HERO, PACE programs tax deductible?

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In recent years, programs have been developed that allow a homeowner to make energy improvements to their residence and pay for them through an assessment on their property tax bill. Clients have asked “if it shows up on my property tax bill it must be deductible, right?” Wrong! Improvements to your individual residence do not qualify as a property tax. However, the interest paid on the improvement usually qualifies as deductible mortgage interest. If you have questions in this area, we would be happy to help.

Take this Tax and Shove It

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Country icon David Allan Coe, who wrote the hit song “Take this job and shove it”, has had a very successful career in country music.  But,he has been less than successful in trying to avoid the long arm of the IRS.  On Monday June 13th, he was ordered to pay nearly 1 million dollars in back taxes on unreported income and unfiled tax returns.  Do I hear a new country song forming about his battle with “the man”?

IRS launches new “more secure” get transcript feature

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Remember the news last year that hackers broke into the IRS website and stole the identities of over 700,000 taxpayers?  The IRS had attempted to set up an easy way for taxpayers to access their tax transcripts since the requests for transcripts had increased dramatically in recent years.  This was convenient for taxpayers but due to lax security, it was also very easy for hackers to break into the application and steal identities of those who had used the service.  To address this problem, the IRS mailed ID Protection PINs to affected taxpayers.  These PINs would be required on their 2015 tax returns to verify their identity so that the ID thieves could not file fraudulent returns using their stolen information.  In case a taxpayer lost or did not receive their letter, the IRS set up a way to retrieve the ID PIN on their website.  Here’s the fun part, the IRS used the SAME SECURITY measures as they had on the original get transcript application so it was just as easy for ID thieves to steal the ID PINs.  Well, now the IRS just announced the launch of a new “get transcript” feature on their website with “enhanced security”.  Let’s see how well this one works.

Congressional Hearing on Protecting Small Business from IRS Abuses

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On Wednesday, the day after an impeachment hearing for the IRS commissioner was held, the House Ways and Means committee held a hearing on protecting small business from IRS abuses.  The hearing largely focused on the IRS use of “structuring” laws to seize assets from many businesses who committed no crime but were merely engaged in businesses where significant amounts of cash were involved.  The structuring laws were passed as a means to track large amounts of cash and were intended to combat money laundering by criminals.  Many consumer advocates have complained about abuses of these laws by the IRS and also by numerous other law enforcement agencies.

For some basic information about structuring see here and here.  To date, I have not written much about structuring, but it is a problem that I hope congress will address.  Although the law was intended to allow law enforcement to track money laundering from criminal activities, it has been abused by IRS and numerous other law enforcement agencies with many instances of assets being seized from individuals and businesses simply because they deal with significant amounts of cash.

Impeachment hearing for IRS Commissioner

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Yes, I know most people are bored stiff watching CSPAN. But, I watched the entire hearing yesterday. I was disgusted by each and every democrat who appeared trying to pretend that the targeting scandal never occurred. Various high level employees at the IRS were involved in the scandal and the cover up and absolutely no one has been held accountable. If you want more details about the scandal, I have blogged about it before and provided links to other sites that have covered this issue in far more detail than I have.
Using the IRS to harass ones political opponents is in my view appalling behavior. As I have mentioned in a previous post, this scandal is not the first instance of this type of abuse of power. Both parties have done it in the past. If there are no consequences for this type of behavior, it will only get worse in the future.

2 mistakes by taxing authorities causing headaches

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Recent mistakes by both the IRS and FTB have caused my clients some recent problems.  I thought I would mention them for any others who have experienced these same problems.

  1. For taxpayers who were paying their tax debts to the IRS through direct debit from their bank account: in February, due to an IRS computer error, payments were not made in roughly 250,000 accounts.  The IRS immediately sent out default letters to these taxpayers and charged interest and penalties for failure to pay.  The IRS has since discovered the error and says that letters were mailed to each affected taxpayer and corrections have been made to their accounts.  If you are having difficulty with this or any other collection problem with the IRS, we can help.
  2. The FTB had a computer problem matching state withholding from employees wages and as a result, many California taxpayers did not get their complete CA refund.  FTB sent out Form 4743D requesting additional information from these taxpayers.  There is a phone number you can call on that notice.  If you were affected by this and have any questions on how to proceed, give us a call and we can help.

Attention 990N filers…

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especially those who like to procrastinate.  If you are a small tax exempt organization that files on a calendar year basis, the due date to file your 990-n is Monday, May 16th.  Until last year these forms were filed through the Urban Institute’s website, but for this year it has switched over to a new IRS website.  To use this new site you will have to register with the IRS on their new site.  Due to the brilliant forethought of those at IRS this website is scheduled to be down for routine maintenance for roughly twelve hours tomorrow.  But the good news is that the registration process on the new site is simple and seems to be working just fine.  For details on this process, check here.

Pay your taxes at 7-eleven?

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I know what you are thinking, but it’s too late for an April fools joke. In an effort to make it easier for taxpayers to make cash payments, the IRS has announced in IR 2016-56 that for a fee, a taxpayer can make a cash payment at a participating 7-eleven store. If you have a burning desire to pay your taxes by cash at your local 7-eleven, you can check out the details here.

Some seniors face RMD Deadline

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Most retirement plans require that a taxpayer take a required minimum distribution (RMD) before the end of the year once they reach 70 1/2 years old. For the year the person reaches age 70 1/2, they have until April 1st of the following year to take their first RMD. So for anyone who turned 70 1/2 in 2015, your deadline to take the RMD is this Friday. The penalties for not complying with this rule are large but there are ways to have the penalty waived. If you or a loved one are in this situation, we can help.