Over the past three years, a variety of people and agencies from homeowners to developers have overpaid about $21 million in property taxes. The county tax office is supposed to make sure that property owners get the money back, but Travis County officials have not been diligent in making sure that happens, according to the report.
]]> Each county must follow certain procedures to try to return the money, but some say the county has made less effort than it should have. As of the end of March, the county had about $6 million in property tax money that needed to be refunded. If the money doesn't get into the right hands after three years, the funds will go to the county general fund.County officials, however, said the office makes every attempt to return the money. Officials said they mail letters to property owners alerting them of the error.
The officials, as well, said the burden can't fall only on the government to return the money. It is incumbent upon property owners, they said, to pay the first amount and then to respond to letters from the county tax offices.
According to Texas law, if a tax office receives two payments for one property in the same amount, the tax agency should return one check. If property owners make one payment that exceeds their tax bill, they must seek a refund in writing. In Travis County, however, taxpayers must put both requests in writing.
Of the overpayments that Travis County has taken in since 2009, about $5.6 million in duplicate payments and $328,000 in single payments is due to property owners. People's taxes are high enough as it is, they shouldn't have to worry about a government's incompetence keeping money that never should have been paid.
Source: Austin American Statesman, "Travis County tends to pocket overpaid taxes," Tony Plohetski, May 5, 2012
]]>The agreement ends a two-year battle between the state and Amazon over the issue. Amazon, which reported $48.1 billion in sales in 2011, traditionally has been opposed to collecting sales taxes from its customers. Texas officials, who want the revenue, and store owners, who said they can't compete with online retailers who do not assess a sales tax, want the taxes collected.
]]> The state had sent Amazon a bill in 2010 for $269 million, the amount Texas officials said Amazon owed in sales taxes from 2005 to 2009.Under the agreement, Amazon has agreed to bring 2,500 jobs and $200 million in investments to the state and to start collecting taxes on sales made in Texas on July 1. In exchange, the state has agreed to resolve its dispute with Amazon over the $269 million bill.
Under increasing pressure from states, Amazon has started to craft agreements with states to collect taxes. While the tax collection will start soon in Texas, Amazon has successfully delayed the collection of taxes in other states. In Nevada, for example, Amazon will not collect taxes until 2014.
Texas brick-and-mortar retailers have urged state officials to begin collecting taxes from Amazon and other online retailers as soon as possible to make the traditional stores more competitive.
Source: Austin American-Statesman, "Amazon agrees to collect sales tax in Texas starting in July, bring 2,500 jobs to state," Barry Harrell, April 27, 2012
]]>Under the rule, which takes effect on Jan. 1, 2013, the IRS will mandate that interest paid to depositors who do not live in Texas be reported to the agency. Industry analysts said the change could mean that non-residents who have their money in banks in U.S. border states could pull their funds out of the institutions. Could this be a case of the IRS not being aware of the unintended consequences of its decisions?
]]> A statement by the IRS announcing the change stated that the move was vital to fighting tax evasion by individuals living outside the country. The IRS said it wants to share the information about interest gained in the U.S. to encourage other governments to share similar data with the IRS.Two U.S. representatives from a southern state have argued that they want Congress to overturn the IRS requirement, fearing non-residents would pull their money out of banks in their states and across the U.S., harming American financial institutions.
A financial industry analyst said that executives at banks in Texas and Florida especially have attempted to fight the rule, leading him to believe they worry about a withdrawal in funds from Latin American depositors.
A spokeswoman for the Treasury Department said she did not believe that theory is supported by evidence. Non-U.S. citizens gain more from a relationship with a U.S. bank than just not having interest reported to their governments, she said.
Source: Reuters, "IRS rule threatens bank capital flight: analysts," Kevin Drawbaugh, April 17, 2012
]]>Sen. Harry Reid, the Senate majority leader, initially proposed the measure, but it has been incorporated into a broader bill to provide funding for federal highways and highway safety programs. It already has passed the Senate and is awaiting approval from the House of Representatives.
