Sept. 15, 2008.

Individual extended 1040 tax returns due Oct. 15, 2008

Please see this news release from the IRS for all the details for Louisiana residents.  If you live in another part of the country and are looking for IRS news regarding disaster relief or specific state tax provisions check out this IRS link.

Remember to take the necessary steps to safeguard your financial records.  In our work with clients around the country, we see far too many people without the documentation needed to help them when their tax liability issues arise.  Here are some tips to help you keep your financial and tax records safe and available should a disaster strike.