National Taxpayer Advocate Reviews Filing Season and Identifies Priority Areas and Challenges in Mid Year Report to Congress
Michael Lodge – listen to my PodCast
I always enjoy reading this report because it is a good report to show how the IRS is doing. My biggest concern is the issue of your passports, the law now states that if you owe taxes they can take your passport rights away and will not be able to travel. This was passed by Congress and it should never have been done. Again, another bill hidden in another bill that had nothing to do with taxes. Americans have got to keep a better eye on Congress sneaking tax law into bills. But the Taxpayer Advocate addressed this and we will have to see how it progresses.
National Taxpayer Advocate Nina E. Olson this week released her statutorily mandated mid-year report to Congress that presents a review of the 2017 Filing Season, identifies the priority issues the Taxpayer Advocate Service (TAS) will address during the upcoming fiscal year, and contains the IRS’s responses to each of the 93 administrative recommendations the Advocate made in her 2016 Annual Report to Congress.
In her preface to the report, Ms. Olson praises the IRS for running a generally successful filing season, including reducing the incidence of identity theft, implementing new accelerated Form W‑2 reporting requirements, and matching Forms W‑2 against tax returns claiming refunds. But Ms. Olson says taxpayers who require assistance from the IRS are continuing to face significant challenges obtaining it. She attributes part of the problem to resource constraints, saying that IRS funding has been reduced by nearly 20 percent since fiscal year (FY) 2010, after adjusting for inflation.
While taxpayer services and enforcement activities are both essential for effective tax administration, Ms. Olson says taxpayer services require more emphasis than they are currently receiving. She points out that more than 60 percent of the IRS budget is allocated to enforcement activities while only about 4 percent is allocated for taxpayer outreach and education. The report elaborates on taxpayer service limitations, particularly involving outreach and education:
As of September 30, 2016, the IRS dedicated only 98 employees to conducting education and outreach to the 62 million small business and self-employed taxpayers, and only 365 employees to conducting education and outreach to the nearly 125 million individual taxpayers. There are 14 states that have no Stakeholder Liaison employees who conduct outreach to small business and self-employed taxpayers. The number of Taxpayer Assistance Centers [TACs] is declining each year, and because of the IRS’s new appointment-only system, taxpayers who show up without an appointment are routinely turned away. The TACs have completely stopped offering free tax preparation for low income, elderly, and disabled taxpayers and . . . [they] will not answer “out-of-scope” tax law questions during the filing season and will not answer any tax law questions outside the filing season.
Ms. Olson recommends that the IRS expand its outreach and education activities and improve its telephone service and that Congress provide the IRS with sufficient funding to do so.
Overview of the Filing Season
The report says the IRS delivered a generally successful filing season in 2017. The IRS processed nearly 130 million returns, about 90 percent of which were filed electronically. Seventy-five percent of the returns resulted in refunds, and the average refund amount was $2,763. The IRS successfully implemented several provisions of the Protecting Americans from Tax Hikes Act of 2015, which directed the IRS to delay paying refunds until February 15 to taxpayers claiming either the Earned Income Tax Credit (EITC) or the Additional Child Tax Credit and required the IRS to deactivate Individual Taxpayer Identification Numbers (ITINs) based on age of issuance and non-use.
During Filing Season (FS) 2017, the IRS answered 79 percent of the telephone calls it received on its “Account Management” (AM) telephone lines that were routed to telephone assistors. That is up from 72 percent during FS 2016. In addition, the time these taxpayers spent on hold declined from 11.1 minutes in FS 2016 to 6.5 minutes in FS 2017. Thus, taxpayers generally were better served on the AM telephone lines.
However, taxpayer service was less successful in other areas. The IRS compliance telephone lines, which are not included in the AM category, showed significant declines. Of note, the IRS received about 2.7 million calls on its “Installment Agreement/Balance Due” line. “For the most part, these calls come from taxpayers who are seeking to make payment arrangements – the sort of calls most private businesses would pick up immediately,” the report says. Yet the IRS answered only 40 percent of these calls during FS 2017 (down from 76 percent in FS 2016), and wait times increased from 11 minutes in FS 2016 to a staggering 47 minutes in FS 2017.
Moreover, despite answering a higher percentage of calls on its AM telephone lines, IRS telephone assistors actually answered 25 percent fewer calls during FS 2017 as compared with FS 2016. That occurred because taxpayer calls routed to AM telephone assistors declined by even more – 32 percent. Had IRS telephone assistors received the same number of calls during FS 2017 as they received during FS 2016, they would have answered only 54 percent of taxpayer calls (rather than 79 percent). Therefore, while the uptick in the percentage of AM calls answered was welcome news this year, the report cautions that the IRS has not necessarily turned the corner in strengthening its telephone service. The report also notes that the FY 2018 budget proposal for the IRS projects the agency will answer only 39 percent of taxpayer calls routed to telephone assistors next year.
During FS 2017, the IRS implemented a policy that, for the first time, requires taxpayers to schedule appointments in advance of visiting any of the IRS’s 376 Taxpayer Assistance Centers to receive face-to-face service. The TACs, which previously were known as “walk-in” sites, have now been transformed into “appointment-only” sites. In response to complaints from TAS and others, the IRS has given TAC managers the discretion to make exceptions to the policy, but the general rule continues to require advance appointments.
This year, the IRS has continued a policy originally adopted in 2014 that sharply limits the authority of IRS employees to answer tax law questions. IRS employees are restricted to answering “basic” questions during the filing season and are restricted from answering any tax law questions outside the filing season. The report says that answering taxpayer questions about how to comply with the law should be viewed as a core function of tax administration.
