IRS Warns of Pervasive Telephone Scam

The Internal Revenue Service today warned consumers about a sophisticated phone scam targeting taxpayers, including recent immigrants, throughout the country.

Victims are told they owe money to the IRS and it must be paid promptly through a pre-loaded debit card or wire transfer. If the victim refuses to cooperate, they are then threatened with arrest, deportation or suspension of a business or driver’s license. In many cases, the caller becomes hostile and insulting.

“This scam has hit taxpayers in nearly every state in the country.  We want to educate taxpayers so they can help protect themselves.  Rest assured, we do not and will not ask for credit card numbers over the phone, nor request a pre-paid debit card or wire transfer,” says IRS Acting Commissioner Danny Werfel. “If someone unexpectedly calls claiming to be from the IRS and threatens police arrest, deportation or license revocation if you don’t pay immediately, that is a sign that it really isn’t the IRS calling.” Werfel noted that the first IRS contact with taxpayers on a tax issue is likely to occur via mail

Other characteristics of this scam include:

  • Scammers use fake names and IRS badge numbers. They generally use common names and surnames to identify themselves.
  • Scammers may be able to recite the last four digits of a victim’s Social Security Number.
  • Scammers spoof the IRS toll-free number on caller ID to make it appear that it’s the IRS calling.
  • Scammers sometimes send bogus IRS emails to some victims to support their bogus calls.
  • Victims hear background noise of other calls being conducted to mimic a call site.
  • After threatening victims with jail time or driver’s license revocation, scammers hang up and others soon call back pretending to be from the local police or DMV, and the caller ID supports their claim.

If you get a phone call from someone claiming to be from the IRS, here’s what you should do:

  • If you know you owe taxes or you think you might owe taxes, call the IRS at 800-829-1040. The IRS employees at that line can help you with a payment issue – if there really is such an issue.
  • If you know you don’t owe taxes or have no reason to think that you owe any taxes (for example, you’ve never received a bill or the caller made some bogus threats as described above), then call and report the incident to the Treasury Inspector General for Tax Administration at 800-366-4484.
  • If you’ve been targeted by this scam, you should also contact the Federal Trade Commission and use their “FTC Complaint Assistant” at FTC.gov. Please add “IRS Telephone Scam” to the comments of your complaint.

Taxpayers should be aware that there are other unrelated scams (such as a lottery sweepstakes) and solicitations (such as debt relief) that fraudulently claim to be from the IRS.

The IRS encourages taxpayers to be vigilant against phone and email scams that use the IRS as a lure. The IRS does not initiate contact with taxpayers by email to request personal or financial information.  This includes any type of electronic communication, such as text messages and social media channels. The IRS also does not ask for PINs, passwords or similar confidential access information for credit card, bank or other financial accounts. Recipients should not open any attachments or click on any links contained in the message. Instead, forward the e-mail to phishing@irs.gov.

For more information: www.onts9.com

Italy’s Supreme Court Clears Sophia Loren of Old Tax Evasion Charges

Italian actress Sophia Loren has been cleared by Italy’s high court of tax evasion charges dating back to her 1974 tax return.

The charges stem from Loren’s appearance in Vittorio De Sica’s movie “The Voyage,” for which her compensation was deferred, according to the Hollywood Reporter. As a result, her income that year put her in the 60 percent tax bracket, rather than the 70 percent bracket. Italian tax authorities at the time, however, said the actress should have been in the 70 percent bracket.

Loren appealed the ruling and kept away from her native country for a number of years. She came back in 1982 to serve 17 days of her 30-day sentence in a low-security Italian prison. Meanwhile, her appeal ground on for the past 39 years and Italy’s Supreme Court ruled last week that she never should have been imprisoned on the charges.

Loren reportedly called the court’s ruling a “miracle of justice,” noting that when “it seems there is no longer any hope, it is still possible justice will be done.”

For more information: www.onts9.com

 

 

IRS: Shutdown to Delay Tax Season

The Internal Revenue Service announced on Tuesday that it will delay the start of the 2014 tax filing season by as much as two weeks due to delays caused by the recent closure of the federal government.

