Archives for April 2019

DON’T BLAME THE IRS – BLAME CONGRESS

April 24, 2019 by Frank

CONGRESS COULD INVEST YOUR TAX DOLLARS AND RECEIVE A 300:1 RETURN, BUT INSTEAD CHOOSE BOONDOGGLES

Nina Olson, IRS Tax Advocate Watch Dog, Issues Annual Report to Congress Suggesting Improvements at the IRS to Help Taxpayers

Taxpayers and tax professionals who communicate with the Internal Revenue Service (IRS) realize that the experience can be very frustrating. The IRS sometimes appears to be a very slow-moving bureaucracy (except when it comes to collecting back taxes).

Congress continues to cut the IRS budget resulting in IRS staff reductions and service center and field office closings. These actions make it more difficult for taxpayers to have their tax problems resolved. Waiting times when calling the IRS for assistance have significantly increased. Taxpayers no longer have the luxury of walking into a nearby IRS office (without an appointment) to have their tax questions answered.

And while the IRS is everyone’s favorite whipping boy, the real problem is Congress for its failure to properly fund the IRS.

The IRS is now being told by Congress, and rightfully so, to make better use of information technology to become more efficient to handle its workload. The immediate problem with that strategic plan is that the IRS computers are obsolete and need to be replaced and reprogrammed. The IRS needs to modernize its computer systems and that takes money!

When we look at our household budgets, we spend our dollars where we get the biggest bang on the dollar. One can only wonder why Congress does not do the same.

For its fiscal year ending September 30, 2018, the IRS collected nearly $3.5 trillion on a budget of $11.43 billion — a return on investment of about 300:1. Congress, showing its infinite wisdom, reduced its funding for IRS technology upgrades by 62 percent from FY 2017 ($290 million) to FY 2018 ($110 million) and constituted just one percent of the agency’s overall appropriation in FY 2018.

Nina Olson, the IRS watchdog who heads The Taxpayer Advocate Service (TAS) which is an independent organization within the IRS that helps taxpayers and protects taxpayer rights, has recommended that additional funding be provided to the IRS . . . subject to accountability measures. The accountability measures are deemed necessary due to the IRS’s historical record of not effectively planning and executing technology upgrades. Specifically, Olson recommends that Congress provide the IRS with additional dedicated, multi-year funding to replace its core IT systems pursuant to a plan that sets forth specific goals and metrics and is evaluated annually by an independent third party.

With an investment return of 300:1, the reluctance of Congress not to upgrade IRS technology abilities is bewildering.

If you would like to discuss your business or personal tax planning, tax preparation and other financial concerns with an experienced tax professional, we invite you to call 610-594-2601 today to make an appointment at our Exton PA CPA office to discuss your situation. You can also schedule a consultation at Click Here.

Copyright © 2019 Keystone Financial Solutions, Inc. All rights reserved. BE SURE TO READ THE DISCLAIMER PAGE: Content in this blog is for educational purposes only and should not be considered as the rendering of tax, legal or investment advice. The publisher of this blog makes no representations as to the accuracy or completeness of any information herein, will not be liable for any errors or omissions, and shall not assume liability for any losses, injuries, or damages from the display or use of this information.

About F. Bryan Haarlander, EA, CTRS:

Bryan Haarlander is an IRS licensed Enrolled Agent and who owns and operates a specialized tax services firm serving clients in the western suburbs of Philadelphia, PA, which includes the cities of Chester Springs, Coatesville, Collegeville, Devon, Downingtown, Exton, Frazer, King of Prussia, Paoli, Philadelphia, Phoenixville, Pottstown, Radnor, Reading, Wayne, West Chester in Berks, Chester, Delaware, Montgomery and Philadelphia Counties, as well as clients in Delaware, New Jersey, New York and throughout the continental USA.

A Certified Tax Resolution Specialist, Bryan is well-known for his IRS tax resolution expertise and his book How to Resolve Your IRS Tax Debt Problems.

PROCRASTINATORS – APRIL 15th ANXIETY REACHES NEW HEIGHTS

April 15, 2019 by Frank

DEADLY STORM THREATENS MILLIONS IN THE NORTHEAS

A deadly storm travels from the South and hits the Northeast with severe thunderstorms, powerful winds and possible tornadoes. Residents and businesses lose electrical power.

TAXPAYERS WHO PROCRASTINATE PANIC

Fellow tax professionals in PA report that they have lost electrical power due to a major storm that uprooted trees and downed power lines. The preparers are unable to open their tax preparation software without electrical power and thus are unable to e-file the tax returns of their clients or file extensions of time to file. It has been reported that some post offices have no power and taxpayers are calling their tax professionals asking what they should do to meet the April 15 deadline.

