taxpayers

Alabama Taxpayers Beware: Broadband Consultants Collect Hefty Fees

Consultants recommending the construction of expensive broadband networks are inundating local governments across the country, according to Yellow Hammer News. Unfortunately, these broadband networks are built using taxpayers’ money. Consultants believe that these new and improved networks will attract business money and improve the quality of life for the residents. This is all true, but who is flipping the bill on this stuff?

According to critics, these consultants are just telling the bureaucrats what they want to hear. These bureaucrats represent the local governments. CTC Technology & Energy consultants managed to wiggle their way into constructing a $57 million broadband network with the help of Huntsville Utilities.

Consultants in various cities and counties across the country have done research regarding these taxpayer subsidized broadband networks, and have found that it’s hard to find a government that hasn’t been offered high-speed internet in some capacity. Both fully-fledged broadband networks and backbones are the most popular options being pushed by consultants. With a backbone, the internet providers can connect to it and then provide high speed internet for all of their customers.

Community Broadband LLC are expecting profits of around $400,000 by the fifth year if the city of Midway, GA built it’s $3.2 million network. The most favorable responses to this proposition are coming from business-owners since they can then subscribe to the high-speed internet service to conduct business faster.

Peachtree City decided to scrap it’s government broadband project and go with local providers to serve the citizens’ broadband needs. The city continues to use Community Broadband as a consultant on communication issues. Consultants cannot be held liable for what the voters decide on.

Marietta sold its FiberNet broadband network at a loss of $24 million in 2004. The network had 180 customers along its 210 mile stretch from Kennesaw to Alpharetta. The city couldn’t keep up with the equipment upgrade costs, so they had to let it go.

The promises made to local governments by consultants are very seductive. The consultants and network builders profit handsomely while the taxpayers are caught in the mess. Local taxpayers are stuck with mountains of debt after municipal broadband networks go down. They have the odds stacked against them.

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Obama’s New Executive Order Will Turn New U.S. Presidents Into Taxpayers

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Obama’s recently signed Executive Order now requires that the President of the United States be a federal taxpayer. According to Andy Borowitz from NewYorker.com, President Obama exclaimed that “Since the President has such a large say in how federal taxes are spent, it only makes sense that he or she contribute to those taxes too.”

Moreover, President Obama reiterated that people should not look too much into the timing of this Executive Order being signed, saying that “it just seemed like the right thing to do”. Andy Borowitz declares that the signing of this executive order was met with opposition by Republicans on Capitol Hill. Paul Ryan, one of the more prominent opponents to the Executive order, claimed that “This is nothing less than an attack on the American Dream of paying no taxes”.

Accordingly, this didn’t phase the President, as he is getting another Executive Order ready that would require all cabinet members to have held at least a summer job relevant to their posts, Borowitz states.

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2017 Tax Season Begins January 23rd

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The Internal Revenue Service had already dropped a bombshell in recent news when they announced that some taxpayers will face a delay in receiving their tax refund with the deadline to file taxes being on April 18th. Recently, the IRS just announced that the next tax season will officially begin on January 23, 2017.

The IRS predicts that 153 million individual tax returns will be filed next year, with 75% of those being submitted electronically using tax software. With that being said, taxpayers can begin submitting electronic tax returns on January 23rd. You can also submit returns to tax preparers before the official start date. That way, when January 23rd comes around the corner, they will be able to submit it to the IRS’ system.

During this upcoming tax season, as mentioned before, taxpayers who claim the Earned Income Tax Credit, or the Additional Child Tax Credit, should expect a slight delay of just a few days to receive their tax return. If you fall into this category, your return will be held until at least February 15th. Unfortunately, if you count the holidays during the month of February, and the weekends, you may not be swimming in cash until late February.

IRS Commissioner John Koskinen urges all taxpayers to plan ahead when planning a date and time to file their taxes. He encourages all taxpayers to hold onto their prior-year tax returns for 3 years at a minimum. This is due to the fact that many taxpayers will be switching things up by using different tax software programs this tax season, and that may require their gross adjusted income from 2015 to file electronically. Anyone looking forward to using the electronic filing pin for this filing season is out of luck, since it is no longer an option.

The filing deadline this year doesn’t fall on April 15th as it usually does, it falls on Tuesday April 18th, 2017. This is due to the fact that  April 15th is on a Saturday this year, and the Monday after is Emancipation Day in the District of Columbia. In the meantime, Koskinen, and the rest of the IRS are preparing for more than 150 million returns this year. “Our systems require extensive programming and testing beforehand”, he states.

