All Articles Tagged "IRS"
You’d be crazy not to dread a tax audit. One of the reasons for all the anxiety is IRS doesn’t let the general public know the details of the auditing process. “For understandable reasons, the IRS insists on keeping the ins and outs of its auditing process on the murky side. How will you catch the bad guys if you give them the rule book first?” reports Yahoo! News.
The biggest myth is that only the wealthy get audited. Okay the rich do sometimes come under extra scrutiny, but low- and middle-income workers also get audited. “The agency is increasingly relying on data mining and robo-audit systems to detect errors in tax returns, which has actually made it easier to go after small-fish taxpayers,” reports Yahoo!
More than 6.5 million taxpayers who had an adjusted gross income of less than $1 million were audited last year. But the IRS audited fewer than 40,000 taxpayers with an income of $1 million or more. Actually, the IRS has reduced the rate of millionaire audits more than other income brackets. “Auditing rates for the under-$200,000 income club fell by only 0.14 percent between 2011 and 2013, compared with a 1.63 percent decrease in the rate of audits of those making $1 million or more…” reports Yahoo! Keep in mind: you can also be audited even after you get your tax refund.
Another myth is that once you get an audit notice from the IRS someone will come knocking on your door, hunting you down for financial info. Out of 6.5 million audits done in 2013, only 362,500 (or 5.5 percent), involved a visit from an IRS agent. Usually you’ll just get a letter requesting additional information.
The third major myth is that if you owe money, the IRS will demand it right away. It may take the IRS three to six years to follow up on questionable tax returns. As we recently reported, the IRS is underfunded and understaffed so they don’t have the manpower to act quickly.
Many people think that if they file for too many deductions and tax credits, they will get red flagged for an audited. This is myth #4. Not so, as long as the tax credits and deductions are justifiable. So take advantage of the Earned Income Tax Credit if you are eligible. As many as one-fifth do not. And be sure to take those home-office deductions. With more than 42 million Americans working as freelancers and independent contractors, the IRS expects these deductions.
If you are audited, there are various types of audits.
-Correspondence Audit: This is done via mail and usually involves small-dollar amounts. The most common errors that will lead to a correspondence audit are: missing forms and schedules, illegible entries and mathematical errors. So make sure you have copies of all your receipts.
-Field Audit: “In a field audit, the examiner visits your home or business to verify the information on your tax return. For example, if you write off a massive amount of printer ink, a field examiner might want to know why you go through so much ink,” reports How Stuff Works.
-Office Audit: You will have to go to an IRS office. Bring all your documentation with you.
Tried calling the IRS lately? I have. If you want a live agent, you’ll be on hold for 30 minutes and upward. Or you could get caught in a maze of automated requests.
In fact, 39 percent of people who called the IRS last year gave up before their call was answered, according to a revealing report by the IRS Taxpayer Advocate. And don’t look for the IRS to fix this anytime soon. “Given our very limited resources, phone lines will be very busy, and there will frequently be extensive wait times,” IRS Commissioner John Koskinen said on the IRS’s YouTube video about the 2013 tax year.
IRS inefficiency is hurting taxpayers. Since they can’t get answers they need from the agency to do their own taxes, more people are paying outside sources to prepare them. And for those who go it on their own, basic mistakes in filing may become fines, penalties, or liens.
The agency’s inability to meet customer demands for the past three years are due to Congressional cuts to the budget. President Obama requested $340 million due to the Affordable Care Act, but Congress has failed to come through.
The IRS Taxpayer Advocate says the agency allotted $172 million for customer service training in 2012, but now only has $22 million to train those same people. The IRS also lost 8,000 employees between 2010 and 2012, according to Edward Jenkins, tax director at accounting firm CBIZ MHM. And in the government’s fiscal year 2017, a whopping 70 percent of IRS executives and half of non-executives will be set to retire, he says.
“The online system is better than it used to be,” Koskinen says. “But you’re still going to end up with 15 to 20 million calls unanswered this year.”
The IRS is even backlogged in dealing with notices they have sent out to taxpayers. “The IRS sends you a notice about an issue on your tax return, you respond, and they send a letter saying they will respond in 45 days,” Jeffrey Porter, chairman of the American Institute of Certified Public Accountants’ tax executive committee, tells USA Today.
Jenkins says the agency needs to update its systems so its 22 departments can communicate. Some parts of the IRS still use the antiquated DOS system.
And the agency just isn’t making money. It collects $255 for every $1 it gets in its budget. Voluntary compliance rate is around 83 percent; 17 percent of tax revenue is uncollected. In 2006, this equaled $450 billion.
With a complicated tax code that changes every year, what’s a confused taxpayer to do?
