Harless Tax Blog

Harless Tax Blog

Did You Know?

Thursday, August 11, 2016

In 2015, Atlanta’s airport became the first to top 100 million passengers in a calendar year, serving over 101 million travelers. Beijing’s airport was a distant second in the world, with nearly 90 million passengers last year. The next busiest U.S. airports were those serving Chicago (No. 4 in the world, 76.9 million), Los Angeles (7th, 74.9 million), and Dallas-Ft. Worth (10th, 63 million).

Important Tax Dates for Employers

Monday, August 08, 2016
  • Reminder of Important Tax Dates for Employers
    • August 10:  For Social Security, Medicare, and withheld income tax, file Form 941 for the second quarter of 2016. This due date applies only if you deposited the tax for the quarter in full and on time.
    • August 15:  For Social Security, Medicare, withheld income tax, and nonpayroll withholding, deposit the tax for payments in July if the monthly rule applies. 

IRS Launches More Rigorous e-Authentication Process and Get Transcript Online

Monday, June 13, 2016

From the IRS.gov Website. Read Original Article >

WASHINGTON — With the assistance of top digital experts at U.S. Digital Service and other security authorities, the Internal Revenue Service today launched a more rigorous e-authentication process for taxpayers that will significantly increase protection against identity thieves impersonating taxpayers to access tax return information through the IRS Get Transcript online service. This enhanced authentication process will also provide a foundation for additional IRS self-help services in the future.

After being disabled last spring, Get Transcript Online is now available for all users to access a copy of their tax transcripts and similar documents that summarize important tax return information. Today’s formal relaunch of Get Transcript Online addresses increased cybersecurity threats by using a new, more secure access framework. This framework enables the IRS to require a two-step authentication process for all online tools and applications that require a high level of assurance.

“The IRS is committed to the protection of taxpayer information and the security of our systems,” said IRS Commissioner John Koskinen. “Criminals are becoming increasingly sophisticated and continue to gather vast amounts of personal information as the result of data breaches at sources outside the IRS. In the face of that threat, we must provide the strongest possible authentication processes, while trying to enhance the ability of taxpayers to legitimately access their data and use IRS services online. We recognize that enhanced security will increase the challenge for taxpayers accessing our on-line services.”

While some taxpayers may now find it more difficult to authenticate their identities with this strengthened process, the IRS is committed to making sure everyone accessing the site will be able to do so in a safe and secure way. The IRS continues to support multiple options for those taxpayers who may be unable to access online features or who prefer to obtain information in more traditional ways. These options currently include ordering transcripts online or by phone for receipt by mail, which typically are delivered to the address of record within five to 10 days. The IRS continues to look for ways to expand options for all taxpayers.

“The incident with Get Transcript Online illustrates a wider truth about identity theft in general, which is that there are no perfect systems,” Koskinen said. “No one, either in the public or private sector, can give an absolute guarantee that a system will never be compromised. For that reason, we continue our comprehensive efforts to update the security of our systems, protect taxpayers and their data and investigate crimes related to stolen identity refund fraud.”

Tax transcripts are summaries of tax returns. Transcripts often are used for non-tax purposes, such as income validation for mortgages or student loans. Taxpayers also can use transcripts to obtain their prior-year adjusted gross income (AGI), which they need in order to e-file their tax returns.

Starting last year, the IRS began working with U.S. Digital Service to create a new e-authentication platform for Get Transcript and other IRS.gov tools. U.S. Digital Service is a branch under the Office of Management and Budget (OMB) that brings some of the private sector’s best tech experts into government to resolve complex issues facing federal agencies. The new secure access process meets the security standards set by the National Institute of Standards and Technology (NIST) and the OMB.

To access the new Get Transcript Online feature, taxpayers must have an email address, a text-enabled mobile phone and specific financial account information, such as a credit card number or certain loan numbers. Taxpayers who registered using the older process will need to re-register and strengthen their authentication in order to access the tool.

As part of the new multi-factor process, the IRS will send verification, activation or security codes via email and text. The IRS warns taxpayers that it will not initiate contact via text or email asking for log-in information or personal data. The IRS texts and emails will only contain one-time codes.

See Fact Sheet 2016-20 for details on what you need to successfully access Get Transcript Online.

New features also allow taxpayers to see the date and time the Get Transcript Online page was last accessed.

Returning users must always receive and enter a text code prior to being able to obtain access.

