Anne B. Wenzel CPA

08/15/2022

10/05/2017

Remember, final filing deadline for extended 2016 individual tax returns is October 16th!

11/04/2015

http://www.accountingtoday.com
IRS Commissioner Sees Budget Cuts Hurting Practitioners, Warns of Delayed Tax Season
WASHINGTON, D.C. (NOVEMBER 3, 2015)


BY MICHAEL COHN
Internal Revenue Service commissioner John Koskinen told a group of tax practitioners that budget cuts at the agency are harming not only taxpayers, but tax practitioners as well, and warned that unless Congress acts on tax extenders legislation, tax season might need to be delayed next year. At the same conference, National Taxpayer Advocate Nina Olson complained of declining taxpayer service levels by the IRS and obstructions to the work of her office on behalf of taxpayers.

John Koskinen
“The IRS is now at its lowest level of funding since 2008,” Koskinen said during a speech Tuesday at the American Institute of CPAs’ National Tax Conference in Washington, D.C. “But if you adjust for inflation, our budget is now comparable to where we were in 1998.”
He admitted that the level of service the IRS was able to provide, both on the phone and in person, was far worse than anyone would want. “Taxpayers who called the IRS had long wait times on the phones,” said Koskinen. “On bad days, fewer than 40 percent of calls were able to reach a live assistor, and that was after a 30-minute wait or longer. And taxpayers who needed in–person help at IRS Taxpayer Assistance Centers often waited in very long lines just to get in the door.”
Koskinen acknowledged the problems did not end with the tax-filing season. Callers have continued to experience long wait times on the phones, and the IRS is still getting reports of long lines at Taxpayer Assistance Centers in some locations. The problems have also been experienced by tax practitioners trying to help their clients comply with their tax obligations.
“This unacceptable level of service is a problem for practitioners as well, especially as it relates to the Practitioner Priority Line,” said Koskinen. “The waits for practitioners on this line have rivaled those for the regular taxpayer help lines. Of course, this is unacceptable to all of us. Tax practitioners interact with the IRS every day, and you need our assistance and expertise to properly represent your clients and help them fulfill their tax obligations.”
Decline in Audits and Compliance
The IRS has also seen reductions in taxpayer compliance. “Consider that the 15,000 full-time employees we have lost since 2010 include 5,000 key enforcement personnel,” said Koskinen. “These are the people who audit returns, perform collection activities and investigate tax fraud and other crimes. We are especially concerned about the effect that the reduction in our workforce has had on audits. The IRS completed about 1.2 million individual audits in fiscal 2015. That’s 13,700 fewer than the previous year. Even more disturbing, the decline in audits in 2015 was not a one-year aberration. The number for 2015 was 350,000 below five years ago. That’s a drop of 22 percent, and corresponds exactly to the number of revenue agents, which is also down 22 percent since 2010. During that same period, the number of income tax returns filed by individuals topped 146 million, an increase of almost 3 percent from 2010.”
Koskinen noted that the decline in audits was leading to a decline in tax revenue. “Not surprisingly, we’re seeing clear evidence of a longstanding decline in revenue coming from audits,” he said. “Between 2005 and 2010, the revenue generated from audits averaged $14.7 billion annually. But since 2010, it has averaged only $10.5 billion a year, which is a drop of nearly 30 percent, and translates to more than $20 billion in uncollected revenue over the past five years. These numbers show that when you have fewer employees doing compliance work, you end up leaving tax revenue on the table. In cutting the IRS budget, the government is forgoing billions just to achieve budget savings of a few hundred million dollars, since we estimate that every $1 invested in the IRS produces $4 in revenue. Some estimates are even higher. No one in all my hearings and private meetings on Capitol Hill has ever disagreed with our assertion that if you give us $1, you will get at least $4 back. Nonetheless, the IRS’s budget continues to be cut.”
Koskinen pointed out that the risk is not just in terms of dollars and cents. “Taxpayer service and enforcement need to be viewed as two sides of the same compliance coin, because our system is built on the notion of voluntary compliance,” he said. “If people think they’re not going to get caught if they cheat, or they’re just fed up because they can’t get the help they need from us to file their taxes, the system will be put at risk, and voluntary compliance is likely to suffer. Consider that a one-percent decline in the compliance rate translates into $30 billion in lost revenue for the government.”
Identity Theft
Koskinen also described the IRS’s efforts to combat identity theft. He noted the IRS has been working with state tax authorities and the private sector, including tax software vendors and major tax prep chains, to beef up security (see IRS, States and Tax Industry Adding New Safeguards to Curb Identity Theft).
“Just two weeks ago, the group announced it is on track to fulfill the goal of having new protections in place by the time taxpayers have to file tax returns in 2016,” he said. “Although we’re still a few months away from W-2s going out to taxpayers, we want everyone to know they can expect more protections than ever when they file their taxes next year.”
For the upcoming filing season, the IRS and its partners have been taking a two-pronged approach. “This involves both improving taxpayer authentication on the front end, and obtaining more matching data so we can make our fraud filters more effective at identifying and stopping false returns,” said Koskinen. “Working together—the states, industry and the IRS—we came up with more than 20 data components that we can collect and share with each other when a return is filed. This data—which is largely invisible to the taxpayer as their return is filed—will shine new light on potentially fraudulent returns. Along with this data sharing, we’ll also continue to use one of our most powerful weapons against fraud, and that is our Return Review Program. This is a relatively new and sophisticated fraud detection system designed specifically to help protect taxpayers.”
Taxpayer Advocate Service Problems
National Taxpayer Advocate Nina Olson spoke at the conference earlier in the morning Tuesday and highlighted some of the same trends, including the IRS’s struggle to help taxpayers facing identity theft. She described one case in which her office had tried to help a taxpayer get a refund released by the IRS.