]]> Critics said that passports and taxes have nothing to do with highway safety and funding. Still, should the law pass, it would allow the State Department to place a passport ban on taxpayers who owe money.Passports could be granted or restored in an emergency or for humanitarian needs. Paying outstanding tax debts also would allow for a passport restoration. The bill, if passed, would apply to those who owe more than $50,000 and have had a tax lien filed against them. The IRS files taxes liens when back taxes are owed and even as taxpayers have a protest pending.
Supporters of the measure contend that owing back taxes and being denied a passport is akin to owing child support and not being allowed a passport. The State Department can deny or revoke a passport when a parent owes more than $2,500 in back payments.
Source: MSN Money, "Owe back taxes? No travel for you," April 12, 2012
]]>Some people might be eligible for tax relief by using the IRS' innocent spouse relief rule. Under that regulation, according to IRS policy, the agency might not find a co-signer on a joint tax return liable if the spouse can prove he or she was unaware or didn't have a reason to challenge the veracity of a tax return.
]]> Others could invoke the equitable relief rule, where the IRS will remove the tax liability from one party under certain circumstances. Those circumstances include when a spouse can prove he or she had fallen victim to domestic violence or other spousal abuse, said an IRS expert. In those cases, the filer might not feel comfortable challenging the tax return submitted by the other party out of fear.The IRS expert said the agency always finds tax cheaters, and the penalties can be extensive for those who cannot claim to be an innocent spouse. When the IRS audits a tax return and rules the taxpayer knowingly evaded paying taxes, criminal prosecution or a penalty for civil fraud can occur. The latter can bring a penalty of as much as 75 percent of the amount of tax underpaid, as well as interest and other penalties.
From October 2010 to September 2011, the IRS tagged taxpayers with more than 2,800 penalties for civil fraud. Fines totaled almost $200 million. If a taxpayer is found guilty of criminal fraud, the penalty could reach a fine of as much as $250,000 and a prison term of five years.
Source: The Sacramento Bee, "Personal Finance: Tax time also means tax cheating," Claudia Buck, April 8, 2012
]]>This story began when $91,000 of a woman's student loan balance was discharged due to her total disability. However, while this financial release seemed like a dream come true, the story quickly evolved into a tax nightmare.
]]> The woman was diagnosed with a tumor that resulted in the removal of a majority of her small intestine. This created a number of other health problems. Ultimately, her physical condition was so severe that the woman retired from her job on a disability pension in 2010. Due to her disability, her federal student loans were released.Unfortunately, this discharge of debt would be reported to the IRS as Cancellation of Debt Income (CODI). Cancelled debt often equates to taxable income. Lenders must report discharged debts of $600 or more to the IRS on a 1099-C form.
However, cancelled student loan debt is not always taxable. For example, if the woman's debt had been cancelled because she worked in a specific profession-medical, teaching or law enforcement-she would be eligible for a total elimination of the debt. Nevertheless, there are no tax breaks for cancellation of debt related to a disability. Student loans cancelled due to the Death and Disability Discharge (Section 437(a) of the Higher Education Act of 1965) are taxable. Now, she owes the IRS $26,000.
The woman tried calling the IRS for assistance. However, at this point, the woman has been warned that if she cannot pay the taxable income, the IRS will put a tax lien on her house and report her to credit agencies.
Unfortunately, there are so many individuals with disabilities that are struggling through this exact dilemma. If you are dealing with a similar problem, you may consider speaking with a knowledgeable tax law attorney. He or she might help you evaluate your financial options.
Source: Yahoo! News, "New Jersey woman's student loan debt creates tax nightmare," Gerri Detweiler, April 6, 2012
]]>· Double check the return for mistakes. Even accidental math mistakes will put the return under greater scrutiny. Also check for correct Social Security numbers.
· Don't expect to get away with anything illegal. The IRS offers people who report tax cheats a reward of as much as 30 percent of tax or penalties it collects following an audit.