Uncle Sam has Flo Rida’s head spinning “right round” with a whopping $1.2 million tax lien. The Wild Ones rapper, whose real name is Tramar Lacel Dillard, is accused of owing the IRS large sums of cash between 2009 and 2011, Radar Online reports.
The legal document, acquired by Radar, was filed on Jan. 2; the federal record states that Dillard is behind on three payments: $343,317.03 in 2009, $10,245.41 in 2010, and $844,093.00 in 2011. Altogether, the Right Round musician owes the taxman $1,197,655 — and 44 cents.
“We have made a demand for payment of this liability, but it remains unpaid. Therefore there is a lien in favor of the United States on all property and rights belonging to this taxpayer for the amount of these taxes, and additional penalties, interest, and cost that may accrue,” the federal filing stated.
This isn’t the first time Flo Rida was singled out for unpaid taxes. In 2012, the rapper owed the IRS $1,040,777.45 and there was a lien against his 2.3-acre Miami estate, according to Gossip Extra.
The chart-topping artist is one of the many, in recent years, who have gotten on Uncle Sam’s bad side including Kelis, Damon Dash, Faith Evans, Fat Joe, Jurmaine Dupri, and Mary J. Blige. It’s getting a little ridiculous, isn’t it?
Once upon a time, when a waiter served a large group of hungry mouths, he or she pocketed automatic gratuities, tips that are usually 18 percent of the customers’ bill. Now, the IRS no longer recognizes gratuity fees as “tips.” They are now “service charges” and are considered regular wages and subject to payroll tax withholding.
With this new law, effective January 1, servers won’t get to see their “tips” until payday. And according to TheBartendingMasters, “Restaurants have to withhold Medicare taxes, Social Security and federal income also.” As this will increase payroll taxes for the employer, you may no longer see “18 percent gratuity” on your next restaurant bill.
The IRS believes that forcing a customer to pay a specific extra payment isn’t a tip. It’s simply a service charge added by the management. A tip, in the IRS’ eyes, is as follows:
1. The customer’s payment must be made free from compulsion;
2. The customer must have the unrestricted right to determine the amount;
3. The payment should not be the subject of negotiation or dictated by the employer policy;
4. And, generally, the customer has the right to determine who receives the payment.
In plain English, customers shouldn’t feel obligated to pay a tip. They should be able to decide how much tip to pay and customers should be able to decide who should get said tip.
Some commenters under TheBartendingMasters site seemed pleased with IRS’ new ruling: “I think it is rude to tell me what I should tip, tips are based on service not expectations,” a poster named Beth said.
This person, however, isn’t on the same page:
“All too often, large tables order up a storm, and then when the bill gets there and they realize how much they’ve spent, they decide, ‘ooh, well I don’t have enough for a tip now. 10% is all I can afford,’ and the server gets the short end of the stick,” a poster named Andrew said.
As many restaurant workers currently live on $2.13 an hour, servers often rely on customers to subsidize their income. By 2014, as gratuity fees start to disappear, waiters and waitresses may experience a greater drought in tips. While this should be incentive for all wait staff to step up their game, diners, don’t be cheap. Minimum of 15 percent, but more like 18 percent should be the rule for good service.
This new law was implemented back in June of 2012, however it was delayed until 2014 to give employers enough time to adjust to the IRS’ new ruling.
So Mc Hammer looks to be having money troubles again and this time, the IRS is on his back over taxes from over 15 years ago.
According to TMZ, “Uncle Sam” has filed a lawsuit against Hammer (real name Stanley Burrell) for close to $800,000 in unpaid taxes.
If you can believe it, the lawsuit is based on his unpaid taxes from 1996 and 1997. If memory serves correctly, he’d already had huge financial problems years before the mid-90s, so to be that far in debt with the IRS shows that he still hadn’t really gotten it together.
According the documents leaked to TMZ, the IRS now wants every dollar Hammer makes in order to pay the $798, 033.48 bill. We haven’t heard much from him over the last few years; for years, he’s been trying to make different web based projects work but none have seemingly been overly successful in recent times.
We’re not quite sure what he’ll do to pay the IRS back but make no mistake, they will get their money. Perhaps his team can talk to someone who produces celebrity reality shows and he can get on there to not only make a check, but also to become visible again. Hmmm, Dancing With the Stars, anyone?
So far, no comment from Hammer.
Maybe you’re thinking that you don’t have enough capital or connections to making the world a better place for your children and grandchildren. Think again! In all worthwhile endeavors, one must start small to reap big rewards in the future. If you have ever dreamed of creating your own nonprofit charity or philanthropic foundation, read on for our nine tips to push you on your way.
As we approach the month of November, you’re going to spend your days soon thinking about holiday shopping, decorations, and dinner table place cards. But, don’t forget about your taxes. In fact, it would be best to go ahead and not only start thinking about them, but to begin organizing your paperwork now for early filing.