Nina Olson
“We sent it over because the taxpayer was experiencing significant hardship, which was an economic hardship,” said Olson. “The response that she got back from an official receiving that order was ‘We have thousands of these cases. Get in line.’ Now, I have never heard that response and I have been there for 15 years.”
Olson’s office had to take the additional step of issuing a Taxpayer Assistance Order. “The IRS is going to have to do this work,” she said. “It’s just a question of whether they’re going to make us do more work to make them do the work. This is what we are seeing in the environment right now, this feeling that because Congress hasn’t funded you, it works its way down to the employees so that they feel, ‘Well, I’m going to do just this, and I’ve got so much work, I’m only going to be able to get this done. What’s seeping down into the front-line employees is a demoralization that it doesn’t matter if they get their work done spectacularly well or not, or that they go the extra mile.”
Olson is also seeing resistance from the IRS to the Taxpayer Advocate Service’s intervention on cases.
“The cases that come up to my level are often very complex,” she said. “People have staked out positions through the various levels of appeals, and I understand that. However, when it gets up to my level, we’re trying to figure out what’s gone on in the case before, and I am trying to take an independent look at the case and understand all perspectives so that I can formulate my position that I will then advocate to the deputy commissioner and the commissioner. We are finding instances where the IRS is refusing to let me or my staff have access to the administrative files of the taxpayers unless I sign a document agreeing in writing not to share any information that I find or see in that file with the taxpayer him or herself. I find that deeply offensive. I am subject to the same laws as any other IRS employee about disclosure of tax information. I am also by law entitled to any tax return or any tax return information that I need to conduct my tax administration duties. My tax administration duties are in the code and number one is help taxpayers resolve their problems with the IRS, and I need to be able to see the administrative files in order to determine how they go about doing that. My position is that the IRS in those instances has violated the law by not providing me access to those files, and I do not say that lightly.”
Olson said there are other instances where the taxpayer has asked her or a member of her staff to attend a conference between the taxpayer’s representative and the IRS, and she has encountered resistance there as well. “The IRS has refused to let us meet, and there is no legal basis for that,” she said. “However, it may take a statute directing the IRS to allow that to happen, or to order the IRS that it can’t stop it. It’s that kind of action, and that kind of activity that actually leads Congress to micromanage the IRS. It’s completely unnecessary and it’s completely avoidable.”
Challenges for Next Tax Season
Congress will need to act on tax extenders legislation if it wants to avoid further problems for taxpayers and tax professionals next tax season, according to Koskinen. He is also worried about the mounting challenges of implementing the Affordable Care Act.
“One more critical challenge, for the IRS and for the tax community, is the upcoming filing season,” he said. “It promises to be another complicated filing season, and not just because of our budget situation. Along with protecting against stolen identity refund fraud, our efforts to prepare for the upcoming filing season once again involve the Affordable Care Act. We are preparing our systems for additional ACA changes that took effect this year. One is a reporting requirement that applies to health coverage providers and certain large employers.”
Another ACA provision taking effect for 2015 is the employer shared responsibility provision, he noted. “Certain large employers will owe a shared responsibility payment if they do not offer adequate, affordable coverage to their full-time employees and at least one of those employees receives the premium tax credit,” said Koskinen.
Another concern the IRS has about the upcoming filing season involves the possibility of late tax legislation. “We had this same concern last year,” said Koskinen. “Once again, Congress has been working on legislation to extend a group of expired tax provisions, but it has not completed action yet. The uncertainty we face over the extenders legislation raises operational and compliance risks for the IRS in its administration of the tax law and delivery of the filing season. This uncertainty imposes stress, not only on the IRS, but also on the entire tax community, including everyone in this room.”
Koskinen warned that tax season might have to be delayed unless Congress acts by next month.
“If this uncertainty persists into December, we could be forced to postpone the opening of the 2016 filing season,” he said. “This would delay the start of processing of tax refunds for millions of taxpayers. It’s also important for lawmakers to understand what the effect would be if they made any substantive changes to tax provisions that are extended, or decided to approve any new tax provisions. We would need to reprogram our systems and make processing changes that would result in delays. So I will continue to urge members of Congress not to let this uncertainty drag on. We believe it is critical for Congress to make a decision one way or another on the extenders legislation no later than the end of November in order to ensure there are no disruptions to the upcoming filing season.”