· Don't overestimate about donations. When giving items to a thrift shop, use the resale value to figure their worth, not the original or replacement value. Date receipts and keep them. The IRS will question donations that are high in relationship to your income.
· File your return. The IRS will find you if you don't; it has ways of identifying people who filed in the past and no longer do.
· If you own a business, don't neglect to list any income. The IRS looks closely at small, businesses. If it comes to an audit, the IRS will look twice as hard as hobbies passed off as businesses, especially if a loss is deducted.
· Be careful what you claim for a home office. Use only the parts of your house that are solely used for business, and it must be your primary place of business.
· If you are reporting investment profits and losses, don't guess. Brokers now report such information to the IRS and will match dates you report for buying and selling of investments.
· If you have been audited before, the likelihood of another audit increases. Be careful to verify returns for the next few years.
Source: CNN Money, "11 tax audit red flags," Blake Ellis, March 28, 2012
]]>Data recently released by the IRS showed that millionaires last year were audited almost twice as much as they were in 2010. In all, the IRS audited 1.1 percent of taxpayers in 2011, about the same rate as the year before. For taxpayers who earned between $1 million and $5 million, the number rose from 7 percent to 12 percent.
]]> For those making between $5 million and $10 million, the number of audits reached 21 percent, an increase from 12 percent in 2010. And for those who claimed income of $10 million or more, 30 percent of them faced audits, as opposed to 18 percent in 2010.Even for people who haven't earned $1 million in a year, the risk was slightly higher last year for an audit. For people who made between $500,000 and $1 million, the audit rate rose to 5 percent from 3 percent in 2010.
Experts said various factors have contributed to the increase in audits. The government has pushed for finding offshore tax evaders, who tend to have higher incomes, but some suspect the cause could be political, as well.
An assistant academic specialist of accounting at Northeastern University said that in the wake of revelations about the low taxes paid by presidential candidate Mitt Romney, a millionaire, the IRS wants to prove to the American public that it is monitoring the millionaires.
Additionally, the IRS wants to bring in more money, and the agency has a better chance of recouping money from millionaires through audits, the accounting specialist said. Filings of higher earners are more complex and that increases the possibility that an error could occur, meaning the IRS could find areas of underpayment.
Source: CNN Money, "Audit rates of millionaires nearly double," Blake Ellis, March 23, 2012
]]>Additionally, the IRS has announced that it will give taxpayers who were out of work for a long period in 2010 a six-month grace period from penalties for failing to pay. Those who are self-employed and earned sharply less than the year before because of the woes of the national economy also can have the six-month grace period. In both instances, taxpayers must meet conditions related to things such as maximum income or maximum taxes due.
]]> The filing date for 2010 taxes is April 17. Those who don't have the cash to pay that day should not ignore the deadline. Taxpayers must act fast to take advantages of more options for repayment, and perhaps consulting with an attorney can ensure all avenues are explored.For taxpayers who don't file a request for their taxes and a request for an extension by April 17, penalties will total an additional 5 percent of taxes owed for each month the payment is outstanding, as well as interest. By filing an extension request, the penalty drops to just 0.5 percent per month.
Experts advise contacting the IRS ahead of time if taxpayers cannot make the full payment on April 17. The IRS could waive the penalty, as well, in the case of extreme circumstances, such as a natural disaster or death of an immediate family member.
Additionally, taxpayers who cannot pay in full have other options. They include:
· Paying by credit card if the interest on the credit card will be less than any penalty.
· Seeking a short-term extension if payment can be made within 120 days.
· Applying for an installment agreement, which allows for installments of up to six years.
· Seeking an Offer in Compromise to reduce the tax owed when financial hardships exist.
Source: Huffington Post, "Can't Pay Your Taxes? Try These Tips," Jason Alderman, March 14, 2012
]]>The IRS typically will send a letter first seeking more information if officials have spotted an abnormality from previous years. Then, taxpayers can review their returns to see if they contain any of the following nine warning signs that can trigger an audit.