Because of this year’s government shutdown, the IRS will not begin to process tax returns until one to two weeks after the originally planned January 21st date. If you’e expecting a return and need that money ASAP, you should act in advance. Just because the government is behind schedule does not mean that you should be. Tax season officially starts in December and you will still be able to send your tax returns at any time. Keep ahead of the game and continue to prepare on time — or early — so you’re not pulling your hair out when we’re talking about how close we are to April.
Taxing a dead man? Well, kind of. The Internal Revenue Service is trying to figure out just how much the image of Michael Jackson is worth.
“There’s a big disparity over Jackson’s image, as well as his recording legacy. The late singer’s estate said the taxable value of his image and likeness was $2,105 — while the IRS says it’s more like $434 million. The estate’s stake in Jackson’s recording assets was valued at $469 million by the IRS, but was not even included in a 2009 estate filing,” reports CNBC.
And get this, the IRS claims the Michael Jackson estate owes $702 million in federal taxes, plus penalties, according to charges the agency brought in U.S. Tax Court.
The agency claims the estate has undervalued the late “King of Pop’s” assets, amounts they charge were not disclosed in a court challenge the estate filed in July, as a response to a bill from the IRS.
But according to Alex Raskolnikov, a professor at Columbia Law School, who specializes in tax law, there is no exact formula the IRS uses to determine the value of assets. “When there is an audit and a valuation of substantial assets (over $50,000), they will use a panel of experts,” he told NBCNews.com.
When Jackson died on June 25, 2009, he left his estate to his mother Katherine, his three children and various charities. At the time, his estate was valued at $7 million, for tax purposes. The IRS disagrees. It said that was deficient by $505.1 million, plus penalties of $196.9 million.
A spokesperson for the Jackson estate told Reuters that the IRS figures were “based on speculative and erroneous assumptions unsupported by the facts or law.”
Thus far, the Jackson estate has covered $100 million in taxes.
This is not good news for small business owners. The Internal Revenue Service is cracking down on small firms. Since fall 2012, the IRS has been sending out letters to 20,000 small businesses notifying them of “possible income under-reporting.”
The reason: purchases made with card swipes. The IRS is suspicious that a lot of cash transactions might be going unreported. ”The IRS says it is trying to identify businesses that get ‘an unusually high portion’ of their reported sales through credit card transactions,” reports CNNMoney.
Before issuing a letter, the IRS compares a business’s credit card and cash receipts with industry averages. Which sounds a bit arbitrary.
An unnamed owner of a baking equipment supply company received such a letter, reports CNNMoney. The letter claimed that “80% of her $549,955 in annual revenue came from credit card swipes.”
In response her accountant, Steve Schneider, answered the IRS explaining that the numbers were correct, but the agency’s assumptions were wrong.
“Over the years, the business model has switched to more online sales,” Schneider told CNNMoney. “These types of customers tend to pay with credit cards.” He doesn’t agree with the IRS’s methods. He feels by relying on industry averages, the agency isn’t accounting for how a particular business operates.
“I just don’t think that the data they have is sufficient for them to send these letters out,” Schneider said.
There are other cases as well. But the IRS says it has reason. The agency found that some $450 billion is owed in taxes that goes uncollected. “Under-reporting by small businesses accounts for about $140 billion of that tax gap,” the story reports.
Some accountants say the IRS has always been stricter with small business. “This is nothing new,” Van Ballantyne, a small business accountant in Greenland, New Hampshire, told CNNMoney. “I think it’s another attempt to try to get us all to sit a little straighter in our chairs and be more honest in our reporting. It is fairly innocuous.”
I’m betting Jermaine Dupri can’t wait for Mariah Carey’s new album to come out and surely, he’s praying for major record sales.
Jermaine Dupri is, once again, in trouble with the IRS. This time, Uncle Sam is looking for Dupri his outstanding tax bill that currently stands at about $800,000, according to TMZ.
They say he hasn’t paid his taxes for the years 2008, 2010 and 2011 where the bills were $646.47, $140,889.76 and $657.156.12, respectively.
So far, it looks like he’s in the clear for 2009.
Here’s the thing: this isn’t the first time, or second for that matter, he’s owed big dollars to the IRS. Back in 2009, he paid a $500,000 tax bill he owed the state of Georgia and in January he paid off a $5 million dollar tax lien.
I mean, do rich people (or the supposedly rich) not get embarrassed or ashamed? How many times do you have to be hit – and hit hard, no less – by someone like the IRS before you realize you need to take care of your own business? It doesn’t even matter whether or not they have the money to pay it back; why even get caught up in all those penalty and interest fees? It’s really ridiculous.
So far, no word from JD on this…situation. Hopefully, he can get this rectified.