The IRS maintains a multi-pronged, strategic approach to combating identity theft and assisting taxpayers who become victims. Last year, the IRS, state tax agencies and the tax industry joined forces for a Security Summit Initiative that identified and enacted new security safeguards for taxpayers in 2016. The Security Summit partners are currently exploring additional safeguards for 2017.

Have a Foreign Bank Account? Important Deadline Approaching

Tuesday, June 07, 2016

For those U.S. tax filers that have foreign bank accounts, please keep in mind that you might have one or more reporting requirements related to those accounts. FABR (FinCen 114) is due June 30. Form 8966 is due with your tax return. If you are unsure of whether you are subject to these requirements, please contact Min Huang, or any of the Harless & Associates tax team for help.

Expats Who Think Renouncing US Citizenship Means Tax Gains Might Need to Think Again

Wednesday, May 25, 2016

Although keeping up with US tax requirements while living and working abroad can provide annoyances and challenges, renouncing US citizenship to avoid IRS responsibilities could mean both penalties and a loss of tax credits. From losing the ability to shield much property from US estate tax (down to $60,000 for a non- citizen from the $5.45 million allowed for US citizens) to restrictive limits on giving gifts tax free to US citizens, expats cum non-US citizens lose these significant tax shelters.

What could be worse is the possibility of paying an exit tax, for high earners, or having the IRS comb carefully through your past five years of tax returns. Little things like not having filed a required form can lead to penalties in the thousands, and if you keep US property, but give up your US passport, you could be required to pay capital gains tax on unrealized gain on that property. Considering these factors, maybe meeting compliance on Foreign Earned Income and understanding the Foreign Account Tax Compliance Act sounds a little less painful. Whatever you choose, before you make the leap, review the financial pros and cons with your tax accountant to decide which option makes the most sense for your individual income and portfolio.

Tax Fraud Blotter: 'Disdain and Disrespect'

Tuesday, April 19, 2016

From Account Today Website. Read Original Article >

A roundup of our favorite recent tax fraud cases.

Birmingham, Ala.: Preparer Donald E. Steele, 41, has been indicted for preparing false income tax returns and for intimidating witnesses contacted by the IRS to question about returns he had prepared.

Birmingham, Ala.: Preparer Donald E. Steele, 41, has been indicted for preparing false income tax returns and for intimidating witnesses contacted by the IRS to question about returns he had prepared.

He is charged with seven counts of aiding in the preparation of a false federal return in 2010 or 2011 and with four counts of witness tampering in 2011. At the time, Steele operated Max Tax, a tax prep business owned by his wife.

Steele is charged with making false claims and fabricating deductions on federal returns for five taxpayers. Among the charges is that in 2011 Steele prepared a 2010 tax return for “H.N.D,” fraudulently claiming an exemption for her disabled dependent brother, identified as “K.L.,” when Steele knew that K.L. was H.N.D.’s boyfriend and not disabled. Steele also claimed a $1,000 American Opportunity Tax Credit based on a false claim that K.L. was a student and had incurred $4,000 in education expenses during the 2010 tax year.

Regarding the witness-tampering counts, Steele is charged with calling K.L. some seven or eight times after learning IRS agents were inquiring about the preparation of H.N.D.’s 2010 return and telling K.L. to lie to the agents and tell them that Steele’s wife had prepared H.N.D.’s return. Two other counts of the indictment charge Steele with preparing returns for “A.E.T.” for the calendar years 2009 and 2010, falsely claiming business losses for the taxpayer when she was not self-employed in either year and did not provide Steele any information pertaining to self-employment. Steele claimed a net business loss of $12,049 for A.E.T. in 2009 and a net loss of $11,938 in 2010, according to the indictment.

In another witness-tampering count, Steele is charged with contacting a former preparer at Max Tax and telling her that if IRS agents contacted her, she should withhold information and tell them that he did not prepare any returns and that his wife prepared and transmitted the returns.

The maximum for aiding in the preparation of a false federal income tax return is three years in prison and a $250,000 fine. The maximum for witness tampering is 20 years in prison and a $250,000 fine.

Los Angeles: Tax preparer Oscar G. Barabino, 56, has pleaded guilty to failing to report income totaling more than $421,000 on his 2008 and 2009 federal income tax returns, costing the government more than $140,000.