Priority Issues for FY 2018
The report identifies and discusses 13 priority issues the Office of the Taxpayer Advocate plans to focus on during the upcoming fiscal year. Among them are the following:
Private Debt Collection Implementation. This spring, the IRS began assigning delinquent taxpayer accounts to private collection agencies (PCAs). TAS reviewed the accounts of taxpayers whose debts had been assigned to PCAs through May 17 and who had filed tax returns for 2014 or later. It found that 23 percent reported incomes below the federal poverty level, and 53 percent reported incomes below 250 percent of the federal poverty level, which is the threshold of “low income” Congress adopted for purposes of obtaining assistance from a Low Income Taxpayer Clinic. Among the elderly, the median income shown on recent returns filed by taxpayers who received Social Security retirement benefits in 2016 was less than $13,200.
The Advocate remains concerned that PCAs will pressure taxpayers who cannot afford to pay into doing so. When the IRS itself is collecting unpaid taxes, it is authorized to perform a financial analysis of a taxpayer’s ability to pay, and it does not collect from taxpayers where its financial analysis shows doing so would impose a financial hardship. oeHoHowever, PCAs are not authorized to perform a financial analysis, and the IRS has not authorized them to collect financial information from taxpayers that could be turned over to the IRS for analysis. Because PCAs are paid a percentage of what they collect, there is a financial incentive for them to pressure even low income taxpayers from whom the IRS ordinarily would not collect to make payments.
The statute governing the program requires the IRS to assign cases to PCAs that the IRS itself is not working and that are contained in “potentially collectible inventory.” However, the statute does not define the term “potentially collectible inventory.” To protect low income senior citizens, the Advocate has previously recommended the IRS adopt a definition that would exclude recipients of Social Security retirement benefits with incomes below 250 percent of the federal poverty level.
The report says the IRS allowed TAS personnel to listen to a sample of PCA telephone calls during the 2006-2009 iteration of the program and initially agreed to do so this spring. However, the IRS recently informed TAS it has changed its position and will not allow TAS personnel to listen to calls. The report says that if TAS is prohibited from listening to a random sample of calls between the PCAs and taxpayers, it will not be able to determine whether the PCAs are complying with taxpayer rights to the extent required by law. Moreover, the IRS has declined to require all PCA employees working taxpayer cases to watch a training video taped by the National Taxpayer Advocate on protecting taxpayer rights.
During FY 2018, TAS will take additional steps to ensure the protection of taxpayer rights under the program and will advocate to exclude Social Security recipients with incomes below 250 percent of the federal poverty level from assignment to PCAs.
U.S. Passport Revocations and Denials. Legislation passed by Congress in 2015 requires the Department of State (DOS) to deny an individual’s passport application and allows the DOS to revoke or limit an individual’s existing passport if the IRS certifies the individual has a “seriously delinquent” tax debt. The law provides an exception allowing the DOS to issue a passport to a certified individual in emergency circumstances or for humanitarian reasons. TAS is actively monitoring the implementation of this requirement because of the risk of extreme harm if the IRS or DOS makes a transcription error or a taxpayer is not given adequate notice of a passport denial or revocation, which could happen while the taxpayer is outside the United States.
TAS is concerned that the IRS does not plan to notify taxpayers of its intent to certify their tax debts as “seriously delinquent” until the certification is taking place. The U.S. Supreme Court has held that the right to travel, including international travel, “is a part of the ‘liberty’ of which the citizen cannot be deprived without due process of law under the Fifth Amendment.” (Kent v. Dulles, 357 U.S. 116, 125-126 (1958).) The report says that revoking a taxpayer’s passport without providing an additional stand-alone notice of intent to do so raises legitimate questions about whether the government has complied with the U.S. Constitution’s due process requirements. Apart from the questionable legality of failing to provide advance notice, the report points out that advance notice of a certification that will lead to denial or revocation of a passport is likely to cause many taxpayers to resolve their debts, thereby sparing both the taxpayer and the government from the bureaucratic hassle of revoking and then reinstating a passport.
During FY 2018, TAS will take steps to address these concerns systemically, and will help affected taxpayers resolve their seriously delinquent tax debts and obtain reversals of certifications in a timely manner, where appropriate.
Transparency in the Offshore Voluntary Disclosure Programs. TAS continues to have concerns about the transparency of the IRS’s Offshore Voluntary Disclosure Programs (OVDPs). These programs are largely governed by a series of Frequently Asked Questions (FAQs) posted on the IRS website. However, the IRS generally does not disclose the legal guidance underlying the FAQs, leaving taxpayers and their representatives with insufficient information about how to interpret ambiguous answers. In analyzing the programs, TAS reviewed a sample of ten items of undisclosed advice about FAQs issued between March 1, 2016 and March 8, 2017. According to the IRS, the undisclosed documents had not been checked or reviewed by any disclosure experts to determine whether they should be disclosed, yet they contained substantial information that would be helpful for taxpayers and their representatives.
The IRS is also objecting to the release of aggregate data that would give Congress, taxpayers, and their representatives a better feel for the how the programs are operating and a range of results they may expect. In the past, both TAS and the Government Accountability Office (GAO) have computed and publicly reported aggregate data, such as the average or median tax, interest, and penalties paid by taxpayers inside and outside the OVDP. The IRS is now objecting to the release of such data, asserting that TAS should not publish any data points more detailed “than those provided by the Commissioner in press releases.”