11/02/2015

Excerpt from Latino Tax Professionals blog dated October 30, 2015
A New Era of Tax-Data Sharing for the IRS

Tax authorities around the world have started to share large amounts of data in an effort to crack down on cheating by taxpayers using offshore accounts.
In early October, the Internal Revenue Service said it had begun the automatic digital exchange of financial-account information with tax authorities abroad. The agency has received information about U.S. taxpayers’ offshore accounts from as many as 70 countries, and it has sent information about foreigners’ U.S. accounts to fewer than 34 countries.
These exchanges of data far expand on prior information sharing between governments. They are an outgrowth of FATCA, the Foreign Account Tax Compliance Act, which Congress enacted following revelations that Swiss banks were encouraging U.S. taxpayers to hide assets abroad.
Since 2009, when U.S. authorities intensified their crackdown on undeclared offshore accounts, more than 54,000 U.S. taxpayers have participated in IRS limited-amnesty programs and paid more than $8 billion to resolve their cases.
FATCA requires foreign financial firms to report account data for their U.S. taxpayers or face stiff penalties. In many countries this information is bundled and submitted by the tax agency to the IRS. After FATCA was enacted, U.S. authorities said that in some cases they would share information on U.S. accounts held by foreigners, in an effort to counter charges the U.S. was acting unilaterally.
FATCA supporters say the law has been a catalyst for historic change. Following its enactment, several non-U.S. countries decided to push for a similar effort, called the Common Reporting Standard. The CRS will enable countries such as Germany and France to exchange tax data digitally by 2018.
So far, more than 90 nations have signed up for CRS. “FATCA and the Common Reporting Standard are fundamental changes in the tax landscape that could help countries around the world stem offshore tax evasion,” says Itai Grinberg, an international tax specialist at Georgetown University’s Law School.
FATCA’s critics question whether its results will justify its cost, and many worry that sensitive financial information sent abroad could be misused despite the IRS’s best efforts to safeguard it.
James Butera, a lawyer with Jones Walker in Washington, notes that U.S-based accounts held by foreigners often aren’t taxable here. Many Latin Americans, he adds, “are afraid that if their financial information is revealed, they’ll be at risk of kidnapping or extortion.”
Mr. Butera represents Florida and Texas bankers in lawsuits challenging required reporting of foreigners’ accounts to the IRS.
Because Fatca’s automatic data exchanges are recent, much remains unclear. Here is what we know:
Who is sharing information? About 70 countries, including Singapore, the Cayman Islands, and the British Virgin Islands, have signed agreements with the U.S. saying they will bundle and send information from financial firms in that country to the IRS, and about 30 more are expected to do so.
In addition, about a dozen countries, including Taiwan, Japan and Switzerland, have signed or will sign a different FATCA agreement under which their financial firms submit information directly to the IRS.
Several dozen countries that have signed FATCA agreements or are expected to are eligible to receive information from the IRS regarding their taxpayers’ U.S. accounts.
However, the IRS must investigate the security of tax information in each country before it approves a data release. As of the end of September, 34 countries were on the approved list, including Mexico, Brazil, and India as well as the U.K. and Sweden. The IRS declined to say which of these have received data.
For a list of FATCA agreements, see the Treasury Department’s FATCA Archive update of Oct. 16. For a list of countries approved to receive IRS data, see IRS Revenue Procedure2015-50.
What information is being shared? Richard Kando, a director of Navigant Consulting in New York, says that in general, financial firms abroad have to report the name, address and taxpayer ID number of each U.S. account holder. They also must give the account number, account balance and gross amounts of dividends, interest and other income—including items such as the cash value of annuities. The threshold for reporting foreign accounts can be as little as $50,000.
The IRS won’t send all the same information abroad about foreigners’ accounts held in the U.S. firms, Mr. Kando says. In general, the agency will provide the name, address, account number and tax ID number or date of birth for the client, plus the gross amounts of deposit interest, U.S.-source dividends and certain other U.S.-source income. But the agency isn’t required to provide the account balance.
The IRS declined to say what the threshold is for reporting accounts held by foreigners.
What about timing? Experts believe that current data transmissions are for the 2014 calendar year.
The IRS hasn’t said which countries have sent data so far, but some countries that haven’t completed FATCA agreements haven’t begun transmissions. Malaysia, for example, isn’t expected to send data on U.S. accounts until 2016.
The upshot, says Mr. Kando, is that “it’s becoming harder and harder for people to maintain undeclared accounts around the world.”

