IRS Dirty Dozen part 2 – 2020
“Taxpayers should watch out for these scams.
Scammers targeting individuals with limited English proficiency: IRS impersonators and other scammers are targeting groups with limited English proficiency. These scams are often threatening in nature. Phone scams pose a major threat to people with limited access to information, including individuals not entirely comfortable with the English language.
A common one remains the IRS impersonation scam where a taxpayer receives a telephone call threatening jail time, deportation or revocation of a driver’s license from someone claiming to be with the IRS. Recent immigrants often are the most vulnerable to these scams. They should ignore these threats and not engage the scammers.
Dishonest return preparers: Taxpayers should avoid so-called “ghost” preparers who expose their clients to potentially serious filing mistakes as well as possible tax fraud and risk of losing their refunds. Ghost preparers don’t sign the tax returns they prepare for taxpayers. They may print the tax return and tell the taxpayer to sign and mail it to the IRS. For e-filed returns, the ghost preparer will prepare but not digitally sign as the paid preparer.
With many tax professionals affected by COVID-19 and their office locations potentially closed, taxpayers should be especially careful to select a credible tax preparer.
Offer in Compromise mills: Taxpayers need to be cautious of misleading tax debt resolution companies that can exaggerate chances to settle tax debts for “pennies on the dollar” through an Offer in Compromise. Dishonest companies oversell the program to unqualified candidates so they can collect a large fee from taxpayers already struggling with debt.
These scams are commonly called OIC “mills,” which cast a wide net for taxpayers, charge them pricey fees and churn out applications for a program they’re unlikely to qualify for.
Fake Payments and Repayment Demands: A con artist will steal a taxpayer’s identity and bank account information. Then the con artist will file a false tax return and will have the refund deposited into the taxpayer’s bank account. Once the direct deposit hits the taxpayer’s account, the fraudster places a call to them, posing as an IRS employee. The taxpayer is told that there’s been an error and that the IRS needs the money returned immediately or penalties and interest will result. The taxpayer is told to buy specific gift cards for the refund amount.
Payroll and HR scams: Tax professionals, employers and taxpayers need to be on guard against phishing designed to steal Form W-2s and other tax information. These are called Business Email Compromise or Business Email Spoofing. These scams have used a variety of tactics including requests for wire transfers or payment of fake invoices.
Ransomware: This is malicious software that is often downloaded by the user after clicking on a malicious attachment that encrypts their data making their data inaccessible. In some cases, entire computer networks can be affected. The IRS and its Security Summit partners have advised tax professionals and taxpayers to use the free, multi-factor authentication feature being offered on tax preparation software products.”
IRS Dirty Dozen part 1 – 2020
“Here is a recap of the first six scams in this year’s Dirty Dozen.
Phishing: Taxpayers should be alert to potential fake emails or websites looking to steal personal information. The IRS will never initiate contact with taxpayers through email about a tax bill, refund or Economic Impact Payment. Don’t click on links claiming to be from the IRS. Be wary of emails and websites − they may be nothing more than scams to steal personal information.
Fake charities: Criminals frequently target natural disasters and other situations, such as COVID-19, by setting up fake charities to steal from well-intentioned people trying to help in times of need. Fraudulent schemes normally start with unsolicited contact by phone, text, social media, email or in-person using a variety of tactics.
Threatening impersonator phone calls: IRS impersonation scams come in many forms. A common one remains fake threatening phone calls from a criminal claiming to be with the IRS. The agency will never threaten a taxpayer or surprise them with a demand for immediate payment. Scam phone calls include those threatening arrest, deportation or license revocation if the victim doesn’t pay a fake tax bill.
Social media scams: Taxpayers need to protect themselves against social media scams, which frequently use events such as COVID-19 to try tricking people. Social media enables anyone to share information with anyone else on the Internet. Scammers use this information as ammunition for a wide variety of scams. These include emails where scammers impersonate someone’s family, friends or co-workers.