According to the plea agreement, for the 2008 tax year Barabino omitted some $296,987 from his total income, resulting in a tax loss to the government of approximately $102,932. For his 2009 return, Barabino omitted approximately $124,283 from his total income, resulting in a tax loss to the government of approximately $37,800.

As part of the plea agreement, Barabino has agreed to not prepare or assist anyone other than himself or his spouse in the preparation of any federal or California income tax returns during his period of supervised release. He further agreed to make full restitution to the U.S. for the tax losses.

Barabino faces a maximum of six years in federal prison and a fine of $500,000 when sentenced on July 25.

Providence, R.I.:
The fraudulent returns allegedly resulted in refunds totaling more than $685,000, which were deposited into a bank account controlled by Guzman.

The indictment charges Guzman with 33 counts of preparing false income tax returns, eight counts of wire fraud, four counts of aggravated ID theft, 23 counts of forgery and one count of theft of government funds.

In one alleged scheme, for tax years 2009, 2010, and 2011 Guzman, then employed at El Centro Multiservices in Providence, filed at least 33 fraudulent returns by creating, inflating or falsifying clients’ dependents, exemptions, credits, deductions and expenses, with and without her client’s knowledge.

The indictment alleges that Guzman also schemed to use others’ personal ID without their authorization to file fraudulent returns during tax years 2009, 2010 and 2011. It is alleged that refunds totaling $686,823.65 obtained through the filing of fraudulent returns were deposited into a personal checking account belonging to Guzman.

Birmingham, Ala.: Preparer Eunice F. Plummer, 36, of Demopolis, Ala., has been sentenced to 46 months in prison for filing more than $250,000 in false returns.

Plummer pleaded guilty in October to three counts of attempting to evade or defeat a large portion of the income tax she owed for 2011, 2012 and 2013. She also pleaded guilty to eight counts of filing false returns for others between 2011 and 2013.

According to the indictment and her plea agreement, Plummer operated Plummer Tax Services from 2010 to 2014, where she routinely inflated customers’ refunds by using such fraudulent information as wage amounts, child and dependent care expenses, education credits, and business losses.

Plummer also substantially underreported her income from operating Plummer Tax Services. Between the taxes she failed to pay on her own behalf and the boosted refund amounts from the fraudulent tax returns she filed for clients, Plummer cheated the IRS out of more than $250,000.

In January and February, while on bond awaiting sentencing following her guilty plea, Plummer re-activated her tax business under the new name Unique Tax Services, at the same location where she had operated Plummer Tax Services, and filed more returns that were fraudulent.

A judge told Plummer at sentencing that by continuing to file fraudulent returns after pleading guilty to that conduct, she showed “disdain and disrespect” to the court and acted like “a thief” and “a con artist.”

Tucson, Ariz.: Preparer Jose Jesus Gonzalez, 48, has received 21 months of imprisonment after pleading guilty to willfully filing a false individual income tax return. He was also ordered to pay more than $255,000 restitution and, separately, a $17,488 fine.

Gonzalez, doing business as Gonzalez Insurance and Tax Services, operated offices in Tucson from 2004 through 2009 and in Phoenix from 2009 through 2010. During the 2008 tax year, Gonzalez e-filed 90 income tax returns seeking a total of $651,500 in false claims for the First-Time Home Buyer Credit. The IRS disallowed a portion of the claims but paid $620,000 in false claims to taxpayers.

Little Rock, Ark.: A jury has convicted traveling minister Allen D. Miles, 58, on 14 counts for his role in a $4.8 million tax refund scam, specifically one count of conspiracy to commit wire fraud, 10 counts of wire fraud and three counts of aggravated ID theft.

Miles, acting with Zinara Highsmith, engaged in a false tax refund scheme in which approximately 2,750 false returns were filed, claiming refunds of approximately $4.8 million. Miles obtained personal ID information from congregants and others by telling them that he could help them obtain money from an alleged government stimulus fund program. Miles did not tell congregants that income tax returns were going to be filed on their behalf.

After he obtained the information, Miles forwarded it to Highsmith, who with others then created the false returns that generated refunds based on certain credits for which the taxpayers did not qualify, such as the American Opportunity Credit, Making Work Pay Credit and the EITC.

For each refund, Miles collected a $125 commission and Highsmith, $275; the taxpayers received the balance. Miles received approximately $300,000 for his efforts in the refund scam, which operated between March and July 2011.

Sentencing is June 13.

