2015 Representation Update - PowerPoint PPT Presentation


Title: 2015 Representation Update


1
2015 Representation Update
  • All audio is streamed through your computer
    speakers.
  • There will be several attendance verification
    questions during the LIVE webinar that must be
    answered via the online quiz at the conclusion to
    qualify for CPE.
  • Todays webinar will begin at 200pm EDT
  • Please note You will not hear any sound until
    the webinar begins.

2
2015 IRS Update
  • Robert E. McKenzie
  • Arnstein Lehr LLP
  • 120 S. Riverside Plaza
  • Chicago, IL 60606
  • 312-876-7100
  • remckenzie_at_arnstein.com

3
Learning Objectives
  • Recognize how current IRS enforcement programs
    work in a reduced budget environment
  • Identify key changes to preparer regulations in
    2014
  • Identify some of the most serious problems
    related to IRS budget cuts
  • Determine how the current IRS exam, collection
    and criminal investigation priorities impact tax
    preparers and taxpayers.

4
IRS Staffing for Key Enforcement Personnel
2010 2011 2012 2013 2014
Revenue Officers 6,042 5,619 5,186 4,748 4439
Revenue Agents 13,888 13,867 13,021 12,234 11,659
Special Agents 2,780 2,698 2,661 2,509 2437
Total 22,710 22,184 20,868 19,491 18535
5
IRS Staffing
6
Preparer Regulation
  • 2011 IRS issued regulations mandating that
    certain tax-return preparers
  • Complete 15 hours of continuing education each
    year and
  • Pass an initial qualifying exam
  • Undergo background checks
  • Loving v. IRS, No. 12-385 (JEB) (D.D.C. Jan. 18,
    2013), held IRS lacks authority to continue
    preparer regulation.
  • IRS lost appeal in February 2014
  • As of now this is a victory for those not smart
    enough to pass a test or ethical enough to
    survive a background check

7
6-10-14 Regulations
  • Modify the standards dealing with written advice
    and update certain other provisions.
  • Amend Circular 230 by eliminating the rules
    governing covered opinions in Section 10.35 of
    the U.S. Tax Code, expand the requirements for
    written advice under Section 10.37.

8
6-10-14 Regulations
  • Regulations also broaden the scope of the
    procedures to ensure compliance under Section
    10.36, requiring that a practitioner with
    principal authority for overseeing a firms
    federal tax practice take reasonable steps to
    ensure the firm has adequate procedures in place
    for purposes of Circular 230 compliance.

9
6-10-14 Regulations
  • New 10.35 Practitioners must exercise competence
    when engaged in practice before the IRS, and that
    the prohibition on a practitioner endorsing or
    negotiating any check issued to a taxpayer
    regarding a federal tax liability applies to
    government payments made by any means.

10
6-10-14 Regulations
  • Eliminates the need to put disclaimer on emails
    letters
  • This electronic mail transmission may contain
    confidential or privileged information. If you
    believe that you have received this message in
    error, please notify the sender by reply
    transmission and delete the message without
    copying or disclosing it. Pursuant to Internal
    Revenue Service guidance, be advised that any
    federal tax advice contained in this written or
    electronic communication, including any
    attachments or enclosures, is not intended or
    written to be used and it cannot be used by any
    person or entity for the purpose of (i) avoiding
    any tax penalties that may be imposed by the
    Internal Revenue Service or any other U.S.
    Federal taxing authority or agency or (ii)
    promoting, marketing or recommending to another
    party any transaction or matter addressed herein.

11
New Voluntary Program
  • Announced 6-26-14 for 2015 tax season
  • Annual Filing Season Program
  • For preparers who are not CPAs EAs or attorneys
  • Tax return preparers who elect to participate in
    the program and receive a record of completion
    from the IRS will be included in a database on
    IRS.gov
  • Database will include(CPAs), EAs enrolled
    retirement plan agents (ERPAs) and enrolled
    actuaries who are registered with the IRS

12
Taxpayer Bill of Rights 6-10-14
  • The Right to Be Informed
  • The Right to Quality Service
  • The Right to Pay No More than the Correct Amount
    of Tax
  • The Right to Challenge the IRSs Position and Be
    Heard
  • The Right to Appeal an IRS Decision in an
    Independent Forum
  • The Right to Finality
  • The Right to Privacy
  • The Right to Confidentiality
  • The Right to Retain Representation
  • The Right to a Fair and Just Tax System

13
2015 TAS Report
  • In the preface to the report, Olson emphasizes
    four points
  •  First, the budget environment of the last five
    years has brought about a devastating erosion of
    taxpayer service, harming taxpayers individually
    and collectively
  • Second, the lack of effective administrative and
    congressional oversight, in conjunction with the
    failure to pass taxpayer rights legislation, has
    eroded taxpayer protections enacted 16 or more
    years ago
  • Third, the combined effect of these trends is
    reshaping U.S. tax administration in ways that
    are not positive for future tax compliance or for
    public trust in the fairness of the tax system
    and
  • Fourth, this downward slide can be addressed if
    Congress makes an investment in the IRS and holds
    it accountable for how it applies that
    investment.