Economic Impact Payment or refund theft: This year, criminals turned their attention to stealing Economic Impact Payments. Many of these scams are identity theft-related. Criminals file false tax returns or supply false information to the IRS to divert refunds to wrong addresses or bank accounts.
Senior fraud: Senior citizens, their friends and family need to be on alert for tax scams targeting older taxpayers. Their growing comfort with technology, including social media, gives scammers another means of taking advantage of them. Phishing scams linked to COVID-19 have been a major threat this year. Seniors should be on alert for a continuing surge of fake emails, text messages, websites and social media attempts to steal personal information.”
How to become compliant with the IRS
This is as easy as 123:
First file your back taxes and, if necessary, correct the tax returns that the IRS has filed for you.
Next pay what you owe or make payment arrangements, or if you can’t pay it all, see if you qualify for currently not collectible or an offer in compromise.
Going forward, file your tax returns, make estimated tax payments or withhold the proper amounts, so you owe nothing when you file them.
What’s not so easy is the desire to do this and the will force to carry it through.
One exercise that I highly recommend to strengthen your willpower is to do what you say you’re going to do, or don’t say it if you’re not going to do it. Otherwise you will weaken your will power. Start small with this exercise and you’ll see that the results are extraordinary!
IRS Gig Economy Tax Center
The IRS has a very helpful Gig Economy Tax Center.
It includes a page to Manage Taxes for Your Gig Work.
Check it out and contact me if you need help filing your tax returns. I’ll help you find allowable deductions to partially offset the income you need to report.
Remember that you have to report all of your income regardless of whether you get a form 1099 for it or not.
Individuals with significant tax debt should act promptly to avoid revocation of passports
The Internal Revenue Service today urged taxpayers to resolve their significant tax debts to avoid putting their passports in jeopardy. They should contact the IRS now to avoid delays in their travel plans later.
Under the Fixing America’s Surface Transportation (FAST) Act, the IRS notifies the State Department (State) of taxpayers certified as owing a seriously delinquent tax debt, which is currently $52,000 or more. The law then requires State to deny their passport application or renewal. If a taxpayer currently has a valid passport, State may revoke the passport or limit a taxpayer’s ability to travel outside the United States.
Three DOJ posts below
I’m not a lawyer so I can’t and don’t handle criminal matters, but what these three posts illustrate is that not filing a tax return or filing a false tax return is a serious matter and needs to be attended to.
If you have tax returns that need to be filed, you can contact me to help you file them.
Louisiana Couple Indicted for Conspiracy to Defraud the IRS and Filing False Tax Returns
Press release from Dept. of Justice:
A federal grand jury sitting in Shreveport, Louisiana, returned an indictment yesterday charging a Shreveport husband and wife with conspiring to defraud the Internal Revenue Service (IRS) and multiple counts of filing false tax returns, announced Principal Deputy Assistant Attorney General Richard E. Zuckerman of the Justice Department’s Tax Division and United States Attorney for the Western District of Louisiana David C. Joseph.
According to the indictment, Robert and Donna Poimboeuf owned and operated D&G Holdings LLC (D&G), a company providing laboratory and mobile phlebotomy services. For the 2011 through 2015 tax years, the Poimboeufs allegedly underreported their income and gross receipts from D&G on their joint personal federal income tax returns by submitting false information to two separate tax return preparers that omitted bank accounts and Forms 1099 that the accountants needed to accurately report their taxable income. The indictment charges that the Poimboeufs also improperly classified business receipts as non-taxable loan proceeds in an effort to reduce their income.
If convicted, Robert and Donna Poimboeuf each face a maximum sentence of five years in prison on the conspiracy counts and three years in prison on each false return count. The Poimboeufs also face a period of supervised release and monetary penalties. An indictment is an accusation. A defendant is presumed innocent unless and until proven guilty.
IRS-Criminal Investigation investigated the case.