Five Tax Tips on Estimated Tax Payments

Friday, April 15, 2016

From the IRS.gov Website. Read Original Article >

You usually will have taxes withheld from your pay if you are an employee. However, if you don’t have taxes withheld, or you don’t have enough tax withheld, you may need to make estimated tax payments. If you are self-employed you normally have to pay your taxes this way. Here are five tips about making estimated tax payments:

  1. When the tax applies. You should pay estimated taxes if you expect to owe at least $1,000 in tax for 2016 after subtracting your withholding and refundable credits. Special rules apply to farmers and fishermen.
  2. How to figure the tax. Estimate the amount of income you expect to receive for the year. Also make sure that you take into account any tax deductions and credits that you will be eligible to claim. Use Form 1040-ES, Estimated Tax for Individuals, to figure and pay your estimated tax.
  3. When to make payments. You normally make estimated tax payments four times a year. The dates that apply to most people for 2016 are April 18, June 15 and Sept. 15. There is one last payment on Jan. 17, 2017.
  4. When to change tax payments or withholding. Major life changes like the birth of a child can affect your taxes. When these changes happen, you may need to revise your estimated tax payments during the year. If you are an employee, you may need to change the amount of tax withheld from your pay. If this is the case, give your employer a new Form W–4, Employee's Withholding Allowance Certificate. You can use the IRS Withholding Calculator tool to help you fill out the form.
  5. How to pay estimated tax. You can pay online, by phone or from your mobile device. Direct Pay is a secure online service to pay your tax bill or your estimated tax directly from your checking or savings account at no cost to you. Visit IRS.gov/payments for easy and secure ways to pay your tax. Paying by mail is another option. If you pay by mail, use the payment vouchers that come with Form 1040-ES.

Each and every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. These are your Taxpayer Bill of Rights. Explore your rights and our obligations to protect them on IRS.gov.

Paying Your Taxes; Tips to Remember

Friday, April 15, 2016

From the IRS.gov Website. Read Original Article >

The IRS offers several payment options if you owe federal tax. Here are some key points to keep in mind when you pay your taxes this year.

  1. Never send cash. Electronic payment options are the quickest and easiest way to make a tax payment. You can pay online, by phone or with your mobile device.
  2. When paying with your mobile device use the IRS2Go app and make payments with Direct Pay, and by Debit or Credit Card. IRS2Go is the official smartphone app of the IRS.
  3. Check out IRS Direct Pay online at IRS.gov or with the IRS2Go app to pay directly from your bank account. It’s secure and free. You will get instant confirmation that you have submitted your payment.
  4. You can pay taxes electronically 24/7 on IRS.gov. Just click on the ‘Payments’ tab for access to IRS Direct Pay and other payment options. Pay in a single step by using your tax software when you e-file. If you use a tax preparer, ask the preparer to make your tax payment electronically.
  5. Whether you e-file your tax return or file on paper, you can choose to pay with a credit or debit card. The company that processes your payment will charge a processing fee. You may be able to deduct the credit or debit card processing fee on next year’s return. It’s claimed on Schedule A, Itemized Deductions.
  6. You may also enroll in the Electronic Federal Tax Payment System. You can use the EFTPS to pay your federal taxes electronically. You have a choice to pay using the Internet, or by phone using the EFTPS Voice Response System.
  7. If you can’t pay electronically, you can still pay by a personal or cashier’s check or money order. Do not send cash. Make your check or money order, payable to the “U.S. Treasury.” Be sure to write your name, address and daytime phone number on the front of your payment. Also, write the tax year, form number you are filing and your Social Security number. Use the SSN shown first if it's a joint return.
  8. If you pay by paper check, complete Form 1040-V, Payment Voucher. Mail it with your tax return and payment to the IRS. Make sure you send them to the address listed on the back of Form 1040-V. This will help the IRS process your payment and post it to your account. You can get the form on IRS.gov/formsat any time.
  9. Remember to include your payment with your tax return but do not staple or clip it to any tax form.
  10. Even if you can’t pay your tax in full, you should file your tax return on time. You should pay as much as you can with your tax return. That will help keep your penalty and interest costs down. You have options such as an installment agreement, which allow you to pay the balance over time. The Online Payment Agreement application is available on IRS.gov.

Each and every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. These are your Taxpayer Bill of Rights. Explore your rights and our obligations to protect them on IRS.gov.