14
Decline in Taxpayer Service Levels
  • IRSs diminished service expectations for FY 2015
    are as follows
  • The IRS is unlikely to answer even half the
    telephone calls it receives, and levels of
    service may average as low as 43.
  • Taxpayers who manage to get through are expected
    to wait on hold for 30 minutes on average and
    considerably longer at peak times.
  • The IRS will answer far fewer tax-law questions
    than in past years.  During the upcoming filing
    season, it will not answer any tax-law questions
    except basic ones.  After the filing season, it
    will not answer any tax-law questions at all,
    leaving the roughly 15 million taxpayers who file
    later in the year unable to get answers to their
    questions by calling or visiting IRS offices.
  • Tax return preparation assistance has been
    eliminated.

15
TAS Consequences of Budget Cuts
  • As a consequence, the IRS has already reduced its
    workforce by nearly 12,000 employees and projects
    further reductions will be needed during FY
    2015. 
  • In addition, the IRS has reduced the amount it
    spends on employee training since FY 2010 by
    83. 
  • These cutbacks leave the IRS with a shrinking
    workforce whose employees are less equipped to do
    their jobs.

16
Among the Most Serious Problems"
  • Lack of Clear Rationale for Taxpayer Service
  • Resource Allocation Decisions.
  • Lack of a Functional IRS Presence in Many Areas. 
  • Potential Patient Protection and Affordable Care
    Act (ACA) Burdens
  • Offshore Voluntary Disclosure (OVD) Program
    Inequities

17
Most Litigated
18
(Dollars in Billions) 2010 2011 2012 2013 2014
Collection 29.10 31.10 30.44 31.40 33.20
Examination 16.90 12.40 10.20 9.83 12.51
Appeals 6.70 6.50 4.20 6.83 6.47
Document Matching 4.90 5.20 5.27 5.29 4.97
Total 57.60 55.20 50.20 53.35 57.15
19
Exam by Income Amount 2013 2014
     
All returns .96 .86
No adjusted Gross Income 6.04 5.26
1 under 25,000 1.00 .93
25,000 under 50,000 .62 .54
50,000 under 75,000 .60 .53
75,000 under 100,000 .58 .52
100,000 under 200,000 .77 .65
200,000 under 500,000 2.06 1.75
500,000 under 1 million 3.79 3.62
1 million under 5 million 9.02 6.21
5 million under 10 million 15.98 10.53
10 million or more 24.16 16.22
20
Collection
2010 2011 2012 2013 2014
Levies 3,606,818 3,748,884 2,961,162 1,855,095 1,995,987
Liens 1,096,376 1,042,230 707,768 602,005 535,580
Seizures 605 776 733 547 432
21
Criminal Investigation
2012 2013 2014
Investigations Initiated 5125 5314 4297
Prosecution Recommendations 3701 4364 3478
Informations/Indictments 3390 3865 3272
Convictions 2634 3311 3110
Sentenced 2466 2812 3268
Percent to Prison 81.5 80.1 79.6
22
(No Transcript)
23
Continuing NRP Study
  • (NRP) study for individual taxpayers that
    provides updated and more accurate audit
    selection tools and support efforts to reduce the
    nations tax gap.
  • About 10,000 to 14,000 every year since October
    2007
  • 2,000 employment tax NRPs per year 2009 to 2011
  • 2014 examined 2500 corporate returns with assets
    under 250,000

24
(No Transcript)
25
2015 Budget
  • President once again asked for increased IRS
    funding
  • Congress once again severely underfund IRS
    thereby costing the American taxpayer billions
    in lost revenue
  • Suppose you were an idiot. And suppose you were
    a member of Congress. But then I repeat
    myself.-- Mark Twain
  • There is no distinctly native American criminal
    class...save Congress.-- Mark Twain
  • In my many years I have come to a conclusion
    that one useless man is a shame, two is a law
    firm and three or more is a congress. -- John
    Adams