Citing the need for “adequate time to program and test tax processing systems,” the service announced that it expected a one- to two-week delay in the start of tax season, and that it would start accepting and processing 2013 individual tax returns no earlier than Jan. 28, 2014, and no later than February 4. Tax season had been expected to start on January 21.

Acting Commissioner Danny Werfel said in the statement that the service was exploring options to shorten the expected delay, but also noted, “Readying our systems to handle the tax season is an intricate, detailed process, and we must take the time to get it right. The adjustment to the start of the filing season provides us the necessary time to program, test and validate our systems so that we can provide a smooth filing and refund process for the nation’s taxpayers.”

The 16-day government shutdown came during the peak period for preparing IRS systems for the upcoming tax season, which involves programming, testing and deployment of more than 50 systems.

About 90 percent of IRS operations were closed during the shutdown, with some major workstreams closed entirely, and the IRS noted that it is also facing extra demands due to the need for systems to prevent refund fraud and ID theft — and that it is still dealing with a backlog of over 1.4 million pieces of correspondence that piled up during the shutdown.

The official start date will be announced in December.

For more information: www.onts9.com

 

Congress Ends Shutdown, but Stage is Set for Next Round

After the partisan passions and heated rhetoric, the disruptions of a government shutdown and displays of dysfunction, Congress did what it could have done weeks ago: voted to fund the government and lift the debt limit.

The passage last night by wide margins—an 81-18 vote in the Democratic-led Senate, followed by a 285-144 vote in the Republican-controlled House—allows the U.S. to avoid default and ends the shutdown that began Oct. 1 and has taken $24 billion out of the economy.

President Barack Obama signed the bill just after midnight, according to a White House statement. The measure puts government workers back on the job as soon as today and permits the U.S. to continue paying its debts, benefits and salaries.

“We’ll begin reopening our government immediately and we can begin to lift this cloud of uncertainty and unease from our businesses and from the American people,” Obama said last night at the White House after the Senate voted.

Lawmakers didn’t show they’re any closer to resolving the underlying issues of spending priorities and deficit-reduction measures, particularly in the House where a shrinking political middle makes compromise elusive as the latest events show.

The focus now shifts to a new series of deadlines—the first for budget negotiations with a Dec. 13 target—that set up more rounds of political combat over taxes and spending on programs including Social Security and Medicare. The deal funds the government at Republican-backed spending levels through Jan. 15, 2014, and suspends the debt limit through Feb. 7.

Health Law
Tea Party-allied Republicans, such as Texas Senator Ted Cruz, said they would find ways to keep up the fight against Obama’s health care law.

The votes conclude a four-week fiscal standoff that began with Republicans demanding defunding the Patient Protection and Affordable Care Act, and objecting to raising the debt limit and funding the government without policy conditions.

They achieved almost none of those goals. Obama and the uncharacteristically unified congressional Democrats stared down Republicans, particularly those allied with the Tea Party movement, who had sought to use the shutdown and debt ceiling as leverage even as more experienced lawmakers realized they didn’t have the votes.

Judd Gregg, a former New Hampshire Republican senator and veteran of Obama’s first-term fiscal commission, said members of his party took on the wrong fight when they made it about Obama’s health care law. Gregg is now chief executive officer of the Securities Industry and Financial Markets Association.

‘Dysfunctional Government’
“It was an exercise in dysfunctional government,” Gregg said in an interview. “It was a loser position from the beginning because there was no way in divided government you’re ever going to repeal Obamacare. We should have been debating as Republicans how we fix our fiscal house.”

The practice of governing by crisis has become so established in Washington that financial markets weren’t disturbed by the impasse, correctly anticipating a deal would come at the last moment as happened in a similar standoff two years ago.

U.S. stocks rallied yesterday on news of the agreement, sending the Standard & Poor’s 500 Index toward a record. The benchmark index rose 1.4 percent to 1,721.54 yesterday in New York after sliding 0.7 percent when the deal looked uncertain the previous day. The Dow Jones Industrial Average rose 205.82 points, or 1.4 percent, to 15,373.83.

Shutdown’s Toll
The Stoxx Europe 600 Index fell 0.4 percent to 314.42 at 8:44 a.m. in London. Standard & Poor’s 500 Index futures slipped 0.2 percent, while the MSCI Asia Pacific Index added 0.9 percent.