“I find the IRS’s objection to our publication of aggregate data on OVDP outcomes deeply disturbing,” Ms. Olson said in releasing the report. “Conceptually, if the IRS is able to limit the release of data to what it includes in press releases, there would be no meaningful Taxpayer Advocate reports, no GAO reports, and no TIGTA reports, and the Freedom of Information Act would become a dead letter. Practically, the IRS has not argued any harm has arisen from the prior release of the same data points to which it is currently objecting. Practitioners have expressed considerable frustration with the OVDPs, where auditors make case-by-case decisions based on nonbinding FAQs that the IRS may withdraw or change at any time, and have complained that outcomes often seem arbitrary and unpredictable. The public deserves access to aggregate data on average outcomes, and we don’t believe any exemption under FOIA entitles the IRS to withhold it.”
During FY 2018, TAS will continue to advocate for the IRS to disclose all OVDP-related rules and procedures along with any legal interpretations of them and advocate for the IRS to disclose detailed summary statistics for the ODVP and streamlined programs so taxpayers have a better sense of likely outcomes.
Other Priority Issues. Other priority issues the Taxpayer Advocate Service plans to focus on during FY 2018 include the IRS’s approach to international tax administration; the advantages and disadvantages of the IRS’s heavy emphasis on online taxpayer accounts; options to improve the administration of the EITC; tax compliance barriers for ITIN holders; the inadequacy of the IRS’s Allowable Living Expense standards; the IRS’s policies regarding levies on retirement accounts; the IRS’s continuing efforts to combat tax-related identity theft; taxpayer challenges in complying with the Affordable Care Act; lack of specificity in third-party contact notices; and the IRS’s continuing information technology challenges, particularly in developing an enterprise-wide case management system.
Volume 2: IRS Responses to Taxpayer Advocate Recommendations
The National Taxpayer Advocate is required by statute to submit a year-end report to Congress that, among other things, describes at least 20 of the most serious problems facing taxpayers and makes administrative recommendations to mitigate those problems. The report released today includes a second volume containing the IRS’s general responses to each of the problems the Advocate identified in her 2016 year-end report as well as specific responses to each recommendation. In addition, it contains TAS’s analysis of the IRS’s responses and, in some cases, details TAS’s disagreement with the IRS’s position.
Overall, the Advocate made 93 administrative recommendations in her 2016 year-end report, and the IRS has implemented or agreed to implement 35 of the recommendations, or 38 percent. The agreed implementation rate is lower than last year’s. Out of 116 administrative recommendations proposed in the Advocate’s 2015 year-end report, the IRS implemented or agreed to implement 65 of the recommendations, or 56 percent.
“Both people who work in the field of tax administration and taxpayers generally can benefit greatly from reading the agency responses to our report,” Ms. Olson said. “Tax administration is a complex field with many trade-offs required. Reading both my office’s critique and IRS’s responses in combination will provide readers with a broader perspective on key issues, the IRS’s rationale for its policies and procedures, and alternative options TAS recommends.”
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The National Taxpayer Advocate is required by statute to submit two annual reports to the House Committee on Ways and Means and the Senate Committee on Finance. The statute requires these reports to be submitted directly to the Committees without any prior review or comment from the Commissioner of Internal Revenue, the Secretary of the Treasury, the IRS Oversight Board, any other officer or employee of the Department of the Treasury, or the Office of Management and Budget. The first report must identify the objectives of the Office of the Taxpayer Advocate for the fiscal year beginning in that calendar year. The second report must discuss at least 20 of the most serious problems encountered by taxpayers, identify the ten tax issues most frequently litigated in the courts, and make administrative and legislative recommendations to resolve taxpayer problems.
Michael Lodge – PodCast
Once again California Law Makers are screwing Californians and going around the law of Prop. 218 to raise taxes without Californians approval. It is very sneaky and they should be stopped. Contact your Assembly member to vote no on SB 231. It is time to clean out the sewer up in Sacramento, they have been at this way to long and taxes in California keep raising because of corrupt politicians.
C.A.R. opposes SB 231 (Hertzberg), a bill that would bypass voter approval requirement for property-related fee and tax increases. SB 231 would redefine the word “sewer” for the purposes of Proposition 218 (aka the “Right to Vote on Taxes Act”), which was approved by California voters in 1996. This will allow local governments to tax property owners directly for costs related to stormwater infrastructure projects without the legally required voter approval.
Prop. 218, The Right to Vote on Taxes Initiative, requires all new property-related taxes, assessments, and most fees to be approved by the voters. There is a limited exception for charges for garbage, water, and sewer services. SB 231 would greatly expand the definition of “sewer” to include storm drainage, effectively eliminating the Prop. 218 voter approval requirement for stormwater management projects.
C.A.R. opposes SB 231 because it would allow for local governments to impose new taxes without voter approval in violation of voter-approve Proposition 218. Notwithstanding the merits of a particular project, Proposition 218 gave the decision-making authority for funding to the voters and the voters should be the ones to decide.
Please ask your Assembly Member to Vote No on SB 231. Don’t allow local governments to impose sewer taxes by side-stepping voters.
Michael Lodge - PodCast
I found this great article written by Laura Knolle, CFP®, MS. It is a great article and it lays out a great plan to prepare for death. Death never tells us in advance when it will come, so we all have to be prepared and make sure that those around us know what to do.
Marriage takes teamwork and each of us comes to the table with different skill sets and plays different roles to make it work. If something were to happen to one in the relationship, how would the other do that job? What steps can we take in preparing for the death of a loved one?
I frequently think about this in my personal life. What should I do now to be prepared if my husband suddenly passed away? I’ve been asking my husband for some time to create a household manual. If something were to happen to you, I say, I’d never know how to adjust the sprinklers, alarm, or heater again.
By thinking this way, I gain a deeper appreciation for those unnoticed things that he does for me and I think it’s what makes me a better planner. The death of a spouse can be very emotional, so creating a widow checklist and assembling the information will prepare you to manage the difficult times by decreasing the stress of decision-making under duress. (For more, see: How Women in Transition Should Mind Their Finances.)