26
(No Transcript)
27
Dirty Dozen
  • 1. Phone Scams
  • 2. Phishing
  • 3. Identity Theft
  • 4. Return Preparer Fraud
  • 5. Offshore Tax Avoidance
  • 6. Inflated Refund Claims

28
Dirty Dozen
  • 7. Fake Charities
  • 8. Hiding Income with Fake Documents
  • 9. Abusive Tax Shelters
  • 10. Falsifying Income to Claim Credits
  • 11. Excessive Claims for Fuel Tax Credits
  • 12. Frivolous Tax Arguments

29
APPEALS
  • In a webcast on July 15th, 2013 the Chief of the
    IRS Office of Appeals announced a change in
    procedures within the next few months. As
    currently set forth in the IRM, Appeals can raise
    new issues if
  • (a) the Appeals Officer is quite certain that
    the IRS would win in court
  • (b) the necessary facts are readily available
    and
  • (c) the additional tax liability is material.
  • Appeals also sometimes refers cases back to the
    auditors for further factual development. As part
    of its judicial approach and culture project,
    Appeals decided that changes in these procedures
    would better reflect its mission and function.

30
IRS Scandal
  • News broke on 5-10-13 that IRS had slowed
    processing of organizations with tea party,
    progressive, occupy or patriot in their names
    were asked more questions prior to granting
    501c(4) tax exempt status
  • 501(c)4 status established for Civic Leagues,
    Social Welfare Organizations, and Local
    Associations of Employees may keep donors secret
  • Proper status was 527 tax exempt but must
    disclose donors
  • There are many Congressional investigations
  • The current uproar is because politicians of both
    parties like to keep donors secret

31
Whistleblowers
  2010 2011 2012 2013
Awards Paid 97 97 128 122
Collections over 2,000,000 9 4 12 6
Total Amount of Awards Paid 18,746,327 8,008,430 125,355,799 53,054,302
Amounts Collected 464,695,459 48,047,500 592,498,294 367,042,420
Awards paid as a percentage of amounts collected. 4.0 16.7 21.2 14.6
32
Misclassified Workers
  • 9-21-11 IRS announced Voluntary Worker
    Classification Program
  • Employers can apply for the program by filing
    Form 8952, Application for Voluntary
    Classification Settlement Program, at least 60
    days before they begin treating the workers as
    employees.
  • A taxpayer who participates in the VCSP will
    agree to prospectively treat the class of workers
    as employees for future tax periods.
  • In exchange, the taxpayer will pay 10 percent of
    the employment tax liability that may have been
    due on compensation paid to the workers for the
    most recent tax year, determined under the
    reduced rates of section 3509

33
In the News
  • Credit Suisse pleads guilty and pays a 2.6
    billion penalty, marking a watershed in a
    campaign that has led to charges against more
    than 100 people since 2009
  • Over 100,000 Foreign Banks to Share Tax Info with
    IRS
  • Zwerner Jury Determines 150 FBAR Penalty
    Applies
  • 106 Swiss banks cooperating with U. S.

34
FATCA
  • Effective 6-30-14
  • Over 150 countries have signed agreements for
    their banks to report accounts of U. S. taxpayers
    to IRS
  • Over 100,000 foreign financial services will
    report to IRS beginning March 2015

35
Credit Suisse Indicted
  • Credit Suisse was indicted on 5-19-14
  • It has entered into plea deal to plead guilty to
    a felony offense of aiding abetting tax fraud
  • It paid a penalty in excess of 2.6 billion
  • Agreed to have a monitor to prevent further
    violations
  • Justice Department now pursuing the names of
    American depositors

36
2012 Settlement Offer Unreported Offshore Income
  • Program continues in 2014
  • Voluntarily and timely disclose unreported
    offshore income.
  • Pay back-taxes and interest for 8 years,
  • Pay either an accuracy or delinquency penalty on
    all eight years.
  • File Form TD F 90-22.1 (FBAR)
  • Pay 27.5 penalty on highest balance in foreign
    bank accounts if over 75,000 and 12.5 for
    smaller accounts
  • Opt out option
  • Offer does not have an expiration date

37
New Program
  • Announced 6-18-14
  • Streamlined for non-wilful
  • 5 for TPs in U. S.
  • 0 for TPs abroad
  • Higher penalty for those banking with 12 banks if
    have not applied by 7-1-14

38
New Program
  • Penalty increases from 27.5 to 50 if, before
    the taxpayers OVDP pre-clearance request is
    submitted, it becomes public that the financial
    institution where the underlying financial
    account is maintained is under investigation by
    the IRS or the Department of Justice.