]]> · The IRS checks previous returns and easily could detect the possibility a taxpayer is not reporting enough earnings.· The IRS receives copies of all of W-2 and 1099 forms, too, so the agency will match a taxpayer's figures with theirs. If there is any dispute on such a form, taxpayers should discuss it with the employer in advance. If there is an error, an employer should send a revised version to the IRS.
· Self employment can raise suspicion with the IRS, especially if the business claims a lot of expenses, but doesn't bring in a lot of earnings.
· Taxpayers cannot write off tools or equipment used in a hobby. To write off such expenses, it must be believable that a taxpayer has a product to sell and expects to make a profit.
· Doing a few hours of work each week from home does not count. A part of a home claimed on tax returns must be used for work only. Also, taxpayers must keep careful records of any mileage or car costs claimed.
· Including costs of meals and entertainment that are out of the ordinary.
· The IRS always is on the lookout for people who might be unlawfully raising charitable contributions.
· The IRS has better ways now to detect offshore accounts, so not reporting one could raise the odds of an audit.
· Taxpayers must check and double check all figures.
Source: U.S. News & World Report, "9 Warning Signs You're About to Get Audited," March 7, 2012
]]>IRS officials say they must compile information to determine whether a group can qualify for the status. To be eligible for tax-exempt status under the federal tax code, an organization's primary mission cannot be to influence an election. But it has some crying foul, claiming that the IRS is persecuting them for political reasons.
]]> IRS officials make the decision on what a group's main role is. In this instance, the IRS has asked the Waco Tea Party of Texas and other organizations to explain the content they posted on social networking sites, provide information about donors and supply copies of all handouts given to their members.In the case of the Waco group, the IRS sent a letter to its officials in February asking them to outline whether the group has close ties with any candidate or party, as well as a list of upcoming events.
Other conservative groups have reported receiving similar correspondence from the IRS. Officials from some groups say they consider the IRS requests to be motivated by politics and impossible to fulfill. Since this is a federal election year, the IRS has come under scrutiny over its ability to monitor all tax-exempt groups tied to politics.
Tax experts say that while the requests might seem intrusive, but the IRS is charged with gathering adequate information in order to rule. While experts say the request is legitimate for the IRS to truly learn if a group has a political mission, others call it nothing more than a witch hunt.
One group said that after waiting more than a year to learn the status of its application, it only recently received a letter containing an extensive questionnaire due back in a short time. A survey containing 30 questions, board-meeting minutes and details regarding postings on Facebook and Twitter must be returned for the application to proceed.
Source: Associated Press, "IRS Tangles With Tea Party Including Local Group Over Tax-Exempt Status," Alan Fram, March 1, 2012
]]>The federal government has sued the anti-war protester, asking her to release her financial paperwork to the IRS pertaining to the time period from August to November 2011. An IRS revenue officer says the records could assist the IRS in tabulating and collecting the woman's taxes from 2005 and 2006.
]]> Up until recently, the woman had at least been on speaking terms with IRS officials. The officer and the woman met in November and agreed to an extension on the taxes until January 2012. In January, however, the woman said she would not provide any paperwork the IRS requested and she wouldn't answer questions.The IRS says she is self-employed. But it's also worth asking what income she has collected in the last few years, since she has devoted much of her time to activism.
The woman is steadfast in her refusal to pay her taxes and hasn't since 2004, saying she doesn't want her money to go toward the war. She has said she won't give the federal government anything because the government can't give her what she wants: her son.
Her son, a specialist in the Army, died while fighting in Iraq in 2004. After he died, his mother organized the group Gold Star Families for Peace, and then in 2005, she set up her camp outside former President Bush's vacation home in Crawford, Texas. She had hoped to force a meeting with the president.
Source: News 10, "Feds sue anti-war activist Cindy Sheehan over back taxes," George Warren and Cornell Barnard, Feb. 22, 2012
]]>The lawsuit, filed by DSW Shoe Warehouse Inc., says the company paid $570,222 to the state for what the comptroller's office said was uncollected taxes. In the lawsuit, pending in state district court in Travis County, the company says that it paid the taxes "under protest" in January and really doesn't owe the money. The lawsuit seeks repayment of the amount paid to the state. Texas' attorney general also is named as a defendant in the suit.