10/01/2015

IRS Tax Tip-reprinted from IRS documentation 9-29-15
Issue Number: HCTT-2015-60
Inside This Issue
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How Your Income Affects Your Premium Tax Credit
You are allowed a premium tax credit only for health insurance coverage you purchase through the Marketplace for yourself or other members of your tax family. However, to be eligible for the premium tax credit, your household income must be at least 100 percent, but no more than 400 percent of the federal poverty line (FPL) for your family size. An individual who meets these income requirements must also meet other eligibility criteria.
The amount of the premium tax credit is based on a sliding scale, with greater credit amounts available to those with lower incomes. Based on the estimate from the Marketplace, you can choose to have all, some, or none of your estimated credit paid in advance directly to your insurance company on your behalf to lower what you pay out-of-pocket for your monthly premiums. These payments are called advance payments of the premium tax credit. If you do not get advance credit payments, you will be responsible for paying the full monthly premium.
If the advance credit payments are more than the allowed premium tax credit, you will have to repay some or all the excess. If your projected household income is close to the 400 percent upper limit, be sure to consider the amount of advance credit payments you choose to have paid on your behalf. You want to consider this carefully because if your household income on your tax return is 400 percent or more of the federal poverty line for your family size, you will have to repay all of the advance credit payments made on behalf of you and your family members.
For purposes of claiming the premium tax credit for 2014 for residents of the 48 contiguous states or Washington, D.C., the following table outlines household income that is at least 100 percent but no more than 400 percent of the federal poverty line:

Federal Poverty Line for 2014 Returns
100% of FPL . 400% of FPL
One Individual $11,490 up to $45,960
Family of two $15,510 up to $62,040
Family of four $23,550 up to $94,200
The Department of Health and Human Services provides three federal poverty guidelines: one for residents of the 48 contiguous states and Washington D.C., one for Alaska residents and one for Hawaii residents. For purposes of the premium tax credit, eligibility for a certain year is based on the most recently published set of poverty guidelines at the time of the first day of the annual open enrollment period for coverage for that year. As a result, the premium tax credit for 2014 is based on the guidelines published in 2013. The premium tax credit for coverage in 2015 is based on the 2014 guidelines. You can find all of this information on the HHS website.
Use our Interactive Tax Assistant tool to find out if you are eligible for the premium tax credit. For more information, see the instructions to Form 8962 and the Questions and Answers on the Premium Tax Credit on IRS.gov/aca.