In China, Dagong Global Credit Rating Co. downgraded its local and foreign-currency assessments of the U.S. to A- from A. Dagong is based in Beijing and one of the nation’s four biggest credit-rating companies. China has the largest foreign holdings of U.S. Treasuries, and the latest monthly U.S. government figures showed it increased its total in July.

Federal agencies were instructed to begin opening offices today in a “prompt and orderly manner” and furloughed employees were allowed to return to work, according to a memo from White House budget office Director Sylvia Burwell.

“We will work closely with departments and agencies to make the transition back to full operating status as smooth as possible,” Burwell said in the memo released early today.

Still, the 16-day shutdown hasn’t been cost-free. It has taken a toll on workers who lost paychecks—furloughed employees will receive back pay—and on the U.S. economy. Standard & Poor’s said yesterday the shutdown has shaved at least 0.6 percent from fourth-quarter 2013 gross domestic product growth, or taken $24 billion out of the economy.

Confidence ‘Shaken’
“Millions suffered,” said Senator Charles Schumer, a New York Democrat. “Millions didn’t get paychecks. The economy was dragged down and confidence and faith in United States credit and in the United States around the world was shaken.”

Macroeconomic Advisers LLC said in a report prepared this week for the Peter G. Peterson Foundation that the budget fights in Washington have lowered U.S. economic growth by about 0.3 percentage points a year since 2009. The fiscal standoff added more than a half-point to this year’s unemployment rate, or the equivalent of about 900,000 jobs, the report said.

It may be weeks or even months before the government resumes issuing loans, payments and contracts at a normal pace. The budget impasse also raised doubts that will linger about U.S. reliability among major creditor nations such as China and frustrated many Americans.

Provide ‘Stability’
“The compromise we reached will provide our economy with the stability it desperately needs,” said Senate Majority Leader Harry Reid. The Nevada Democrat negotiated the agreement with his Republican counterpart, Mitch McConnell of Kentucky, after House Speaker John Boehner, an Ohio Republican, was unable to come to terms within his caucus.

“It would appear as though we’re kicking the can down the road one more time,” Representative Jim Bridenstine, an Oklahoma Republican, said in an interview.

The U.S. Chamber of Commerce, the country’s largest business group, supported the agreement, as did the Business Roundtable, an association of large-company chief executives. Several small-government groups, including the Club for Growth and Heritage Action for America, urged lawmakers to vote against the accord.

The votes were held just hours before the nation was set to exhaust its borrowing authority, which the Obama administration had warned would have dire consequences within days given global reliance on U.S. Treasuries.

Credit Rating
The Senate accord was unveiled a day after Fitch Ratings put the U.S. AAA credit grade on ratings watch negative, citing the government’s inability to raise the debt ceiling in a timely manner. After a 2011 debt-ceiling fight, Standard & Poor’s downgraded the United States’ credit rating to AA+ from AAA, criticizing the nation’s political process and lawmakers for failing to cut spending or raise revenue enough to reduce the budget deficit.

Boehner, acceding to the demands of the White House and Democratic-led Senate, said in a statement that blocking the bipartisan deal would only create a “risk of default” on U.S. debt, which he previously said would not happen.

Republicans say Boehner’s willingness to heed their concerns will leave his position as speaker unchallenged in the year ahead.

“We fought the good fight,” Boehner said yesterday on WLW, a radio station in his home state of Ohio. “We just didn’t win.”

At the end of a weeks-long stalemate, Obama managed to stave off a frontal assault on his health care law by House Republicans and forced them to surrender on raising the U.S. debt ceiling without conditions.

‘Next Battle’
“It’s clearly a win for the president,” said Patrick Griffin, a congressional lobbyist in the administration of President Bill Clinton, who faced two government shutdowns and a combative Republican Congress. “Whether it’s a battle win or a war win for the president we don’t know. The next battle will come soon.”

The reaction of independents may determine whether Republicans have a chance to make inroads in the Senate in the 2014 election. Republicans need a net gain of six seats to win the majority in the 100-member chamber. Democrats are defending seven seats in states Republican Mitt Romney won in the 2012 presidential election.