The Dangers of Failing to PrepareSince I help many widows and widowers in my practice, I see the consequences of not preparing for this inevitability. And it can often be very dramatic, because dealing with the grief is overwhelming.
The world doesn’t stop working because of tragedy and many widows and widowers struggle to learn about their finances, which is only amplified by the emotion. What’s hard is that it doesn’t have to be that way. It’s why I always recommend that couples come to meetings with me together, so that they both are comfortable not just with the plan but with what they need to do for the times in which life inevitably happens to us.
But I see that more people than just my clients need help in preparations, so below I’ve provided a financial preparation checklist for couples. I encourage you to work on it together.
A Checklist for WidowsKnow who your trusted professionals are, including your:
Have a current estate plan in place. This includes:
Know each other’s passwords. My husband decided to set up LastPass. I was slow to adopt it but now can’t imagine not using it. (For more, see: Why Do Widows Leave Their Advisors?)
Understand what insurance you have in place. This includes:
Lastly, make sure you understand your budget - what bills are due and when. This also includes:
Michael Lodge – Tax Tip – Listen to my PodCast
Insurance is once area that has become a way to reduce tax issues for tax payers. I found this great article on Bloomberg and wanted to share it with you.
By Sonali Basak and Tom Metcalf, June 28, 2017, 2:00 AM PDT
Introduced in the 2000s, IDFs have become so mainstream that banks such as JPMorgan Chase & Co. and Goldman Sachs Group Inc. are offering them. Hedge funds like Paulson & Co. and Israel Englander’s Millennium Partners LP have been managing them for years.
For investors, the products provide a legal way to avoid taxes. For investment firms, the premiums are “sticky” — they make for stable, long-term sources of capital that act as a bulwark against client redemptions at a time when clients just pulled $75.6 billion from hedge funds in the five quarters through March, according to Hedge Fund Research.
How it works: The client buys a private-placement life-insurance policy. The insurance company invests in alternative assets such as hedge funds. Profits, if any, would ordinarily be taxed as capital gains, but because it involves an insurance company, which must abide by certain restrictions, the money can grow tax-free. Beneficiaries get their money when the insured person dies. For products structured correctly, there aren’t any levies on death benefits.
$15 BillionMany IDFs are life-insurance policies, but they also come in the form of annuities, which have different tax implications. There’s no official accounting of how much money has been invested, but according to Aaron Hodari, who keeps tabs for Birmingham, Michigan-based Schechter Wealth, it’s at least $15 billion — triple what it was a decade ago.
IDFs have been a discreet maneuver for years because investors “don’t want everyone to know how well it’s going,” said Richard C. Wilson, chief executive officer of the Family Office Club, a network of more than 1,500 registered family offices.
JPMorgan and Millennium declined to comment. Goldman Sachs and Paulson didn’t respond to requests for comment.
“People use these partly for estate-planning reasons but the main advantage is to let the value of these investments accumulate without any tax,” said Alex Gelinas, a tax lawyer at Sadis & Goldberg. “That will always be an appealing feature.”
The Internal Revenue Service has strict rules for the funds. Policy owners can’t try to affect, directly or indirectly, the investment decisions of the account managers. And insurance companies are prohibited from investing in certain assets.
“If the investor has too much control, the investor is taxed immediately,” IRS spokesman Anthony Burke said in an email. “If the investor withdraws the amount, the investor must pay tax.”
Word SpreadingTax status makes a clear difference. If a 45-year-old, non-smoking man were to contribute $2.5 million to an IDF for four years, the investment would be worth $113 million within 40 years with a 6.5 percent internal rate of return, according to a presentation by wealth-planning law firm Giordani, Swanger, Ripp & Jetel. The account value would be $48.8 million if the investor paid taxes, the document shows.
Word is spreading at closed gatherings such as this month’s Private Placement Life Insurance and Variable Annuities Forum in Boston. That’s where Hodari spoke in front of some of the 250 attendees, who included employees of Goldman Sachs, Dan Loeb’s Third Point LLC, GoldenTree Asset Management, Golub Capital and York Capital. There was a similar meeting in New York in September. Third Point, GoldenTree, Golub and York all declined to comment.
Paulson OfferingSkyBridge Capital, the firm formerly run by Anthony Scaramucci, started its first offering late last year. A SkyBridge representative declined to comment.
Billionaire John Paulson offered an IDF in 2013 for his merger arbitrage fund, through an insurer called Philadelphia Financial. Blackstone Group LP made a bet on the business by agreeing to buy Philadelphia Financial a year later. It’s now Lombard International. It sells Goldman Sachs and Millennium funds, according to a marketing document that says the offering is not intended for retail investors. Lombard also works with several JPMorgan hedge funds, and Morgan Stanley markets the products. Blackstone, Morgan Stanley and Lombard all declined to comment.
Blackstone has spent more than $600 million over the past few years through its Tactical Opportunities unit to acquire businesses that offer private-placement insurance.
Wealth Gap“A handful of larger managers have long offered such products,” JPMorgan said in a white paper last year. “What is new, though, is the increase in the number of managers interested in launching IDFs and growing demand among private bank platforms seeking to partner with managers on such offerings.”
The rising use of tax-avoidance plans among the wealthy widens the gap between rich and poor, said Gabriel Zucman, an economics professor at the University of California at Berkeley.
“These forms of tax avoidance are one of the key reasons why income and wealth inequality are rising so much in the U.S.,” Zucman said. “These schemes allow very wealthy individuals to pay very little in taxes at the same time as effective tax rates paid by the working class are on the rise because of sharp increases in payroll taxes.”