03/18/2014

What do I need to know about the Health Care Law for my 2013 Tax Return?

For most people, the Affordable Care Act has no effect on their 2013 federal income tax return. For example, you will not report health care coverage under the individual shared responsibility provision or claim the premium tax credit until you file your 2014 return in 2015.

However, for some people, a few provisions may affect your 2013 tax return, such as increases in the itemized medical deduction threshold, the additional Medicare tax and the net investment income tax.

Here are some additional tips:
Filing Requirement: If you do not have a tax filing requirement, you do not need to file a 2013 federal tax return to establish eligibility or qualify for financial assistance, including advance payments of the premium tax credit to purchase health insurance coverage through a Health Insurance Marketplace.

W-2 Reporting of Employer Coverage: The value of health care coverage reported by your employer in box 12 and identified by Code DD on your Form W-2 is not taxable.

03/06/2014

Own a Home? You May Be Entitled to Tax Breaks
Excerpt from www.Zillow.com

DATE: FEBRUARY 19, 2014 | CATEGORY:TIPS & ADVICE | AUTHOR:MARY BOONE


U.S. tax season officially runs from Jan. 31 to April 15. While several energy-efficient home improvement tax credits recently expired, there are still many tax breaks available to homeowners.
Whether you own a single-family home, condo, co-op apartment or mobile home, you may qualify — just be aware that, in most cases, you’ll need to itemize your taxes in order to take advantage of these deductions and credits. Here are a few of the tax breaks you’ll want to check out.

Mortgage interest deduction
In most cases, you can deduct all of your home mortgage interest. How much you can deduct depends on when you took out the mortgage, the amount of the mortgage and how you use mortgage proceeds. You can deduct your home mortgage interest only if your mortgage is a secured debt. Your mortgage is a secured debt if you put your home up as collateral to protect the interests of the lender. You may qualify for a mortgage interest deduction on a loan secured for your primary and second home, even if your second home is a boat or RV with cooking, sleeping and bathroom facilities. The interest you pay on a mortgage for a third, fourth or fifth home may be deductible if the proceeds of the loan were used for business, investment or other deductible purposes; check with a tax accountant for details.

Deduction of points
If you bought a home in 2013 and paid points in order to obtain your home mortgage, these fees are included on the income tax deductions list and can be deducted. If you refinanced your home, these points are still deductible, but it must be done over the life of the mortgage.

Exclusion on sales gains
If you sold a home in 2013, you may qualify for an exclusion on the net sales gain (selling price minus purchase price plus improvements) of up to $250,000 for an individual or $500,000 for a couple. This exclusion requires that the home was used as your personal residence for two of the past five years. Things become more complicated if you lived in the house, moved out and then moved back in; be sure to consult a tax professional to see if you qualify for a partial exclusion.
Deduction of property taxes
You can deduct your state and local property taxes, as long as they are based on the assessed value of the real property. If you pay your property taxes out-of-pocket, you need to locate your bills to determine how much you paid. If your money is being held in escrow for the purpose of paying property taxes, you cannot claim this deduction until the money is actually taken out of escrow and paid. If you receive a partial refund of your property tax, the amount of the deduction you can claim will be reduced.

Mortgage insurance deduction
Mortgage insurance provided by the U.S. Department of Veterans Affairs is commonly known as a funding fee; if provided by the U.S. Department of Agriculture Rural Development, it’s referred to as a guarantee fee. The funding fee or guarantee fee can be included in the amount of your home loan or paid in full at the time of closing. These fees can be deducted fully in tax year 2013 if the mortgage insurance contract was issued in 2013. If you pay private mortgage insurance (PMI), that’s a cost you probably won’t be able to deduct — unless you meet the requirements of a special PMI law that allows deductions of PMI payments on loans originated or refinanced between Jan. 1, 2007, and Dec. 31, 2013, and that meet certain loan amount limits.

Home office deduction
Beginning in tax year 2013, taxpayers may use a simplified option when figuring the deduction for business use of their home. Both homeowners and renters can take advantage of this deduction, as long as the space serves as your principal place of business and is regularly and exclusively used for business purposes. You’re entitled to a deduction of $5 per square foot of the home used for business, up to 300 square feet.