“For now, the default debate, coupled with the shutdown of the government, has been to the detriment of Senate Republicans,” said Jennifer Duffy, senior editor of the Washington-based Cook Political Report, which tracks congressional contests. The Republicans’ “path to the majority was narrow before the shutdown and has gotten considerably more narrow since.”

Tea Party
While public opinion polling shows Americans disproportionately blame Republicans for their handling of the debt fight, members have more than a year before they have to face voters again in midterm elections.

The Tea Party is less popular than ever, with many Republicans viewing the movement negatively, according to a poll released yesterday by the Pew Research Center for the People and the Press in Washington. Overall, 49 percent of the public has an unfavorable opinion of the Tea Party, up from 45 percent in June, while 30 have a favorable opinion, down from 37 percent two months ago.

Those numbers may be misleading, as the Tea Party movement is most effective as a political force in Republican-dominated Congressional districts where incumbents look for a primary challenge.

Hobby or Business? Why It Matters

 

Millions of Americans have hobbies such as sewing, woodworking, fishing, gardening, stamp and coin collecting, but when that hobby starts to turn a profit, it might just be considered a business by the IRS.

Definition of a Hobby vs. a Business

The IRS defines a hobby as an activity that is not pursued for profit. A business, on the other hand, is an activity that is carried out with the reasonable expectation of earning a profit.

The tax considerations are different for each activity so it’s important for taxpayers to determine whether an activity is engaged in for profit as a business or is just a hobby for personal enjoyment.

Of course, you must report and pay tax on income from almost all sources, including hobbies. But when it comes to deductions such as expenses and losses, the two activities differ in their tax implications.

Is Your Hobby Actually a Business?

If you’re not sure whether you’re running a business or simply enjoying a hobby, here are some of the factors you should consider:

  • Does the time and effort put into the activity indicate an intention to make a profit?
  • Do you depend on income from the activity?
  • If there are losses, are they due to circumstances beyond your control or did they occur in the start-up phase of the business?
  • Have you changed methods of operation to improve profitability?
  • Do you have the knowledge needed to carry on the activity as a successful business?
  • Have you made a profit in similar activities in the past?
  • Does the activity make a profit in some years?
  • Do you expect to make a profit in the future from the appreciation of assets used in the activity?

An activity is presumed to be for profit if it makes a profit in at least three of the last five tax years, including the current year (or at least two of the last seven years for activities that consist primarily of breeding, showing, training, or racing horses).

The IRS says that it looks at all facts when determining whether a hobby is for pleasure or business, but the profit test is the primary one. If the activity earned income in three out of the last five years, it is for profit. If the activity does not meet the profit test, the IRS will take an individualized look at the facts of your activity using the list of questions above to determine whether it’s a business or a hobby. (It should be noted that this list is not all-inclusive.)

Business Activity: If the activity is determined to be a business, you can deduct ordinary and necessary expenses for the operation of the business on a Schedule C or C-EZ on your Form 1040 without considerations for percentage limitations. An ordinary expense is one that is common and accepted in your trade or business. A necessary expense is one that is appropriate for your business.

Hobby: If an activity is a hobby, not for profit, losses from that activity may not be used to offset other income. You can only deduct expenses up to the amount of income earned from the hobby. These expenses, with other miscellaneous expenses, are itemized on Schedule A and must also meet the 2 percent limitation of your adjusted gross income in order to be deducted.

What Are Allowable Hobby Deductions?

If your activity is not carried on for profit, allowable deductions cannot exceed the gross receipts for the activity.

Note: Internal Revenue Code Section 183 (Activities Not Engaged in for Profit) limits deductions that can be claimed when an activity is not engaged in for profit. IRC 183 is sometimes referred to as the “hobby loss rule.”

Deductions for hobby activities are claimed as itemized deductions on Schedule A, Form 1040. These deductions must be taken in the following order and only to the extent stated in each of three categories:

  • Deductions that a taxpayer may claim for certain personal expenses, such as home mortgage interest and taxes, may be taken in full.
  • Deductions that don’t result in an adjustment to the basis of property, such as advertising, insurance premiums, and wages, may be taken next, to the extent gross income for the activity is more than the deductions from the first category.
  • Deductions that reduce the basis of property, such as depreciation and amortization, are taken last, but only to the extent gross income for the activity is more than the deductions taken in the first two categories.