The IRS has been known to pounce if it believes IDF rules about keeping investors away from the fund’s investment strategy have been broken.
In a 2015 decision, the U.S. tax court ruled that Jeffrey Webber, a venture capitalist who’d invested in variable life insurance policies, effectively retained control over the investments by using associates as conduits to direct the investment strategy of these funds. The result: a tax bill of about $400,000 on income realized by the accounts. Webber didn’t appeal and said he was happy about other aspects of the decision, including the lack of penalties imposed, according to his lawyer, Megan L. Brackney of Kostelanetz & Fink.The level of separation can raise issues, too. Lawrence Buchalter, a hedge fund manager who invested in IDFs through Philadelphia Financial, sued the company claiming it failed in its due diligence process when it invested in a hedge fund that lost money in a fraud scheme. Buchalter’s case was dismissed due to statute of limitations.
None of that damped the interest of investors at this month’s Boston conference, according to Hodari. “The mood is great,” he said.
Michael Lodge – Tax Tips – Listen to my PODCAST
Every year in the summer time the scammers come out to play. But their play can cost you a lot of money.
The Internal Revenue Service this week issued a warning that tax-related scams continue across the nation even though the tax filing season has ended for most taxpayers. People should remain on alert to new and emerging schemes involving the tax system that continue to claim victims.
“We continue to urge people to watch out for new and evolving schemes this summer,” said IRS Commissioner John Koskinen. “Many of these are variations of a theme, involving fictitious tax bills and demands to pay by purchasing and transferring information involving a gift card or iTunes card. Taxpayers can avoid these and other tricky financial scams by taking a few minutes to review the tell-tale signs of these schemes.”
A new scam which is linked to the Electronic Federal Tax Payment System (EFTPS) has been reported nationwide. In this ruse, con artists call to demand immediate tax payment. The caller claims to be from the IRS and says that two certified letters mailed to the taxpayer were returned as undeliverable. The scammer then threatens arrest if a payment is not made immediately by a specific prepaid debit card. Victims are told that the debit card is linked to the EFTPS when, in reality, it is controlled entirely by the scammer. Victims are warned not to talk to their tax preparer, attorney or the local IRS office until after the payment is made.
The IRS does not call and leave prerecorded, urgent messages asking for a call back. In this tactic, scammers tell victims that if they do not call back, a warrant will be issued for their arrest. Those who do respond are told they must make immediate payment either by a specific prepaid debit card or by wire transfer.
Private Debt Collection Scams
The IRS recently began sending letters to a relatively small group of taxpayers whose overdue federal tax accounts are being assigned to one of four private-sector collection agencies. Taxpayers should be on the lookout for scammers posing as private collection firms. The IRS-authorized firms will only be calling about a tax debt the person has had – and has been aware of – for years. The IRS would have previously contacted taxpayers about their tax debt.
Scams Targeting People with Limited English Proficiency
Taxpayers with limited English proficiency have been recent targets of phone scams and email phishing schemes that continue to occur across the country. Con artists often approach victims in their native language, threaten them with deportation, police arrest and license revocation among other things. They tell their victims they owe the IRS money and must pay it promptly through a preloaded debit card, gift card or wire transfer. They may also leave “urgent” callback requests through phone “robo-calls” or via a phishing email.
AD – READ A BOOK THIS SUMMER ON BUSINESS
Tell Tale Signs of a Scam:
The IRS (and its authorized private collection agencies) will never:
The IRS initiates most contacts through regular mail delivered by the United States Postal Service. However, there are special circumstances in which the IRS will call or come to a home or business, such as:
Michael Lodge –
So last week the Senate issued their draft of the healthcare reform and sent it to the CBO to give their report. So here is the bill now.
H.R. 1628, Better Care Reconciliation Act of 2017
An Amendment in the Nature of a Substitute [LYN17343] as Posted on the Website of the Senate Committee on the Budget on June 26, 2017
The Congressional Budget Office and the staff of the Joint Committee on Taxation (JCT) have completed an estimate of the direct spending and revenue effects of the Better Care Reconciliation Act of 2017, a Senate amendment in the nature of a substitute to H.R. 1628. CBO and JCT estimate that enacting this legislation would reduce the cumulative federal deficit over the 2017-2026 period by $321 billion. That amount is $202 billion more than the estimated net savings for the version of H.R. 1628 that was passed by the House of Representatives.
The Senate bill would increase the number of people who are uninsured by 22 million in 2026 relative to the number under current law, slightly fewer than the increase in the number of uninsured estimated for the House-passed legislation. By 2026, an estimated 49 million people would be uninsured, compared with 28 million who would lack insurance that year under current law.
But remember, since there is not a legal mandate to have health insurance this would increase only because people have the right to get or decline coverage.
Following the overview, this document provides details about the major provisions of this legislation, the estimated costs to the federal government, the basis for the estimate, and other related information, including a comparison with CBO’s estimate for the House-passed act.
Michael Lodge – follow my PODCAST
When you are starting a new business or a project the first two meetings should be with your attorney and accountant. Why? Because at the beginning of anything you want to know what your risks are and if you have all of the legal issues out-of-the-way for risk management issues.
I will give you a good example. Over the weekend I was having lunch with some friends who are like a brother and sister. We were talking about my friends work with the federal government in implementing new software for mental health part of the healthcare system. She is a programmer / project manager on a project to automate the medical information between many different users. The project has been going on for a year and millions has been spent on this project by the federal government. However, my friend who has been out in the real world just joined the team on the project. She asked one question – who has the legal liability on this project? What happens if one item doesn’t work or is not fast enough to update the patients information on medication. What happens if information does not populate the system timely and medicine is given to the patient that kills them? Who has the legal responsibility and have you brought in legal? The answer was that no one from legal had looked at the process being developed and when they were finally brought in they were pissed off. The project team were developing a project that has a big risk issue because you are dealing with patient lives. The other project managers were shocked that they even had to think about risk as they sat at their desks inputting code, they never went beyond their jobs and asked the most needed questions. Project managers should know the questions to ask when working on a new system or project. Who has the risk and how do we counter the risk.