Identity theft and tax refund fraud is a big issue for the IRS that they are working tirelessly to prevent. They are constantly adding new procedures to reduce this issue and continue the progress they have made in previous years regarding identity theft and tax refund fraud.

Although this filing season is seeing a few changes being made, it is still best for all taxpayers to file their taxes the way they regularly file them. Just remember that January 23rd is when it all begins, and April 18th is when it all ends.

(Photo by David McNew/Getty Images)

IRS To Lower Standard Mileage Rates

(Photo by David McNew/Getty Images)

(Photo by David McNew/Getty Images)

The IRS has issued an option of using standard mileage rates to calculate costs associated with operating vehicles for business, charitable, medical, or moving purposes in order to calculate deductible costs, according to Jeff Stimpson from AccountingToday.com. Beginning January 1st, standard mileage rates for the use of cars, vanes, pickups, or panel trucks, will be 53.5 cents per mile (down from 54 cents per mile in 2016), 17 cents per mile for medical or moving purposes (down from 19 cents per mile in 2016), and 14 cents per mile driven in service of a charitable organization.

Accordingly, Donna Koppensteiner, senior vice president of business development for Runzheimer, claims that the drop in cents per mile was due to the declining fuel prices. Ironically enough however, such a drop was largely offset by rising vehicle insurance and vehicle maintenance costs.

Stimpson claims that the IRS reiterated the fact that using standard mileage rates is only an option and taxpayers can choose the actual costs of using their vehicles rather than using the standard mileage rates. Stimpson states that “A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost recovery System (MACRS), or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously.”

Thus, Stimpson states that these and other requirements that fall under Rev. Proc. 2010-51 Notice 2016-79 “contains the standard mileage rates, the amount a taxpayer must use in calculating reductions to basis for depreciation taken under the business standard mileage rate” along with the cost to taxpayers for computing the allowance under both a fixed and variable rate plan.

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Taxpayers Beware: New Impersonation Scam Reported By TIGTA

The Treasury Inspector General for Tax Administration (TIGTA) released a new poster to further warn taxpayers of a recent trend of unsolicited and illicit calls by people who are claiming to be the Internal Revenue Service (IRS) and Treasury employees attempting to reclaim unpaid federal taxes.

According to J. Russell George, the Treasury Inspector General for Tax Administration, “As the tax filing season approaches, it is critical that all taxpayers remember to be wary of unsolicited telephone calls and e-mails from individuals claiming to be IRS and Treasury employees.” Furthermore, J. Russell George claims that although there has been tremendous progress in investigating these fraudulent calls, the callers remain undeterred.

Karen Kraushaar, the Director of Communications for TIGTA, informed in TIGTA’s press release that the J. Russell George “announced the indictment of 56 alleged scammers and five call centers in India associated with the scam, the largest tax impersonation scam ever seen in the United States.” Moreover, she states that 21 alleged scammers were arrested in the United States.

Accordingly, Karen claims that TIGTA has been investigating this scam since the fall of 2013, and as of now, there have been more than 1.8 million reports to TIGTA by individuals who have received such illicit calls. Of those 1.8 Million, 9,600 have reported that they paid the scammers over $50 million.

As stated in TIGTA’s press release, it is imperative for taxpayers to know that the IRS typically contacts taxpayers regarding unpaid taxes by mail first, not by phone. Additionally, Karen states that unlike these scammers, the IRS will not “insist on payment using an iTunes card, gift card, prepaid debit card, money order, or wire transfer.” Moreover, she claims that “the IRS will never request personal or financial information by e-mail, text, or any social media”, and especially “will not ask for a credit card number over the phone”.

If you happen to get such an illicit call, TIGTA recommends the following:

  • If you owe money to the IRS in Federal taxes, or think you might, call 800-829-1040. The employees of the IRS can help you with any related questions.
  • If you do not owe taxes, fill out the “IRS Impersonation Scam” form on tigta.gov, or call TIGTA at 800-366-4484.
  • You can file a complaint with the Federal Trade Commission at FTC.gov
  • If you get an illicit e-mail by these scammers, forward the e-mail phishing@irs.gov. And DO NOT open any attachments or links within the email.
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IRS Restructuring Its Future Workforce

A new year brings new changes, especially in the IRS’ case. This stems from the fact that society is changing fast, and the agency’s Human Resource department is already reinventing how it plans to keep up with these changes. This new plan will stretch to 5 years and beyond.