THE BENEFITS OF NOT WAITING UNTIL THE LAST MINUTE

There is a very good reason that tax professionals request that taxpayers send their information in by March 15 or some other date well before April 15. Not only are tax professionals inundated by taxpayers requesting that their returns be prepared in the waning days before the April 15 due date, by there are factors that tax professionals cannot control.

This year it is the unexpected storm knocking out electrical power.

In prior years, the IRS computers have crashed due to the number of tax returns filed at the last minute.

WHAT YOU NEED TO DO

Carefully read and complete your tax professional’s tax organizer and send it and your tax documents by the due date set by your preparer. If you are missing a partnership K-1 form or some other tax document, send everything else and include a note about the missing item. This allows your tax professional to begin work on your return ASAP.

Be sure you have whitelisted your tax professional’s email address and frequently check your email inbox.

When your tax professional sends you a draft of your return to review, immediately review it. The longer you wait to review it, the closer the April 15 deadline approaches and returns get backed up at your preparer’s office.

Sign up for EFTPS payments. This is the IRS’s Electronic Federal Tax Payment System (https://www.eftps.gov) that allows you to expeditiously make payments to the IRS and receive an immediate confirmation of the amount, date, and tax year of the payment.

Understand that if your preparer completes your return before the due date and efiles the return, any balance due can be scheduled for payment on the due date. Thus, filing early does not mean that the funds are paid early.

PEACE OF MIND

Taxpayers have a choice. Filing early reduces the liklihood of ID theft by scammers and avoids the panic of what to do when you hit the proverbial wall on April 15 and the best plans go awry.

Or, you can continue to procrastinate and stress yourself by filing at the last minute.

About F. Bryan Haarlander, EA, CTRS:

A Certified Tax Resolution Specialist, Bryan is well-known for his IRS tax resolution expertise and his book How to Resolve Your IRS Tax Debt Problems.

FREE TAX RETURNS PREPARED HERE

April 9, 2019 by Frank

WASHINGTON POST WARNS TAXPAYERS ABOUT FREE TAX RETURN PREPARATION SERVICES

While One Should Always be Cautious of Sharing Personal Information, “Tax Time” Always Calls for Increased Caution and Discretion

Everybody loves “free stuff.” Unless you are dealing with a philanthropist, are these free deals really free? According to Geoffrey Fowler in a March 7 article in the Washington Post, we are reminded that nothing is certain except death, taxes . . . and tech companies making grabs for your data.

Mr. Fowler’s article discussed the various “free” online tax services and why they are free. “How is somebody going to make money from this?” he asks. As Fowler so astutely stated, in Silicon Valley the adage is “If the product is free, that means you’re the product.”

He found that some vendors use the intimate details of the taxpayer’s tax returns to:

Bait you to purchase paid services. As examples, he mentioned that TurboTax and H&R Block offer limited free service to sell you more expensive paid services.

Sell you financial services. The data in your tax return is a gold mine. It allows vendors to determine how much you earn and are paying for your current mortgage. If you are wondering why you are being targeted by mortgage refinancing ads or solicitations from investment companies, your free tax return may be the reason.

Credit card solicitations. Some companies make money by showing you tailored “offers” for credit cards and loans based on a profile of your financial life.

PRIVACY CONCERNS

Fowler stated that we’ve been letting free technology blind us to a really important question: When tax prep is free, you may be paying with your privacy. He states there’s a fine line between useful and creepy with surveillance. For some, such offers might be acceptable, even time- and money-saving. Fowler says that offers made by Credit Karma Tax are taking a business idea that hasn’t worked out well with Facebook and applying it to even more sensitive information . . . your personal financial information.

To really understand what free costs, you have to follow the data. Taped on Fowler’s desk are four questions he has learned to ask any business that wants his data:

1. What information is being used?

2. Who is it being shared with?

3. How secure is it?

4. How long are they holding on to it? If you use a service for a year, you tax information could be available “for sale” for several years. You need to read the fine print.

While credit bureaus and data brokers already collect information about your finances, some details are hard for that industry to come by, such as your cash flow, mortgage deduction and savings yield.

Remember that when using such free services, you are potentially putting your Social Security numbers at risk along with your address, employer’s name, address and EIN, dates of birth, and dependent children’s names. The IRS has gone to great lengths to redact much of this information in its transcripts system to prevent hackers from stealing your identity and preparing fraudulent income tax returns.

Data breach announcements by large companies appear to be becoming more common today. Using Willie Sutton’s quote as to why he robbed banks, “That’s where the money is.” Consider the potential consequences of voluntarily putting confidential information on the web.