So the point is – that when you are starting a company, developing software, or any other kind of business concern you are working on, the first question is what is my legal risk. What am I developing that has risk and who will be responsible for that risk. Just one lawsuit can crumble any company or project.
The first part of developing a new company, project, product or service – call in your attorney and your accountant. That should be your first call.
Michael Lodge – Senate Healthcare Bill – listen to my PodCast
Before you all start yelling at the Senate and start spinning – below I have provided you with the link to the actual bill and a summary of what the bill does. Read the bill – don’t spin nonsense.
Discussion Draft – Senate Republican Health Care Bill - View the Senate Republican Health Care bill here.
Senate Republican Health Care Overhaul Proposal
Seven years ago, Democrats imposed a risky health care experiment on Americans that led to skyrocketing costs and collapsing insurance markets. Senate Republicans are working to fix the mess Democrats made by acting to rescue the millions trapped by Obamacare. The discussion draft will:
Overview of the Discussion Draft of Senate Amendment to H.R. 1628
Help stabilize collapsing insurance markets that have left millions of Americans with no options.
Short-Term Stabilization Fund: To help balance premium costs and promote more choice in insurance markets throughout the country, this stabilization fund would help address coverage and access disruption – providing $15 billion per year in 2018 and 2019; $10 billion per year in 2020 and 2021.
Cost-Sharing Reductions: Continues federal assistance – through 2019 – to help lower health care costs for low-income Americans in the individual market.
Free the American people from the onerous Obamacare mandates that require them to purchase insurance they don’t want or can’t afford.
Repeals the individual and employer mandates.
Improve the affordability of health insurance, which keeps getting more expensive under Obamacare.
Long-Term State Innovation Fund: Dedicates $62billion, over 8 years, to encourage states to assist high-cost and low-income individuals to purchase health insurance by making it more affordable.
Tax Credits: Targeted tax credits will help defray the cost of purchasing insurance; these advanceable and refundable credits – adjusted for income, age and geography – will help ensure those who truly need financial assistance can afford a health plan.
Health Savings Accounts: Expanded tax-free Health Savings Accounts to give Americans greater flexibility and control over medical costs; increased contribution limits to help pay for out-of-pocket health costs and to help pay for over-the-counter medications.
Repeals Obamacare Taxes: Repeal costly Obamacare taxes that contribute to premium increases and hurt life-saving health care innovation, like the taxes on health insurance, prescription drugs, medical devices, and “high-cost” employer sponsored plans.
Empowers states through state innovation waivers (Obamacare 1332 Waiver): Provide states additional flexibility to use waivers that exist in current law to decide the rules of insurance and ultimately better allow customers to buy the health insurance they want. Allow the Department of Health and Human Services (HHS) to fast-track applications from states experiencing an Obamacare emergency.
Preserve access to care for Americans with pre-existing conditions, and allow children to stay on their parents’ health insurance through age 26. (There are no changes to current law as it applies to Veterans, Medicare, or Social Security benefits.)
Strengthen Medicaid for those who need it most by giving states more flexibility while ensuring that those who rely on this program won’t have the rug pulled out from under them.
Targets Medicaid to Those Most in Need: In 2021, begins gradual reductions in the amount of federal Obamacare funds provided to expand Medicaid, restoring levels of federal support to preexisting law by 2024 while providing fairness for non-expansion states.
New Protection for the Most Vulnerable: Guarantees children with medically complex disabilities will continue to be covered.
Provides additional state flexibility to address the substance abuse and mental health crisis.
Flexibilities for Governors: Allows states to choose between block grant and per-capita support for their Medicaid population beginning in 2020, with a flexibility in the calculation of the base year. Allows states to impose a work requirement on non-pregnant, non-disabled, non-elderly individuals receiving Medicaid.
New Protections for Taxpayers: Curbs Medicaid funding gimmicks that drive up federal costs.
Michael Lodge – Tax Tips Listen to the PodCast – WBTPOD
The IRS recently reminded small business owners – especially individuals who are self-employed – that there are two methods of deducting home-office expenses. A lesser-known “simplified” method can provide a flat-dollar write-off without the usual record keeping hassles.
But what the IRS didn’t say is this: Many taxpayers will be in line for a bigger deduction if they rely on the more traditional “regular” method.For starters, you may deduct home-office expenses only if you use a portion of your home regularly and exclusively as your principal place of business or a place to meet or deal with customers, clients, or patients in the normal course of business.
In addition, you may be entitled to deductions for a business storage area or a separate structure (e.g., a detached garage or barn) used strictly for business purposes.
AD – SUMMER READING – WBTPOD
If you qualify, you can deduct expenses directly related to your home office, as well as a proportionate share of certain expenses of the entire home. To claim a deduction, you may use the regular method or the recently approved simplified method.
Regular method. This method requires you to compute the business use of the home by dividing the expenses of operating the home between personal and business use. Direct business expenses are fully deductible and the percentage of the home floor space used for business is assigned to indirect total expenses.
Simplified method. This method reduces the paperwork and record keeping burden for small businesses. It has a prescribed rate of $5 a square foot for business use of the home up to 300 square feet, for a maximum annual deduction of $1,500.
Choosing this option requires taxpayers to complete a short worksheet in the tax instructions and enter the result on the tax return. There is a special calculation for daycare providers.Regardless of the method used to compute the deduction, business expenses in excess of gross income aren’t deductible.