Daniel Riordan, who is the Chief Human Capital Officer for the IRS, states that they looked at their own vision statement, and they asked themselves “whether or not they captured what they wanted as an HR organization, all that they have to offer.” Based on these thought processes, this urged them to begin to restructure.

The IRS is shifting to a more automated process. This is forcing Riordan to brainstorm how the agency plans to maintain quality, customer service, training, and talent management.

Another worry that is being brought to the forefront with the changes occurring is skill sets. The Future State Program will have new demands that need to be met. Incoming employees must be trained by the agency on the particular expertise that accompanies the new program. But before that is done, the agency will complete a thorough assessment of what skills and weaknesses their current workforce has now.

Riordan is also considering creating new career path models and new positions within the agency. According to him, all newcomers want to know “where they can go in the organization, and how they are going to fit in,” especially in the midst of the new changes. Employee job satisfaction is an important component that they want to improve.

Along with employee job satisfaction, the IRS is pushing to create quality customer service, which is very crucial in their mission and operation. Of course, this becomes hard to do when the Future State Program is digitizing a lot of procedures. To solve this, they have implemented a few pilots and are allowing customer service representatives to work from anywhere across the globe.

This works out well because it eliminates real estate cost, which is a major expense for the agency. So far, the agency is digitizing more of its information to help accelerate the move to a mobile environment, which will enable the IRS to move its workforce to a virtual environment.

The Taxpayer Advocate and other groups are outraged and have criticized the IRS for the Future State Plan, stating that it’s too aggressive. Riordan, on the other hand, explains that they will be keeping the phone contact portion of their service. “We know to the dollar, to the penny, how much that costs for each interaction.” He understands the importance of giving taxpayers “that very personal service over the phone.”

The IRS has Taxpayer Assistance Centers (TAC) located all across the country. One strategy that proved inefficient was using a “first-come, first-serve” approach. All this did was create an unbearable workload for them, which led to poor customer service.

Due to this issue, they tried implanting another 44 pilot locations last year. This allowed taxpayers to book appointments to visit a TAC and receive in person service. The representatives at these locations answered approximately 1 million calls between October 2015, and June 2016. Fortunately, half of these callers got their issue resolved without having to commute to an actual center.

Due to its success, this strategy will be implemented at 376 centers by the end of 2016. This doesn’t come as a surprise considering approximately 90% of taxpayers received help within 30 minutes of arriving at the center if they called the appointment hotline. This is a 40% improvement from the previous year.

As of now, the IRS is working closely with the Treasury Department to develop a good talent management system. IRS employees should look forward to these innovative changes sometime next year.

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Trump Administration Can End IRS Discrimination

Over the last several years, the IRS has been constantly accused of discrimination during the tax-exempt status process. The IRS apparently discriminates against taxpayers who have political views that oppose the Obama Administration. Democrats disapprove of this behavior, due to it being a violation of the 1st amendment.

As a result of these accusations, the IRS has lost many battles against non-profits who were victimized. They were also crushed by the US Treasury Inspector General for Tax Administration (TIGTA). Studies done by TIGTA proved many accusations of discrimination to be true. A federal appeals court also accused the IRS of discriminating against tea party groups.

Now that the real estate mogul, Donald Trump, has been elected, the Justice Department will have Jeff Sessions as the new Attorney General. Justin was assigned by Donald Trump, of course. The new assignee will allow the IRS to change their litigation stance.

The government has a habit of purposely making IRS cases take as long as possible to resolve. When the IRS is asked to produce documentation on what led to their decision about who should or should not receive tax-exempt status, they remain silent, which is where the discrimination comes into play. They are hoping that the new Attorney General will change the unfair rules, such as the long purposeful delay of investigation, and make sure justice is done.

All members of the Justice Department lawyers have no other choice but to report to the new Attorney General. Many plaintiffs aren’t seeking money damages against the IRS, but simply wanted the truth to be told. It is now up to Donald Trump and Jeff Sessions to end IRS discrimination.

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Partnerships Could Lose Tax Advantages In 2018

Partnerships have always been looked at in a good light due to its tax advantages. However, those times have changed due to the new Bipartisan Budget Act of 2015. This new law is set to take place in the year of 2018. Bipartisan Budget Act will override the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA). The IRS will now be allowed to collect taxes on the partnership level, instead of going through individual partners to pass adjustments.