If your hobby is regularly generating income, it could make tax sense for you to consider it a business because you might be able to lower your taxes and take certain deductions.

For more information:  www.onts9.com

Tax Provisions of the Affordable Care Act

The Patient Protection and Affordable Care Act of 2010, in concert with the enactment of the Health Care and Education Tax Credits Reconciliation Act of 2010, resulted in a number of changes to the US tax code. As such there are a number of tax implications for individuals and businesses. With healthcare exchanges set to open on October 1, it’s time to take a closer look at what it all means for you.

Individuals

Healthcare Exchanges

Healthcare Exchanges, which are also referred to as Health Insurance Marketplaces, are officially open for enrollment on October 1, 2013. Some of these exchanges are run by the state in which you reside. Others are run by the federal government.

Individuals (including self-employed) who do not currently have insurance or buy insurance on their own can use these marketplaces to buy insurance, which becomes effective January 1, 2014. When you get health insurance through the Marketplace, you may be able to get the new advance Premium Tax Credit that will immediately help lower your monthly premium.

The Congressional Budget Office projects that seven million–primarily uninsured people–will use the exchanges to purchase private health insurance. The rest, including the 170.9 million people already covered by their employer’s insurance, as well as the 101.5 million enrolled in government health programs, are not affected and need not take any action.

Individual Mandate

Starting January 2014, United States citizens and legal residents must obtain minimum essential health care coverage for themselves and their dependents, have an exemption from coverage, or make a payment when filing a 2014 tax return in 2015. The Individual Mandate is also known as the Individual Shared Responsibility Payment.

The payment varies and is based on income level. In 2014, the basic penalty for an individual (no dependents) is $95 or 1% of your yearly income (whichever is higher), with substantial increases in subsequent years. For example, in 2015, the penalty is $325 or approximately 2% of income, whichever is higher. In 2016, it increases to $695 or 2.5% of income (again, whichever is higher), indexed for inflation thereafter.

Most people already have qualifying health care coverage and will not need to do anything more than maintain that coverage throughout 2014. Self-insured ERISA policies used by larger employers, as well as Medicare, Medicaid, and CHIP (Children’s Health Insurance Program), and all of the health insurance plans offered by the exchanges fall under the category of minimum essential health care coverage.

Note: Certain individuals are exempt from the tax and include: (1) people with religious objections; (2) American Indians with coverage through the Indian Health Service; (3) undocumented immigrants; (4) those without coverage for less than three months; (5) those serving prison sentences; (6) those for whom the lowest-cost plan option exceeds 8% of annual income; and (7) those with incomes below the tax filing threshold who do not file a tax return($10,000 for singles and $20,000 for couples under 65 in 2013).

Refundable Tax Credit

Effective in 2014, certain taxpayers will be able to use a refundable tax credit to offset the cost of health insurance premiums so that their insurance premium payments do not exceed a specific percentage of their income. Qualified individuals are those with incomes between 133 percent and 400 percent of the federal poverty level. A sliding scale based on family size will be used to determine the amount of the credit. In addition, married taxpayers must file joint returns to qualify.

FSA Contributions

FSA (Flexible Spending Arrangements) contributions are limited to $2,500 per year starting in 2013 and indexed for inflation after that.

New Rules for HSAs and Archer MSAs

Tax on non-qualified distributions from HSAs and Archer MSAs that are used to cover the cost of over the counter medicine without a script increased to 20 percent starting in 2011. Medical devices, eyeglasses, contact lenses, copays, and deductibles are not affected, nor is Insulin even if it is non-prescription.

Medicare Part D

Medicare Part D, the tax deduction for employer provided retirement prescription drug coverage, was eliminated in 2013.

Increase in AGI Limit for Deductible Medical Expenses

In 2013 the limit for deductible medical expenses increased to 10 percent of AGI (7.5% in prior years); however, the 7.5 percent threshold continues through 2016 for taxpayers aged 65 and older, including those turning 65 by December 31, 2016.

Health Coverage of Older Children

The cost of employer provided health care coverage for children (through age 26) on tax returns is excluded from gross income.