]]> Officials of the retailer said they believe the comptroller's auditor applied faulty sampling methods that did not follow state guidelines in coming up with the amount the state said DSW owed.The attorney representing DSW in the lawsuit said the comptroller's office did not use statistical sampling techniques that are widely recognized. Sampling, in tax terms, is the method the comptroller used to figure out how much a company should have collected in sales taxes over a specified time period. In this case that period is July 1, 2005, through Sept. 30, 2008. The attorney said the comptroller's office contends it can use whatever sampling methods it wants.
Fighting a government agency, whether it is a state taxing authority or the Internal Revenue Service, is never easy for businesses large or small. Consulting early on with an experienced tax attorney who knows the laws and can ensure a company is doing everything right is important.
Source: Austin American-Statesman, "DSW Shoe Warehouse sues comptroller over $570,000 tax assessment," Barry Harrell, Feb. 14, 2012
]]>A U.S. District Court judge in Dallas gave the man a 105-month prison sentence and told him to repay the government nearly $31,000 for his scheme, which is the amount the IRS couldn't recover out of the more than $1.8 million the agency mistakenly paid to the man.
]]> The government had accused the man, now 65, is accused of filing tax returns claiming that he was owed approximately $8 million. He agreed to plead guilty to single counts of theft of government property and aggravated identity theft.The man was an IRS employee for more than a decade beginning in 1985. His attorney said his IRS-related work dealt with property instead of revenue or tax returns. But prosecutors contend that as an IRS official, the man knew the ins and outs of the tax system.
In 2005 and 2006 he filed 29 false tax forms, the man admitted. He planned to use the money in real estate. He used the names and Social Security numbers of actual people on the returns and said he intended to return the money once his real estate business started to make money, according to court documents.
In all, the IRS issued seven refund checks for $1.865 million before a bank notified the IRS of a possible scheme. The individual checks were written in amounts from more than $215,000 to nearly $475,000, documents showed.
Everyday people are intimidated enough by the IRS that they don't need to deal with the headaches created by an employee trying to scam the system. People with questions about their tax status should consult with an experienced tax attorney.
Source: Star-Telegram, "Former IRS worker sentenced to 105 months," Dianna Hunt, Feb. 9, 2010
]]>Tax agencies -- the Internal Revenue Service, in particular -- are watching. And with tax regulations seemingly becoming more complicated each year, it could be worthwhile to consult with a tax attorney to make sure all tax preparations are done correctly.
]]> Thanks to new regulations, collectors of online payments are required to send people who took in more than $20,000 in more than 200 combined transactions a 1099-K form. Such collectors include PayPal, an online service that transfers funds between buyers and sellers, and Amazon.com, which sets up online stores for vendors, then takes in the money for them. Credit card companies that contract with sellers to collect money also must issue the form.In the past, vendors selling on sites such as eBay or Etsy were trusted to report their sales
More than 50 million forms will be sent out this year, according to IRS estimates. Projections show that the U.S. Treasury could reap about $9.5 billion in revenue over the next 10 years when money transferred electronically is factored in as taxable income.
What this will mean for consumers who shop online isn't clear. Sellers could increase their prices to cover their tax bills and maintain the same profits. Or, perhaps, sellers will stop offering their merchandise online once they reach the $20,000 mark.
One thing is certain, however. Sellers cannot ignore the 1099-K form. The IRS will get a copy of it, too. The IRS will compare the amount of sales listed on the taxpayer's tax forms with the 1099-K to make sure all income is declared. Business owners also will need to carefully track their expenditures to deduct as business expenses as taxes are paid on the net receipts.
Source: Bloomberg Businessweek, "Hiding Income? Look Out, Here Comes the 1099-K," Karen E. Klein, Jan. 24, 2012
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