Deductible expenses for business use of a home include the business portion of:
In general, expenses for the parts of the home not used for business can’t be deducted.
You also may take a deduction for business storage purposes when the dwelling unit is the sole fixed location of the business or is used regularly for providing daycare services. Note: Exclusive use isn’t required in these instances.
Even though the IRS is reminding taxpayers about the simplified option, your clients may do better by deducting actual expenses.
For example, suppose the 300-square-foot room you use for a home office represents 10 percent of the home’s total 3,000 square feet. Now say that you have direct expenses of $2,000 and $10,000 in indirect expenses (not counting mortgage interest and property taxes, which are generally deductible anyway). Using the regular method, your deduction of $3,000 ($2,000 + 10 percent of $10,000) is twice the maximum deduction allowed with the simplified method!
Review the situation for each client. Then you can help your client determine the best record keeping approach. Written by Ken Berry, AccountingWeb.
Michael Lodge – Tax Tips – listen to my podcast
The Internal Revenue Service is now accepting renewal applications for the Individual Taxpayer Identification Numbers (ITINs) set to expire at the end of 2017. The agency urges taxpayers affected by changes to the ITIN program to submit their renewal applications as soon as possible to avoid the rush.
In the second year of the renewal program, the IRS has made changes to make the process smoother for taxpayers. The renewal process for 2018 is beginning now, more than three months earlier than last year.
“This is an important program, and the IRS is opening the renewal process several months earlier to help taxpayers and make the process smoother,” said IRS Commissioner John Koskinen. “We encourage taxpayers affected by the ITIN changes to review the program’s details and renew ITINs this summer to avoid delays that could affect their tax filing and refunds next year.”
Under the Protecting Americans from Tax Hikes (PATH) Act, ITINs that have not been used on a federal tax return at least once in the last three consecutive years will expire Dec. 31, 2017, and ITINs with middle digits 70, 71, 72 or 80 will also expire at the end of the year. Affected taxpayers who expect to file a tax return in 2018 must submit a renewal application.
As a reminder, ITINs with middle digits of 78 and 79 already expired last year. Taxpayers with these ITIN numbers can renew at any time.
ITINs are used by people who have tax filing or payment obligations under U.S. law but who are not eligible for a Social Security number. ITIN holders who have questions should visit the ITIN information page on IRS.gov and take a few minutes to understand the guidelines.
READ A SUMMER BOOK – CLICK HERE
Last year, the IRS launched a wider education effort to share information with ITIN holders. To help taxpayers, the IRS has a variety of informational materials, including flyers and fact sheets, available in several languages on IRS.gov.
The IRS continues to work with partner groups and others in the ITIN community to share information widely about these important changes.
Who Should Renew an ITIN
Taxpayers whose ITIN is expiring and who need to file a tax return in 2018 must submit a renewal application. Others do not need to take any action.
Taxpayers with an ITIN with middle digits 70, 71, 72 or 80 have the option to renew ITINs for their entire family at the same time. Those who have received a renewal letter from the IRS can choose to renew the family’s ITINs together even if family members have an ITIN with middle digits other than 70, 71, 72 or 80. Family members include the tax filer, spouse and any dependents claimed on the tax return.
How to Renew an ITIN
To renew an ITIN, a taxpayer must complete a Form W-7 and submit all required documentation. Taxpayers submitting a Form W-7 to renew their ITIN are not required to attach a federal tax return. However, taxpayers must still note a reason for needing an ITIN on the Form W-7. See the Form W-7 instructions for detailed information.
The IRS began accepting ITIN renewals today. There are three ways to submit the W-7 application package:
Federal returns that are submitted in 2018 with an expired ITIN will be processed. However, exemptions and/or certain tax credits will be disallowed. Taxpayers will receive a notice in the mail advising them of the change to their tax return and their need to renew their ITIN. Once the ITIN is renewed, any applicable exemptions and credits will be restored and any refunds will be issued.
Additionally, several common errors can slow down and hold some ITIN renewal applications. The mistakes generally center on missing information and/or insufficient supporting documentation. The IRS urges any applicant to check over their form carefully before sending it to the IRS.
As a reminder, the IRS no longer accepts passports that do not have a date of entry into the U.S. as a stand-alone identification document for dependents from a country other than Canada or Mexico, or dependents of U.S. military personnel overseas. The dependent’s passport must have a date of entry stamp, otherwise the following additional documents to prove U.S. residency are required:
IRS Warns of New Phone Scam Involving Bogus Certified Letters; Reminds People to Remain Vigilant Against Scams, Schemes this Summer
Michael Lodge, Business and Tax Adviser – listen to my Podcast
Every year, right after the tax season and during the summer months, the scammers start to come out and start making those threatening phone calls. Hang up – it is not the IRS.
The Internal Revenue Service today warned people to beware of a new scam linked to the Electronic Federal Tax Payment System (EFTPS), where fraudsters call to demand an immediate tax payment through a prepaid debit card. This scam is being reported across the country, so taxpayers should be alert to the details.
In the latest twist, the scammer claims to be from the IRS and tells the victim about two certified letters purportedly sent to the taxpayer in the mail but returned as undeliverable. The scam artist then threatens arrest if a payment is not made through a prepaid debit card. The scammer also tells the victim that the card is linked to the EFTPS system when, in fact, it is entirely controlled by the scammer. The victim is also warned not to contact their tax preparer, an attorney or their local IRS office until after the tax payment is made.
“This is a new twist to an old scam,” said IRS Commissioner John Koskinen. “Just because tax season is over, scams
and schemes do not take the summer off. People should stay vigilant against IRS impersonation scams. People should remember that the first contact they receive from IRS will not be through a random, threatening phone call.”