Medicare Tax Increases for High Income Earners

Starting in 2013, there is an additional 0.9 percent Medicare tax on wages above $200,000 for individuals ($250,000 married filing jointly).

Also starting in 2013, there is a new Medicare tax of 3.8 percent on investment (unearned) income for single taxpayers with modified adjusted gross income (MAGI) over $200,000 ($250,000 joint filers). Investment income includes dividends, interest, rents, royalties, gains from the disposition of property, and certain passive activity income. Estates, trusts and self-employed individuals are all liable for the new tax.

Exemptions are available for business owners and income from certain retirement accounts, such as pensions, IRAs, 401(a), 403(b), and 457(b) plans, is exempt.

Businesses

Self-Employed

If you run an income-generating business with no employees, then you’re considered self-employed (not an employer) and can get coverage through the Marketplace and use it to find coverage that fits your needs.

Note: You are not considered an employer even if you hire independent contractors to do some work.

If you currently have individual insurance, that is a plan you bought yourself and not the kind you get through an employer, you may be able to change to a Marketplace plan.

Note: You can’t be denied coverage or charged more because you have a pre-existing health condition.

Small Businesses (50 or Fewer Employees)

If you have 50 or fewer full-time equivalent (FTE) employees (generally, workers whose income you report on a W-2 at the end of the year) you are considered a small business under the health care law.

As a small business, you may get insurance for yourself and your employees through the SHOP (Small Business Health Options Programs) Marketplace. This applies to non-profit organizations as well.

And, if you have fewer than 25 employees, you may qualify for the Small Business Tax Credit (see next section). Non-profit organizations can get a smaller tax credit.

Note: Beginning in 2016, the SHOP Marketplace will be open to employers with 100 or fewer FTEs.

As an employer, you must provide notification to your employees of coverage options available through the Marketplace and are required to provide this notice to all current employees and to each new employee beginning October 1st, 2013, regardless of plan enrollment status or full or part-time employment. The Department of Labor has sample notices that employers can use to comply with this regulation. One notice is for employers who do not offer a health care plan and the second for employers who offer a health care plan.

Small Business Health Care Tax Credit

Small businesses and tax-exempt organization that employ 25 or fewer, full-time equivalent workers with average incomes of $50,000 or less, and that pay at least half (50%) of the premiums for employee health insurance coverage are eligible for the Small Business Health Care Tax Credit. For tax years 2010 through 2013, the maximum credit is 35 percent for small business employers and 25 percent for small tax-exempt employers such as charities.

Starting in 2014, the tax credit is worth up to 50% of your contribution toward employees’ premium costs (up to 35% for tax-exempt employers). The tax credit is highest for companies with fewer than 10 employees who are paid an average of $25,000 or less. The smaller the business, the bigger the credit is.

Note: The credit is available only if you get coverage through the SHOP Marketplace.

Additional Tax on Businesses Not Offering Minimum Essential Coverage

Effective January 1, 2015 an additional tax will be levied on businesses with 50 or more full-time equivalent (FTE) employees that do not offer minimum essential coverage. This penalty is sometimes referred to as the Employer Shared Responsibility Payment or “Play or Pay” penalty.

You may have to pay this additional tax if you have 50 or more full-time equivalent employees and at least 1 of your full-time employees gets lower costs on their monthly premiums through the Marketplace.

Note: Employers with fewer than 50 FTE employees are considered small businesses and are exempt from the additional tax.

The amount of the annual Employer Shared Responsibility Payment is based partly on whether you offer insurance.

  • If you don’t offer insurance, the annual payment is $2000 per full-time employee (excluding the first 30 employees)
  • If you do offer insurance, but the insurance doesn’t meet the minimum requirements, the annual payment is $3000 per full-time employee who qualifies for premium savings in the Marketplace

Note: Unlike employer contributions to employee premiums, the Employer Shared Responsibility Payment is not tax deductible.

A health plan meets minimum value if it covers at least 60% of the total allowed costs of benefits provided under the plan. To determine whether other coverage meets minimum value, please contact us for assistance.

Note: All plans in the Marketplace meet minimum value, so any coverage offered through the SHOP Marketplace should qualify.