39
(No Transcript)
40
ID Theft Hot Line
  • Operational on October 1, 2008
  • Toll free number 1-800-908-4490
  • Hours of Operation Monday - Friday, 800 a.m. -
    800 p.m. your local time
  • In January, IRS began marking individual tax
    accounts involving verified victims of identify
    theft using a special filter to note their
    accounts

41
ID Theft
  • Form 14026
  • Fax to (978) 247-9965.
  • Mail to
  • Internal Revenue Service
  • P.O. Box 9039
  • Andover, MA 01810-0939

42
Practitioner Priority Service
  • 1-866-860-4259

43
Collection Higher User Fees
  • Prior to 2014 the fee for an IA was
  • 105,
  • a reduction to 52 for a direct debt agreement,
    and
  • 45 to restructure or reinstate a defaulted IA. 
  • As of 1-1-2014, IA fees are 
  • 120 for an IA and
  • 50 to restructure/reinstate a defaulted IA. 
  • Direct debit agreement fee does not change. 
  • Prior to 2014 the fee for an OIC was 150.
  • As of January 1, 2014, for an OIC is 186.  The
    no fee for low-income taxpayers continues to
    apply.

44
Offer Environment
 Offers in compromise (thousands) 2012 2013 2014
Number of offers received 64 74 68
Number of offers accepted 24 31 27
Accepted 38 42 40
Amount of offers accepted 195,652 195,379 179,354
45
Fresh Start
  • Between 2009 and 2012 the IRS had a series of
    initiatives for struggling taxpayers
  • The initiatives are known as Fresh Start

46
IRS Revised Rules for Streamlined Installment
Agreements
  • Announced 1-12-12
  • The revised procedures now allow taxpayers up to
    72 months to pay their tax obligations.
  • The new procedures also increase the maximum
    amount subject to the relaxed streamlined
    agreements from 25,000 to 50,000.
  • Form 9465-FS was to be used if your liability was
    greater than 25,000 but not more than 50,000.
    Though Form 9465-FS was meant to be used by
    taxpayers with liabilities greater than 25,000
    but not more than 50,000, it could be used by
    all taxpayers to request an installment
    agreement. lt25,000 may also use Form 9465.
  • 72 months to pay up from 60 months

47
Revised Form 9465
  • In April, 2013 the IRS changed rules.
  • Form 9465-FS eliminated and replaced by revised
    Form 9465
  • No longer need financial statement for amounts
    between 25,000 and 50,000

48
LAST FRESH START INITIATIVE
  • 5-21-12
  • Revises calculation of future income for OICs
  • Expands allowable expense categories
  • Liberalizes valuation of vehicles
  • Liberalizes valuation of assets used in business
  • Reduces use of dissipated asset theories
  • Reduces multiplier for determining future income
    component of RCP

49
Reduced Valuation of Assets
  • As a general rule, equity in income producing
    assets will not be added to RCP of a viable
    business unless the assets are not critical to
    the business
  • Reduce the value of TP cash by 1,000 and by the
    amount of allowable expenses because it will be
    used for those expenses
  • Reduce the value of vehicles, planes boats used
    to produce income or for health welfare of the
    family by 3,450 each
  • Less use of dissipated asset theory
  • If liability did not exist at the time TP at time
    of transfer
  • Withdrawals from IRAs 401Ks to invest in a
    business if taxpayer did not owe taxes at that
    time
  • 3 year period for asserting dissipated assets
    including the year of submission

50
Calculation of Future Income
  • Offers to be paid in 5 or fewer payments use 12
    as multiplier instead of prior 48
  • Example TP can pay 300 per month the RCP is
    3,600 not 14,400
  • Offers of 6 or more payments use 24 as multiplier
    instead of 60
  • Example TP can pay 300 per month the RCP would
    be 7,200 not 18,000
  • A deferred offer can no longer exceed 24 months

51
Future Income Component
  • More expenses allowed
  • Student loan payments
  • Payments to state agencies proportional to
    federal payment
  • Charge card payments
  • No longer only allow car payments to projected
    payoff date
  • Extra 200 per month allowed for vehicles with
    more than 75,000 miles or 6 years or older

52
Summary of 5-21-12 Changes
  • Offers will now be accepted for a lot lower
    amount
  • New Form 656 instructions for OICs
  • Most liberal OIC policies since adoption of the
    allowable expense standards in the 90s
  • The new policies can be used in negotiating
    installment agreements also

53
Questions?
54
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Title: 2015 Representation Update


1
2015 Representation Update
  • All audio is streamed through your computer
    speakers.
  • There will be several attendance verification
    questions during the LIVE webinar that must be
    answered via the online quiz at the conclusion to
    qualify for CPE.
  • Todays webinar will begin at 200pm EDT
  • Please note You will not hear any sound until
    the webinar begins.