EFTPS is an automated system for paying federal taxes electronically using the Internet or by phone using the EFTPS Voice Response System. EFTPS is offered free by the U.S. Department of Treasury and does not require the purchase of a prepaid debit card. Since EFTPS is an automated system, taxpayers won’t receive a call from the IRS. In addition, taxpayers have several options for paying a real tax bill and are not required to use a specific one.
Tell Tale Signs of a Scam:
The IRS (and its authorized private collection agencies) will never:
Michael Lodge – listen to my podcast
I have been watching a situation that seems to arise every so often in business and also in personal lives. In the last year I have seen a close friend go through some tough legal issues. When he was on top everyone loved him, they used him to get what they wanted. As soon as he got himself into trouble they dropped him like a hot potato and ran, began gossiping and hoping he would fail. They would go on and on and never once looked back how they used him to get what they wanted.
My friend was an out performer, whatever he set his mind to do he would get it done. He knew business forwards and backwards, and when people needed help he would always be there. But when the bad times hit they would sit to the side and say how much they loved him but sat there and did nothing except talk about him. It was an amazing thing to see, and still to watch it even to this day. I always reminded him that you can’t think of those people as friends, they never were his friends. Instead they were users to see how much money they could make off of him. But here they sit today, I can see and hear them, talking and talking about my friend as if they didn’t even remember him. Amazing how people are, their true colors show through. Those her were his clients and friends for years all of a sudden abandon him.
Now everyone makes mistakes. Everyone makes an error in their life that they have to be responsible for. That is what real people do. They stand up, take on the issue, and resolve it to the best of their ability. The weak will run, tell a lie and say it wasn’t them at fault, or will cry and make people feel sorry for them – but will never take responsibility. But a real person take on the issue and deals with it to the best of their ability. No looking back, and all those that sit there and chat and gossip, you cut them off and you never look back. So what kinds of people do you watch out for.
SPECIAL BOOKS FOR THE SUMMER – READ
You are thankful with all of your heart for those that helped you in a difficult time. They will be blessed ten fold.
Those that left you in a difficult time, didn’t even care about what happened to you, karma is a bitch. Cut them out and never look back. They will only take but never give.
Those who got you into the mess you are in, again karma is a bitch. Those are the most dangerous people you can have around you. They know they did wrong, they knew that what they did was not ethical but they did it anyway. They will suffer in the future greater then you.
But my friends, who are going through trouble, stand up tall and take it, resolve it, live with it, and never look back. Those with bad karma you will never see them or hear from them again. But those who stood with you in thick and thin of times – will always be there for you and you for them.
“Watch your thoughts, for they become words. Watch your words, for they become actions. Watch your actions, for they become habits. Watch your habits, for they become character. Watch your character, for it becomes your destiny”.
Michael Lodge, Business and Tax Adviser –
Hate rose its ugly head yesterday in our Nations Capital. A lone liberal anti Trump anti Republican gunman became a terrorist on our nations leaders. Hate rose up and it was ugly, disturbing and an attack on everyone in this nation that believes in democracy. Political hate has been growing in this nation from the beginning of the Obama presidency to this point in time with President Trump. However, it has become more dangerous because voices of hate became stronger, trying to shut down freedom of speech, attacking police officers throughout the United States, attacking the President daily from the media and even on the floor of the Congress. Hate has been getting stronger day after day, and it pushed one man who hated to try to kill.
When did Americans begin to hate each others view so much that it led to terrorist acts against other Americans?
Hate, it has caused a lot of problems in the world, but has not solved one yet. – Maya Angelou
When did Americans lose their common sense to think things through. When they become followers instead of leaders? Leaders lead with the passion to do good, not fail the nation with hate. America is better than this. We have to be very careful about this hate that is growing. Henry Cabot Lodge wrote, “Strong, generous, and confident, she has nobly served mankind. Beware how you trifle with your marvellous inheritance, this great land of ordered liberty, for if we stumble and fall freedom and civilization everywhere will go down in ruin.” Those that are pushing hate language are treading on our freedoms, our liberty and causing America to stumble and fall as a nation.
Common sense debate on our nations problems should be desired by all Americans. Hate language and shutting people down because they don’t believe as you do is not honest debate, it is corrupted by political spin because they chose to follow instead of lead. This hate from all sides must stop before our liberties are taken away because hate got out of control. You can stand up for how you believe, that is what is expected from each of us. But to stand up and hate by attacking with words and lies, this leads to evil acts against Americans and our democracy. Be careful how you treat our nation and all Americans, words of hate lead to evil and brutal destruction.
Another quote from Henry Cabot Lodge is as follows, “It sets its face rightfully against the doctrines of the Anarchist and the Communist, who seek to solve the social problems not by patient endeavor, but by brutal destruction.” He is speaking of our American values that are far different from those that present hate and evil to our democracy. What happened to America’s patient endeavor to do what is right for America instead of brutal destruction by political hate? Where is our common sense as Americans instead of a political agenda? America has to do better.
Stop the hate speech, be a patient America, be a common sense independent thinker, be leaders.
SPECIAL BOOKS FOR THE SUMMER – READ
Michael Lodge – listen to my podcasts
I am working on a probate case at the moment and it takes a long time to go through the motions. Get your wills and trusts in order. Keep them updated. It makes it a lot easier for your family and heirs. Also, get your healthcare directives in place. No matter what your age, always be prepared. If your parents do not have their wills, trusts, and medical directives in order, talk with them and get everyone prepared. If you have young children, even more important. Don't let the state take over. I know, hard to think about, but it has to be done. Talk with your attorney, they can help walk you through the process.