About F. Bryan Haarlander, EA, CTRS:

A Certified Tax Resolution Specialist, Bryan is well-known for his IRS tax resolution expertise and his book How to Resolve Your IRS Tax Debt Problems.

HOW TO CAREFULLY CHOOSE YOUR TAX PREPARER

April 2, 2019 by Frank

HELPFUL TIPS TO CONSIDER WHEN CHOOSING YOUR TAX PREPARER

IRS Expects More Taxpayers to Seek Professional Help This Year Due to the Most Sweeping Tax Reform Changes Made in More than 30 Years by the Tax Cuts and Jobs Act

Tax Preparer Fraud

In the past few years, the IRS has made significant improvements in its efforts to educate taxpayers. One of its focal points has been to warn taxpayers about tax scams. Unfortunately for taxpayers, one of the major scams the IRS has identified is tax preparer fraud. IRS advises taxpayers to know and look for the warning signs and understand the dangers of using these con artists

Known Benefits of Using a Professional Tax Preparer

With the passage of the Tax Cuts and Jobs Act, the most sweeping tax reform legislation in more than 30 years, our office is seeing more taxpayers choosing to use a paid professional to prepare their tax returns this year. With many tax professionals charging a few hundred dollars to prepare a tax return, it is often viewed as a dollar outlay that brings significant peace of mind to taxpayers knowing that their tax returns were prepared in accordance with IRS rules, and perhaps more importantly, that they have taken advantage of any available tax strategies so as not to overpay their taxes.

There is also the time savings. Whereas it can take an individual several hours to prepare their own return, it is a relatively simple task to complete your tax professional’s tax organizer and send him/her your tax documents.

The IRS reminds taxpayers to be careful when selecting a tax professional. Selecting the right tax professional is vitally important. Remember that taxpayers are ultimately responsible for the accuracy of their tax return, regardless of who prepares it.

How to Wisely Choose Your Tax Return Preparer

First and foremost, don’t begin your search by asking the question: “How much do you charge to prepare a tax return?” While the cost to prepare your tax return is an important consideration, it really is one of the least important considerations as you peruse the other considerations listed below.

Inquire about the preparer’s experience in preparing tax years. How many years? If you have a small business or rental property, does the preparer have experience preparing Schedule C and Schedule E?

Does the preparer use a tax organizer or checklist so as not to overlook tax deductions?

Does the tax professional merely prepare tax returns or will s/he look for tax savings strategies that can be implemented to reduce your taxes?

Ask how the preparer about the new Tax Cuts and Jobs Act. You want to make sure that the preparer is familiar with the new law and particularly about the Qualified Business Income deduction if you have a business.

Has the preparer written any books or articles about taxes? Spoken before any industry groups about taxes? This would indicate that the person is knowledgeable about taxes.

Look for a preparer who is available year-round. In the event questions come up about a tax return, taxpayers may need to contact the preparer after the filing season is over. Tax planning is ideally done months before the end of the calendar year to allow sufficient time for implementation.

Ask if the preparer has an IRS Preparer Tax Identification Number (PTIN). Paid tax return preparers are required to register with the IRS, have a PTIN and include it on tax returns.

Inquire whether the tax return preparer has a professional credential (enrolled agent, certified public accountant or attorney), belongs to a professional organization or attends continuing education classes. Because tax law can be complex, competent tax preparers remain up-to-date on tax topics..

Check the preparer’s history. Check the Better Business Bureau website for information about the preparer. Look for disciplinary actions and the license status for credentialed preparers. For CPAs, check with the State Board of Accountancy. For attorneys, check with the State Bar Association. For Enrolled Agents, go to IRS.gov and search for “verify enrolled agent status” or check the Directory.

Ask about service fees. Avoid preparers who base fees on a percentage of their client’s refund or boast bigger refunds than their competition.

Make sure the preparer offers IRS e-file and ask to e-file the tax return.

You are signing your tax return under penalties of perjury. The preparer should be preparing your return based on your tax documents and not using national averages or fabricated numbers.

Never sign a blank or incomplete return. Work with preparers who provide you with a draft copy of your return for your review before it is e-filed. Make sure your preparer provides you with an opportunity to ask questions if something is not clear or appears inaccurate.

Any refund should go directly to you, the taxpayer, and not into the preparer’s bank account. If using direct deposit or ACH debit payments, review the routing and bank account numbers on the e-file authorization form against your bank information.

Make sure that the preparer provides you with a copy of your tax return.

Understand tax representation rules. Only attorneys, CPAs and enrolled agents can represent any client before the IRS in any situation.

About F. Bryan Haarlander, EA, CTRS:

A Certified Tax Resolution Specialist, Bryan is well-known for his IRS tax resolution expertise and his book How to Resolve Your IRS Tax Debt Problems.