2
2015 IRS Update
  • Robert E. McKenzie
  • Arnstein Lehr LLP
  • 120 S. Riverside Plaza
  • Chicago, IL 60606
  • 312-876-7100
  • remckenzie_at_arnstein.com

3
Learning Objectives
  • Recognize how current IRS enforcement programs
    work in a reduced budget environment
  • Identify key changes to preparer regulations in
    2014
  • Identify some of the most serious problems
    related to IRS budget cuts
  • Determine how the current IRS exam, collection
    and criminal investigation priorities impact tax
    preparers and taxpayers.

4
IRS Staffing for Key Enforcement Personnel
2010 2011 2012 2013 2014
Revenue Officers 6,042 5,619 5,186 4,748 4439
Revenue Agents 13,888 13,867 13,021 12,234 11,659
Special Agents 2,780 2,698 2,661 2,509 2437
Total 22,710 22,184 20,868 19,491 18535
5
IRS Staffing
6
Preparer Regulation
  • 2011 IRS issued regulations mandating that
    certain tax-return preparers
  • Complete 15 hours of continuing education each
    year and
  • Pass an initial qualifying exam
  • Undergo background checks
  • Loving v. IRS, No. 12-385 (JEB) (D.D.C. Jan. 18,
    2013), held IRS lacks authority to continue
    preparer regulation.
  • IRS lost appeal in February 2014
  • As of now this is a victory for those not smart
    enough to pass a test or ethical enough to
    survive a background check

7
6-10-14 Regulations
  • Modify the standards dealing with written advice
    and update certain other provisions.
  • Amend Circular 230 by eliminating the rules
    governing covered opinions in Section 10.35 of
    the U.S. Tax Code, expand the requirements for
    written advice under Section 10.37.

8
6-10-14 Regulations
  • Regulations also broaden the scope of the
    procedures to ensure compliance under Section
    10.36, requiring that a practitioner with
    principal authority for overseeing a firms
    federal tax practice take reasonable steps to
    ensure the firm has adequate procedures in place
    for purposes of Circular 230 compliance.

9
6-10-14 Regulations
  • New 10.35 Practitioners must exercise competence
    when engaged in practice before the IRS, and that
    the prohibition on a practitioner endorsing or
    negotiating any check issued to a taxpayer
    regarding a federal tax liability applies to
    government payments made by any means.

10
6-10-14 Regulations
  • Eliminates the need to put disclaimer on emails
    letters
  • This electronic mail transmission may contain
    confidential or privileged information. If you
    believe that you have received this message in
    error, please notify the sender by reply
    transmission and delete the message without
    copying or disclosing it. Pursuant to Internal
    Revenue Service guidance, be advised that any
    federal tax advice contained in this written or
    electronic communication, including any
    attachments or enclosures, is not intended or
    written to be used and it cannot be used by any
    person or entity for the purpose of (i) avoiding
    any tax penalties that may be imposed by the
    Internal Revenue Service or any other U.S.
    Federal taxing authority or agency or (ii)
    promoting, marketing or recommending to another
    party any transaction or matter addressed herein.

11
New Voluntary Program
  • Announced 6-26-14 for 2015 tax season
  • Annual Filing Season Program
  • For preparers who are not CPAs EAs or attorneys
  • Tax return preparers who elect to participate in
    the program and receive a record of completion
    from the IRS will be included in a database on
    IRS.gov
  • Database will include(CPAs), EAs enrolled
    retirement plan agents (ERPAs) and enrolled
    actuaries who are registered with the IRS

12
Taxpayer Bill of Rights 6-10-14
  • The Right to Be Informed
  • The Right to Quality Service
  • The Right to Pay No More than the Correct Amount
    of Tax
  • The Right to Challenge the IRSs Position and Be
    Heard
  • The Right to Appeal an IRS Decision in an
    Independent Forum
  • The Right to Finality
  • The Right to Privacy
  • The Right to Confidentiality
  • The Right to Retain Representation
  • The Right to a Fair and Just Tax System

13
2015 TAS Report
  • In the preface to the report, Olson emphasizes
    four points
  •  First, the budget environment of the last five
    years has brought about a devastating erosion of
    taxpayer service, harming taxpayers individually
    and collectively
  • Second, the lack of effective administrative and
    congressional oversight, in conjunction with the
    failure to pass taxpayer rights legislation, has
    eroded taxpayer protections enacted 16 or more
    years ago
  • Third, the combined effect of these trends is
    reshaping U.S. tax administration in ways that
    are not positive for future tax compliance or for
    public trust in the fairness of the tax system
    and
  • Fourth, this downward slide can be addressed if
    Congress makes an investment in the IRS and holds
    it accountable for how it applies that
    investment.