Excise Tax on High Cost Employer-Sponsored Insurance

Effective in 2018, a 40 percent excise tax indexed for inflation will be imposed on employers with insurance plans where the annual premium exceeds $10,200 (individual) or $27,500 (family). For retirees age 55 and older, the premium levels are higher, $11,850 for individuals and $30,950 for families.

Excise Tax on Medical Devices

Effective January 1, 2014, a 2.3 percent tax will be levied on manufacturers and importers on the sale of certain medical devices.

Indoor Tanning Services

A 10 percent excise tax on indoor tanning services went into effect on July 1, 2010. The tax doesn’t apply to phototherapy services performed by a licensed medical professional on his or her premises. There’s also an exception for certain physical fitness facilities that offer tanning as an incidental service to members without a separately identifiable fee.

For more information: www.onts9.com

 

Oct. 15 Deadline Still in Effect, IRS Warns

 

The Internal Revenue Service reminded taxpayers that the October 15 deadline remains in effect for people who requested a six-month extension to file their tax return.

While the current government shutdown has shuttered many offices and turned off many services, it “does not affect the federal tax law, and all taxpayers should continue to meet their tax obligations as normal,” the IRS said in a statement.

Over 12 million people filed for automatic six-month extensions earlier in 2013, most of whom will have to file by the October 15 deadline. Some groups do have more time, the IRS noted, including members of the military and others serving in Afghanistan or other combat zones, as well as people in parts of Colorado affected by severe weather, flooding, landslides and mudslides.

The service encouraged taxpayers to e-file their returns, but said that it would accept returns both electronically or on paper, and accept and process payments accompanying either type of return. It will not be able to issue refunds, however, until normal government operations resume.

For more information: www.onts9.com

 

IRS Suspends Tax Refunds and Tax Court Closes during Government Shutdown

The Internal Revenue Service has temporarily stopped sending out tax refunds, and the Tax Court has suspended operations during the federal government shutdown, as lawmakers in Congress continue their battle over delaying or defunding “Obamacare” for a year.

The IRS announced contingency plans for the government shutdown on Monday ahead of the looming shutdown (see IRS Releases Gov’t Shutdown Contingency Plan). On Tuesday, with the House and Senate failing to reach an agreement on a budget resolution to continue funding government operations—and with the impasse continuing over the insistence by Republican lawmakers that the health care reform law should be delayed as a necessary pre-condition for agreeing to a budget deal—the IRS elaborated on the shutdown plans on its Web site, including a temporary stoppage in tax refunds.

“Tax refunds will not be issued until normal government operations resume,” said the IRS. The IRS emphasized, however, that the underlying tax law remains in effect, and all taxpayers should continue to meet their tax obligations as normal.

“Individuals and businesses should keep filing their tax returns and making deposits with the IRS, as they are required to do so by law,” said the IRS. “The IRS will accept and process all tax returns with payments, but will be unable to issue refunds during this time. Taxpayers are urged to file electronically, because most of these returns will be processed automatically.”

In addition, the IRS noted that no live telephone customer service assistance will be available. However, most automated toll-free telephone applications will remain in operation. IRS walk-in taxpayer assistance centers will be closed, though.

While federal government offices are closed, people who have appointments with the IRS related to examinations and audits, as well as tax collection, appeals or Taxpayer Advocate cases should assume their meetings are canceled, the IRS noted. IRS personnel will reschedule the meetings at a later date once the government shutdown ends.

In addition, IRS computer systems will continue to mail out automated notices to taxpayers, but IRS employees will not be sending any paper correspondence during the period when the federal government is shut down. The IRS provided some basic steps to follow during this period:

• Continue to file and pay taxes as normal. Individuals who have requested an extension of time to file should file their returns by Oct. 15, 2013.

• All other tax deadlines remain in effect, including those covering individuals, corporations, partnerships and employers. The regular payroll tax deadlines remain in effect as well.

• Taxpayers can file their tax returns electronically or on paper—although the processing of paper returns will be delayed until full government operations resume. Payments accompanying paper tax returns will still be accepted as the IRS receives them.

• Tax refunds will not be issued until normal government operations resume.

• Tax software companies, tax practitioners and Free File will remain available to assist with taxes.

A number of IRS services will remain available, but in a limited way. For taxpayers and preparers seeking assistance, only the automated applications on the regular (800) 829-1040 telephone line will remain open.