Employers: Have fewer than 50 Employees? Here’s how ACA Affects You

Thursday, April 14, 2016

From the IRS.gov Website. Read Original Article >

Most employers have fewer than 50 full-time employees or full-time equivalent employees and are not subject to the Affordable Care Act’s employer shared responsibility provision. 

If an employer has fewer than 50 full-time employees, including full-time equivalent employees, on average during the prior year, the employer is not an ALE for the current calendar year. Therefore, the employer is not subject to the employer shared responsibility provisions or the employer information reporting provisions for the current year. 

Calculating the number of employees is especially important for employers that have close to 50 employees or whose workforce fluctuates throughout the year. To determine its workforce size for a year an employer adds its total number of full-time employees for each month of the prior calendar year to the total number of full-time equivalent employees for each calendar month of the prior calendar year, and divides that total number by 12. 

Employers with 50 or fewer employees can purchase health insurance coverage for its employees hrough the Small Business Health Options Program – better known as the SHOP Marketplace. 

Employers that have fewer than 25 full-time equivalent employees with average annual wages of less than $50,000 may be eligible for the small business health care tax credit if they cover at least 50 percent of their full-time employees’ premium costs and generally if they purchase coverage through the SHOP.

Employers that provide self-insured health coverage must file an annual information return reporting certain information for individuals they cover. This requirement applies regardless of the size of the employer’s workforce. Self-insured employers with fewer than 50 full-time employees should have provided the 2015 information returns, Forms 1095-B, to their employees by March 31. The deadline for sending information Forms 1094-B and 1095-B to the IRS is May 31, or June 30 if filing electronically. 

For more information, visit our Determining if an Employer is an Applicable Large Employer page on IRS.gov/aca. The Small Business Health Care Tax Credit Estimator can help you determine if you might be eligible for the Small Business Health Care Tax Credit and how much credit you might receive.

IRS Offers New Cash Payment Option

Friday, April 08, 2016

From the IRS.gov Website. Read Original Article >

WASHINGTON — The Internal Revenue Service announced today a new payment option for individual taxpayers who need to pay their taxes with cash. In partnership with ACI Worldwide’s OfficialPayments.com and the PayNearMe Company, individuals can now make a payment without the need of a bank account or credit card at over 7,000 7-Eleven stores nationwide.

“We continue to look for new ways to provide services for our taxpayers. Taxpayers have many options to pay their tax bills by direct debit, a check or a credit card, but this provides a new way for people who can only pay their taxes in cash without having to travel to an IRS Taxpayer Assistance Center," said IRS Commissioner John Koskinen.

Individuals wishing to take advantage of this payment option should visit the IRS.gov payments page, select the cash option in the other ways you can pay section and follow the instructions:

  • Taxpayers will receive an email from OfficialPayments.com confirming their information.
  • Once the IRS has verified the information, PayNearMe sends the taxpayer an email with a link to the payment code and instructions.
  • Individuals may print the payment code provided or send it to their smart phone, along with a list of the closest 7-Eleven stores.
  • The retail store provides a receipt after accepting the cash and the payment usually posts to the taxpayer’s account within two business days.
  • There is a $1,000 payment limit per day and a $3.99 fee per payment.

Because PayNearMe involves a three-step process, the IRS urges taxpayers choosing this option to start the process well ahead of the tax deadline to avoid interest and penalty charges.

The IRS has been partnering with Official Payments since 1999 for taxpayers wanting to use a credit card to pay taxes.

In this new option, PayNearMe is currently available at participating 7-Eleven stores in 34 states. Most stores are open 24 hours a day, seven days a week,. For details about PayNearMe, the IRS offers a list of frequently asked questions on IRS.gov.

The IRS reminds individuals without the need to pay in cash that IRS Direct Pay offers the fastest and easiest way to pay the taxes they owe. Available at IRS.gov/Payments/Direct-Pay, this free, secure online tool allows taxpayers to pay their income tax directly from a checking or savings account without any fees or pre-registration.

“Taxpayers should look into the payment option that works best for them,” Koskinen said. 

Check IRS.gov/payments for the most current information about making a tax payment.

The IRS continues to remind taxpayers to watch out for email schemes. Taxpayers will only receive an email from OfficialPayments.com or PayNearMe if they have initiated the payment process. The IRS reminds taxpayers who haven’t taken this step to be watchful of any emails they receive saying there are tax issues involving the IRS or from others in the tax industry.