14
Decline in Taxpayer Service Levels
  • IRSs diminished service expectations for FY 2015
    are as follows
  • The IRS is unlikely to answer even half the
    telephone calls it receives, and levels of
    service may average as low as 43.
  • Taxpayers who manage to get through are expected
    to wait on hold for 30 minutes on average and
    considerably longer at peak times.
  • The IRS will answer far fewer tax-law questions
    than in past years.  During the upcoming filing
    season, it will not answer any tax-law questions
    except basic ones.  After the filing season, it
    will not answer any tax-law questions at all,
    leaving the roughly 15 million taxpayers who file
    later in the year unable to get answers to their
    questions by calling or visiting IRS offices.
  • Tax return preparation assistance has been
    eliminated.

15
TAS Consequences of Budget Cuts
  • As a consequence, the IRS has already reduced its
    workforce by nearly 12,000 employees and projects
    further reductions will be needed during FY
    2015. 
  • In addition, the IRS has reduced the amount it
    spends on employee training since FY 2010 by
    83. 
  • These cutbacks leave the IRS with a shrinking
    workforce whose employees are less equipped to do
    their jobs.

16
Among the Most Serious Problems"
  • Lack of Clear Rationale for Taxpayer Service
  • Resource Allocation Decisions.
  • Lack of a Functional IRS Presence in Many Areas. 
  • Potential Patient Protection and Affordable Care
    Act (ACA) Burdens
  • Offshore Voluntary Disclosure (OVD) Program
    Inequities

17
Most Litigated
18
(Dollars in Billions) 2010 2011 2012 2013 2014
Collection 29.10 31.10 30.44 31.40 33.20
Examination 16.90 12.40 10.20 9.83 12.51
Appeals 6.70 6.50 4.20 6.83 6.47
Document Matching 4.90 5.20 5.27 5.29 4.97
Total 57.60 55.20 50.20 53.35 57.15
19
Exam by Income Amount 2013 2014
     
All returns .96 .86
No adjusted Gross Income 6.04 5.26
1 under 25,000 1.00 .93
25,000 under 50,000 .62 .54
50,000 under 75,000 .60 .53
75,000 under 100,000 .58 .52
100,000 under 200,000 .77 .65
200,000 under 500,000 2.06 1.75
500,000 under 1 million 3.79 3.62
1 million under 5 million 9.02 6.21
5 million under 10 million 15.98 10.53
10 million or more 24.16 16.22
20
Collection
2010 2011 2012 2013 2014
Levies 3,606,818 3,748,884 2,961,162 1,855,095 1,995,987
Liens 1,096,376 1,042,230 707,768 602,005 535,580
Seizures 605 776 733 547 432
21
Criminal Investigation
2012 2013 2014
Investigations Initiated 5125 5314 4297
Prosecution Recommendations 3701 4364 3478
Informations/Indictments 3390 3865 3272
Convictions 2634 3311 3110
Sentenced 2466 2812 3268
Percent to Prison 81.5 80.1 79.6
22
(No Transcript)
23
Continuing NRP Study
  • (NRP) study for individual taxpayers that
    provides updated and more accurate audit
    selection tools and support efforts to reduce the
    nations tax gap.
  • About 10,000 to 14,000 every year since October
    2007
  • 2,000 employment tax NRPs per year 2009 to 2011
  • 2014 examined 2500 corporate returns with assets
    under 250,000

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2015 Budget
  • President once again asked for increased IRS
    funding
  • Congress once again severely underfund IRS
    thereby costing the American taxpayer billions
    in lost revenue
  • Suppose you were an idiot. And suppose you were
    a member of Congress. But then I repeat
    myself.-- Mark Twain
  • There is no distinctly native American criminal
    class...save Congress.-- Mark Twain
  • In my many years I have come to a conclusion
    that one useless man is a shame, two is a law
    firm and three or more is a congress. -- John
    Adams

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Dirty Dozen
  • 1. Phone Scams
  • 2. Phishing
  • 3. Identity Theft
  • 4. Return Preparer Fraud
  • 5. Offshore Tax Avoidance
  • 6. Inflated Refund Claims