Georgia Precious Metals Broker Convicted Of Willfully Failing To File Tax Returns
Press release from Dept. of Justice:
A federal jury in Atlanta, Georgia, convicted Saleem Hakim, 49, of three counts of failing to file federal income tax returns, announced Principal Deputy Assistant Attorney General Richard E. Zuckerman of the Justice Department’s Tax Division.
According to court documents and evidence presented at trial, Saleem Hakim was in the business of brokering the sale of precious metals to clients. As a precious metal broker, Hakim received funds from clients, converted a portion of the funds to precious metals, and kept the remainder for his personal use. For the years 2011 through 2013, the total amount Hakim retained was in excess of $1 million. Despite receiving income in excess of the filing thresholds and knowing his obligation to make and file tax returns, Hakim did not file any income tax returns. Hakim is a former resident of Smyrna, Georgia.
Sentencing is scheduled for February 26, 2019. Hakim faces a maximum of one year in prison on each count, as well as a period of supervised release and monetary penalties.
Owner of Michigan Trucking Business Sentenced for $2.9 Million Theft and Failure to File Tax Returns
Press release from Dept. of Justice:
The owner of a Michigan trucking business was sentenced today in federal court in Detroit, Michigan, to 33 months in prison for wire fraud and willfully failing to file a tax return, announced Principal Deputy Assistant Attorney General Richard E. Zuckerman of the Justice Department’s Tax Division, and Matthew J. Schneider, U.S. Attorney for the Eastern District of Michigan.
According to court documents, Arshawn Kenard Hall, a resident of Farmington, Michigan, operated a truck hauling business called RAMA Enterprise Inc. (RAMA). An automobile company hired Hall to transport plastic crates filled with automobile parts. After transporting the parts, Hall was required to return the empty crates to a facility in Detroit. Instead, Hall took the plastic crates and sold them to a plastic recycling company for approximately $460,000. The value of the stolen plastic crates to their owner was approximately $2,921,000.
Hall also willfully failed to file a 2012 federal income tax return on behalf of RAMA and failed to pay the taxes due. The tax loss associated with Hall’s conduct is $142,069.
In addition to the term of imprisonment, U.S. Court Judge Terrence G. Berg ordered Hall to serve three years of supervised release, to pay restitution of $2,919,265 to the automobile company and $142,069 to the Internal Revenue Service (IRS).
Tax Cuts and Jobs Act: Impact on Businesses
The Tax Cuts and Jobs Act, a $1.5 trillion tax cut package, was signed into law on December 22, 2017. The centerpiece of the legislation is a permanent reduction of the corporate income tax rate. The corporate rate change and some of the other major provisions that affect businesses and business income are summarized below. Provisions take effect in tax year 2018 unless otherwise stated.
Corporate tax rates
- Instead of the previous graduated corporate tax structure with four rate brackets (15%, 25%, 34%, and 35%), the new legislation establishes a single flat corporate rate of 21%.
- The Act reduces the dividends-received deduction (corporations are allowed a deduction for dividends received from other domestic corporations) from 70% to 50%. If the corporation owns 20% or more of the company paying the dividend, the percentage is now 65%, down from 80%.
- The Act permanently repeals the corporate alternative minimum tax (AMT).
Pass-through business income deduction
Individuals who receive business income from pass-through entities (e.g., sole proprietors, partners) generally report that business income on their individual income tax returns, paying tax at individual rates.
For tax years 2018 through 2025, a new deduction is available equal to 20% of qualified business income from partnerships, S corporations, and sole proprietorships.
For those with taxable incomes exceeding certain thresholds, the deduction may be limited or phased out altogether, depending on two broad factors:
- The deduction is generally limited to the greater of 50% of the W-2 wages reported by the business, or 25% of the W-2 wages plus 2.5% of the value of qualifying depreciable property held and used by the business to produce income.
- The deduction is not allowed for certain businesses that involve the performance of services in fields including health, law, accounting, actuarial science, performing arts, consulting, athletics, and financial services.