The IRS Web site, www.IRS.gov, will remain available, but some interactive features may not be available. IRS Free File partners—tax software vendors who partner with the IRS to provide free tax prep and processing for taxpayers with incomes up to a certain threshold—will continue to accept and file tax returns. Tax software companies in general will also continue to accept and file tax returns, the IRS noted.

Tax Court Closed
The U.S. Tax Court also said on its Web site Monday that it would suspend operations in the event of a shutdown. The Tax Court Courthouse in Washington, D.C., was only open on Tuesday from 8:00 a.m. until 12:00 noon. Petitions, motions and other papers were received only during those four hours on that day. “After 12:00 noon no documents will be received by the court until the shutdown is concluded or the court posts other further notice on this Web site,” said the court.
Documents could be submitted to the Tax Court’s Web site for e-filing only until noontime on Tuesday, October 1, but the Tax Court said it would not receive submissions of documents for e-filing after that time until further notice.

In addition, the Tax Court said it would serve no documents starting Oct. 1, 2013 if the federal government was shut down.

Due dates previously set by a Tax Court Rule or Order for filing a document or completing discovery or any other act will be extended, with all such due dates on or after Oct. 1, 2013 extended by the number of days that court operations are suspended, up to a maximum extension of five days from the date the Tax Court resumes operations. If the extended due date falls on a Saturday, Sunday or a legal holiday as defined in the Tax Code, the due date will then be the next succeeding day that is not a Saturday, Sunday or a legal holiday.

However, the Tax Court said it lacks the authority to extend statutory filing deadlines imposed in the Tax Code. For example, Section 6213(a) provides that a taxpayer must file a petition with the court to re-determine a deficiency within 90 days after the mailing of a notice of deficiency, and Section 6330(d)(1) provides that a taxpayer must file a petition to review a determination involving a proposed lien or levy within 30 days after the mailing of the notice of determination.

Even though hand delivery to the courthouse is not available during the period the Tax Court is closed due to a government shutdown, taxpayers still need to comply with the statutory deadlines by mailing a petition to the Tax Court on a timely basis. “Timeliness of mailing of the petition is determined by the United States Postal Service’s postmark or the delivery certificate of an approved private express delivery company,” the Tax Court noted.

For further information, visit the Tax Court’s Web site at www.ustaxcourt.gov, where notices about the Court’s closure and resumption of operations will be posted and updated throughout the period of any shutdown.

IRS Employee Furloughs
The IRS also provided a link to information for its employees. “An IRS-wide furlough began on Oct. 1, 2013 for everyone except already-identified excepted employees,” said the site.

For continuing information on the furlough, the IRS encouraged its employees to monitor news outlets, the Web page for employees or the 24/7 Emergency Hotline, (866) 743-5748.

The National Treasury Employees Union, which represents IRS employees, said Wednesday that it supports legislation introduced in the House and Senate to provide back pay to federal employees who have been sidelined by the furlough caused by the government shutdown. Sen. Ben Cardin, D-Md., and Reps. James Moran, D-Va., and Frank Wolf R-Va., introduced the Federal Employee Retroactive Pay Fairness Act. Approximately 800,000 federal workers—including many represented by NTEU—were forced off their jobs by the shutdown.

In separate letters to the lawmakers who introduced the legislation, NTEU president Colleen M. Kelley thanked them and stressed that through no fault of their own, dedicated federal employees “are being held hostage—unsure when they might be able to return to their federal offices, unsure whether or not they will be able to make their next rent or mortgage payments, and frustrated and scared about their future.”

The NTEU noted that retroactive pay for shutdown-related furlough days requires congressional action. Such a step was taken in the last government-wide shutdown in 1995 and 1996.

Kelley pointed out that that many federal employees, like many Americans, live paycheck to paycheck and face similar financial obligations and pressures. She also noted that many federal employees have in recent months needed to take unpaid furlough days as a result of sequestration, and that all of them have been operating under a three-year pay freeze.

“NTEU is continuing its efforts not only to bring the current shutdown to a prompt end, but to secure the end of the damaging policy of sequestration and ensure that federal agencies have sufficient funding moving forward,” she said.

For more Information: www.onts9.com