28
Dirty Dozen
  • 7. Fake Charities
  • 8. Hiding Income with Fake Documents
  • 9. Abusive Tax Shelters
  • 10. Falsifying Income to Claim Credits
  • 11. Excessive Claims for Fuel Tax Credits
  • 12. Frivolous Tax Arguments

29
APPEALS
  • In a webcast on July 15th, 2013 the Chief of the
    IRS Office of Appeals announced a change in
    procedures within the next few months. As
    currently set forth in the IRM, Appeals can raise
    new issues if
  • (a) the Appeals Officer is quite certain that
    the IRS would win in court
  • (b) the necessary facts are readily available
    and
  • (c) the additional tax liability is material.
  • Appeals also sometimes refers cases back to the
    auditors for further factual development. As part
    of its judicial approach and culture project,
    Appeals decided that changes in these procedures
    would better reflect its mission and function.

30
IRS Scandal
  • News broke on 5-10-13 that IRS had slowed
    processing of organizations with tea party,
    progressive, occupy or patriot in their names
    were asked more questions prior to granting
    501c(4) tax exempt status
  • 501(c)4 status established for Civic Leagues,
    Social Welfare Organizations, and Local
    Associations of Employees may keep donors secret
  • Proper status was 527 tax exempt but must
    disclose donors
  • There are many Congressional investigations
  • The current uproar is because politicians of both
    parties like to keep donors secret

31
Whistleblowers
  2010 2011 2012 2013
Awards Paid 97 97 128 122
Collections over 2,000,000 9 4 12 6
Total Amount of Awards Paid 18,746,327 8,008,430 125,355,799 53,054,302
Amounts Collected 464,695,459 48,047,500 592,498,294 367,042,420
Awards paid as a percentage of amounts collected. 4.0 16.7 21.2 14.6
32
Misclassified Workers
  • 9-21-11 IRS announced Voluntary Worker
    Classification Program
  • Employers can apply for the program by filing
    Form 8952, Application for Voluntary
    Classification Settlement Program, at least 60
    days before they begin treating the workers as
    employees.
  • A taxpayer who participates in the VCSP will
    agree to prospectively treat the class of workers
    as employees for future tax periods.
  • In exchange, the taxpayer will pay 10 percent of
    the employment tax liability that may have been
    due on compensation paid to the workers for the
    most recent tax year, determined under the
    reduced rates of section 3509

33
In the News
  • Credit Suisse pleads guilty and pays a 2.6
    billion penalty, marking a watershed in a
    campaign that has led to charges against more
    than 100 people since 2009
  • Over 100,000 Foreign Banks to Share Tax Info with
    IRS
  • Zwerner Jury Determines 150 FBAR Penalty
    Applies
  • 106 Swiss banks cooperating with U. S.

34
FATCA
  • Effective 6-30-14
  • Over 150 countries have signed agreements for
    their banks to report accounts of U. S. taxpayers
    to IRS
  • Over 100,000 foreign financial services will
    report to IRS beginning March 2015

35
Credit Suisse Indicted
  • Credit Suisse was indicted on 5-19-14
  • It has entered into plea deal to plead guilty to
    a felony offense of aiding abetting tax fraud
  • It paid a penalty in excess of 2.6 billion
  • Agreed to have a monitor to prevent further
    violations
  • Justice Department now pursuing the names of
    American depositors

36
2012 Settlement Offer Unreported Offshore Income
  • Program continues in 2014
  • Voluntarily and timely disclose unreported
    offshore income.
  • Pay back-taxes and interest for 8 years,
  • Pay either an accuracy or delinquency penalty on
    all eight years.
  • File Form TD F 90-22.1 (FBAR)
  • Pay 27.5 penalty on highest balance in foreign
    bank accounts if over 75,000 and 12.5 for
    smaller accounts
  • Opt out option
  • Offer does not have an expiration date

37
New Program
  • Announced 6-18-14
  • Streamlined for non-wilful
  • 5 for TPs in U. S.
  • 0 for TPs abroad
  • Higher penalty for those banking with 12 banks if
    have not applied by 7-1-14

38
New Program
  • Penalty increases from 27.5 to 50 if, before
    the taxpayers OVDP pre-clearance request is
    submitted, it becomes public that the financial
    institution where the underlying financial
    account is maintained is under investigation by
    the IRS or the Department of Justice.