For those with taxable incomes not exceeding $157,500 ($315,000 if married filing jointly), neither of the two factors above will apply (i.e., the full deduction amount can be claimed). Those with taxable incomes between $157,500 and $207,500 (between $315,000 and $415,000 if married filing jointly) may be able to claim a partial deduction.
“Bonus” depreciation
The cost of tangible property used in a trade or business, or held for the production of income, generally must be recovered over time through annual depreciation deductions. For most qualified property acquired and placed in service before 2020, special rules allowed an up-front additional “bonus” amount to be deducted. For property placed in service in 2017, the additional first-year depreciation amount was 50% of the adjusted basis of the property (40% for property placed in service in 2018, 30% if placed in service in 2019).
The Act extends and expands first-year additional (“bonus”) depreciation rules. Bonus depreciation is extended to cover qualified property placed in service before January 1, 2027. For qualified property that’s both acquired and placed in service after September 27, 2017, 100% of the adjusted basis of the property can be deducted in the year the property is first placed in service. The first-year 100% bonus depreciation percentage amount is reduced by 20% each year starting in 2023 (i.e., the first-year bonus percentage amount will be 80% in 2023, 60% in 2024, 40% in 2025, and 20% in 2026) until bonus depreciation is eliminated altogether beginning in 2027.
For qualified property acquired before September 28, 2017, prior bonus depreciation limits apply — if placed in service in 2017, a 50% limit applies; the limit drops to 40% if the property is placed in service in 2018, and to 30% if placed in service in 2019.
Note that the timelines and percentages are slightly different for certain aircraft and property with longer production periods.
Internal Revenue Code (IRC) Section 179 expensing
Small businesses may elect under IRC Section 179 to expense the cost of qualified property, rather than recover such costs through depreciation deductions. The Tax Cuts and Jobs Act increases the maximum amount that can be expensed in 2018 from $520,000 to $1,000,000, and the threshold at which the maximum deduction begins to phase out from $2,070,000 to $2,500,000. Both the $1,000,000 and $2,500,000 amounts will be increased to reflect inflation in years after 2018. The new law also expands the range of property eligible for expensing.
Foreign income
Under pre-existing corporate tax rules, U.S. companies were taxed on worldwide profits, with a credit available for foreign taxes paid. If a U.S. corporation earned profit through a foreign subsidiary, however, no U.S. tax was typically due until the earnings were returned to the United States, generally in the form of dividends paid. This system contributed to some domestic corporations moving production overseas, and may have led some multinational companies to keep profits outside the United States.
The new law fundamentally changes the way multinational companies are taxed, making a shift from worldwide taxation of income to a more territorial approach. Under the new rules, qualifying dividends from foreign subsidiaries are effectively exempted from U.S. tax. This is accomplished by allowing domestic C corporations that own 10% or more of a foreign corporation to claim a 100% deduction for dividends received from that foreign corporation, to the extent the dividends are considered to represent foreign earnings.
The new law also forces corporations to pay U.S. tax on prior-year foreign earnings that have accumulated outside the United States in foreign subsidiaries, through a one-time “deemed repatriation” of the accumulated foreign earnings. U.S. shareholders owning at least 10% of a specified foreign corporation* may be subject to a one-time tax on their share of accumulated untaxed deferred foreign income; deferred income that represents cash will be taxed at an effective rate of 15.5%, other earnings at an effective rate of 8%; the resulting tax can be paid in installments. The tax applies for the foreign corporation’s last tax year that begins before 2018. The one-time tax is also not limited to C corporations; it can apply to all U.S. shareholders, including individuals (special rules apply to S corporations and REITs). After paying the one-time deemed repatriation payment, foreign earnings can be brought back to the United States without paying any additional tax.
*Includes controlled foreign corporations (CFCs) and non-CFC foreign corporations (other than passive foreign investment companies, or PFICs) if there is at least one 10% shareholder that is a U.S. corporation.
Copyright Broadridge Investor Communication Solutions, Inc. All rights reserved.
Follow Us!