If the simplified option doesn’t appeal to you, you may still use the regular method (required for tax years 2012 and prior) and determine the actual expenses of your home office: mortgage interest, insurance, utilities, repairs and depreciation. If you use the regular method, deductions for a home office are based on the percentage of your home devoted to business use.

Energy-savings deductions
If you installed a geothermal heat pump, small wind turbine or solar energy system in your home in 2013, you may be able to claim a tax credit for up to 30 percent of the cost of installation. The credit has no upper limit and applies to both existing homes and new construction, but not to rental properties. This credit runs through the end of 2016. You can also get a credit of up to 30 percent of the cost of residential fuel cells, up to $500 per 0.5 kilowatt of power capacity. This credit also expires Dec. 31, 2016.

Clergy, military housing allowance
Ministers and members of the U.S. armed services who receive a housing allowance that is not taxable can deduct their real estate taxes and home mortgage. Even better news? You don’t have to reduce your deductions by your nontaxable allowance.

03/05/2014

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Four Things You Should Know if You Barter
Bartering is the trading of one product or service for another. Often there is no exchange of cash. Small businesses sometimes barter to get products or services they need. For example, a plumber might trade plumbing work with a dentist for dental services.
If you barter, you should know that the value of products or services from bartering is taxable income.
Here are four facts about bartering:
1. Barter exchanges. A barter exchange is an organized marketplace where members barter products or services. Some exchanges operate out of an office and others over the Internet. All barter exchanges are required to issue Form 1099-B, Proceeds from Broker and Barter Exchange Transactions. The exchange must give a copy of the form to its members who barter and file a copy with the IRS.
2. Bartering income. Barter and trade dollars are the same as real dollars for tax purposes and must be reported on a tax return. Both parties must report as income the fair market value of the product or service they get.
3. Tax implications. Bartering is taxable in the year it occurs. The tax rules may vary based on the type of bartering that takes place. Barterers may owe income taxes, self-employment taxes, employment taxes or excise taxes on their bartering income.
4. Reporting rules. How you report bartering on a tax return varies. If you are in a trade or business, you normally report it on Form 1040, Schedule C, Profit or Loss from Business.

Excerpt from IRS Tax Tip 2014-26

11/21/2013

Mayonnaise Jar & Two Beers...

When things in your life seem almost too much to handle, when 24 hours in a day are not enough, remember the mayonnaise jar and the 2 beers.

A professor stood before his philosophy class and had some items in front of him. When the class began, he wordlessly picked up a very large and empty mayonnaise jar and proceeded to fill it with golf balls. He then asked the students if the jar was full. They agreed that it was.

The professor then picked up a box of pebbles and poured them into the jar. He shook the jar lightly. The pebbles rolled into the open areas between the golf balls. He then asked the students again if the jar was full. They agreed it was.

The professor next picked up a box of sand and poured it into the jar. Of course, the sand filled up everything else. He asked once more if the jar was full. The students responded with a unanimous 'yes.'

The professor then produced two Beers from under the table and poured the entire contents into the jar effectively filling the empty space between the sand. The students laughed....

'Now,' said the professor as the laughter subsided, 'I want you to recognize that this jar represents your life.

The golf balls are the important things---your family, your children, your health, your friends and your favorite passions---and if everything else was lost and only they remained, your life would still be full.

The pebbles are the other things that matter like your job, your house and your car.

The sand is everything else---the small stuff.

'If you put the sand into the jar first,' he continued, 'there is no room for the pebbles or the golf balls.

The same goes for life.
If you spend all your time and energy on the small stuff you will never have room for the things that are important to you. Pay attention to the things that are critical to your happiness.

Spend time with your children.

Spend time with your parents.
Visit with grandparents.

Take time to get medical checkups.

Take your spouse out to dinner.

Play another 18.

There will always be time to clean the house and fix the disposal.

Take care of the golf balls first---the things that really matter.
Set your priorities. The rest is just sand.

One of the students raised her hand and inquired what the Beer represented.

The professor smiled and said, 'I'm glad you asked.' The Beer just shows you that no matter how full your life may seem, there's always room for a couple of Beers with a friend.

Please share this with someone you care about. I JUST DID!


LIFE ISN'T ABOUT WAITING FOR THE STORM TO PASS...
...IT'S LEARNING HOW TO DANCE IN THE RAIN !