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ID Theft Hot Line
  • Operational on October 1, 2008
  • Toll free number 1-800-908-4490
  • Hours of Operation Monday - Friday, 800 a.m. -
    800 p.m. your local time
  • In January, IRS began marking individual tax
    accounts involving verified victims of identify
    theft using a special filter to note their
    accounts

41
ID Theft
  • Form 14026
  • Fax to (978) 247-9965.
  • Mail to
  • Internal Revenue Service
  • P.O. Box 9039
  • Andover, MA 01810-0939

42
Practitioner Priority Service
  • 1-866-860-4259

43
Collection Higher User Fees
  • Prior to 2014 the fee for an IA was
  • 105,
  • a reduction to 52 for a direct debt agreement,
    and
  • 45 to restructure or reinstate a defaulted IA. 
  • As of 1-1-2014, IA fees are 
  • 120 for an IA and
  • 50 to restructure/reinstate a defaulted IA. 
  • Direct debit agreement fee does not change. 
  • Prior to 2014 the fee for an OIC was 150.
  • As of January 1, 2014, for an OIC is 186.  The
    no fee for low-income taxpayers continues to
    apply.

44
Offer Environment
 Offers in compromise (thousands) 2012 2013 2014
Number of offers received 64 74 68
Number of offers accepted 24 31 27
Accepted 38 42 40
Amount of offers accepted 195,652 195,379 179,354
45
Fresh Start
  • Between 2009 and 2012 the IRS had a series of
    initiatives for struggling taxpayers
  • The initiatives are known as Fresh Start

46
IRS Revised Rules for Streamlined Installment
Agreements
  • Announced 1-12-12
  • The revised procedures now allow taxpayers up to
    72 months to pay their tax obligations.
  • The new procedures also increase the maximum
    amount subject to the relaxed streamlined
    agreements from 25,000 to 50,000.
  • Form 9465-FS was to be used if your liability was
    greater than 25,000 but not more than 50,000.
    Though Form 9465-FS was meant to be used by
    taxpayers with liabilities greater than 25,000
    but not more than 50,000, it could be used by
    all taxpayers to request an installment
    agreement. lt25,000 may also use Form 9465.
  • 72 months to pay up from 60 months

47
Revised Form 9465
  • In April, 2013 the IRS changed rules.
  • Form 9465-FS eliminated and replaced by revised
    Form 9465
  • No longer need financial statement for amounts
    between 25,000 and 50,000

48
LAST FRESH START INITIATIVE
  • 5-21-12
  • Revises calculation of future income for OICs
  • Expands allowable expense categories
  • Liberalizes valuation of vehicles
  • Liberalizes valuation of assets used in business
  • Reduces use of dissipated asset theories
  • Reduces multiplier for determining future income
    component of RCP

49
Reduced Valuation of Assets
  • As a general rule, equity in income producing
    assets will not be added to RCP of a viable
    business unless the assets are not critical to
    the business
  • Reduce the value of TP cash by 1,000 and by the
    amount of allowable expenses because it will be
    used for those expenses
  • Reduce the value of vehicles, planes boats used
    to produce income or for health welfare of the
    family by 3,450 each
  • Less use of dissipated asset theory
  • If liability did not exist at the time TP at time
    of transfer
  • Withdrawals from IRAs 401Ks to invest in a
    business if taxpayer did not owe taxes at that
    time
  • 3 year period for asserting dissipated assets
    including the year of submission

50
Calculation of Future Income
  • Offers to be paid in 5 or fewer payments use 12
    as multiplier instead of prior 48
  • Example TP can pay 300 per month the RCP is
    3,600 not 14,400
  • Offers of 6 or more payments use 24 as multiplier
    instead of 60
  • Example TP can pay 300 per month the RCP would
    be 7,200 not 18,000
  • A deferred offer can no longer exceed 24 months

51
Future Income Component
  • More expenses allowed
  • Student loan payments
  • Payments to state agencies proportional to
    federal payment
  • Charge card payments
  • No longer only allow car payments to projected
    payoff date
  • Extra 200 per month allowed for vehicles with
    more than 75,000 miles or 6 years or older

52
Summary of 5-21-12 Changes
  • Offers will now be accepted for a lot lower
    amount
  • New Form 656 instructions for OICs
  • Most liberal OIC policies since adoption of the
    allowable expense standards in the 90s
  • The new policies can be used in negotiating
    installment agreements also

53
Questions?
54
Thank you for participating in this
webinar.Below is the link to the online survey
and CPE quiz
  • http//webinars.nsacct.org/postevent.php?id15779
    Use your password for this webinar that is in
    your email confirmation.
  • You must complete this survey and the quiz or
    final exam (for the recorded version) to qualify
    to receive CPE credit.
  • National Society of Accountants
  • 1010 North Fairfax Street
  • Alexandria, VA 22314-1574
  • Phone  (800) 966-6679
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