This is bound to force partnerships to plan ahead of time to protect their interests the best way they can. The act basically enforces entity-level tax on partnerships, which will totally cause a shift in how interests are protected and valued. Small sized partnerships may think that they are in the safe zone. However, the new audit regime is applied to all partnerships regardless of size.

The good news is, some partnerships with 100 or fewer partners can choose to not abide by the rules only if the partners are actual; individuals, deceased partner estates, s corporations, c corporations, etc. Some partnerships may even have partners who may be a part of another partnership or trust. If this is the case, you’re not allowed to elect out of the new rules.

Good news, right? Wrong. Although you may be eligible to opt out of the new partnership rules, the process to actually fulfill this wish is a huge pain.

In order to officially finalize this process, the following must happen;

  1. They must officially elect out of the new partnership rules
  2. Each partner must be informed of this decision
  3. The legal names, and taxpayer identification number of the partners, or anyone whose treated as partners, must be submitted

Taxing at the entity level

The partnerships will be assessed for “imputed underpayment” and this will be based on the corporate or individual tax rate. This may seem unfair, which is why partners who should have lower tax rates are accommodated by the IRS and Treasury.

On another good note, the partnership is allowed 2 possible exceptions in order for prior tax year partners to pay their part of the tax liabilities on the partnership level. This is due to the new law requiring the IRS to assess the partnership on the year of adjustment, instead of the year under audit. That way, current partners won’t be held liable for tax errors of the previous partners.

Exception 1: The imputed underpayment will be reduced based on the amount paid by a partner. All partners should file amended tax returns in order to show their distributive shares of the adjustments. They must also make sure all taxes are paid within 270 days. This exception requires that the partnership;

  1. Discuss the effects of the adjustments
  2. Inform all partners of the adjustments being made
  3. Make sure all partners agree to file amended tax returns and all applicable payments that reflect the new k-1s, even the years that are not directly affected by it

Exception 2: This exception requires the partnership to be very responsive. If the partnership is given notice of an adjustment, they have 45 days to decide whether or not they will choose to issue statements to the partners concerning the share of partnership items.

If the selection process goes through, interest on underpayments from the adjustment year, along with taxes in the year of the K-1 must be paid.

Partnerships now requiring representatives

Another catch that comes with this new law is the appointment of a person or entity as a representative for the partnership. If the partnership representative (PR) is an estate, association, company, corporation, or partnership, someone else such as; a corporate officer, partner, or trustee has to act on behalf of the PR. However, the IRS will gladly appoint a PR if one is not chosen by the partnership.

Creating Appropriate Partnership Agreements

To make things easier, it would be wise to make sure that all of the following are in the agreement between partners.

  1. Procedures for selecting a representative for the partnership and rules on actions that the PR may or may not engage in.
  2. Rules that forces the partnership to inform all partners of; an IRS audit, IRS adjustments, and up to date information on the audit.
  3. How tax payments are going to be divided among partners
  4. Whether or not the partners would like to elect out of the new entity-level assessment
  5. Provisions concerning the amended tax returns of partner
  6. The required indemnification and escrow provisions for partners who may sell their interest
  7. Provisions that allow small-sized partnerships to opt-out

There’s no doubt that Bipartisan Budget Act is definitely a curveball thrown at partnerships. It’s extremely important for partnerships to take into consideration the changes that need to be made. All decisions should be based upon the new IRS partnership audit rules.

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Trump Still Facing Tax Audit, But Will The Public See Them?

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Donald Trump is known for keeping his tax returns a secret. Now that the real estate mogul is President, there is no way around it. However, that doesn’t mean that the public will necessarily be seeing these tax returns.

Trump has been facing IRS tax problems for over the last 10 years. As mentioned before, the president of the United States is required to follow IRS’ administrative procedures and will be vulnerable to mandatory tax return examinations.

This mandatory procedure still doesn’t guarantee Donald Trump will make his tax returns public. Every president has released their tax returns without resistance. However, it is not necessarily mandatory more so than it is a tradition. This leaves the question of, “will trump follow suit and release his returns as part of the tradition?”

All presidents are required to give us a look into their finances, which usually includes entities that they have interest in, liabilities and income, along with assets. However, President Trump does not have to show the amount of taxes that he has paid.

Issues Concerning Transparency

Luckily for President Trump, his taxes didn’t get in the way of his campaign, despite Hilary Clinton claiming that he hasn’t paid federal income taxes for years. It’s clear that Donald Trump is not very transparent with his financial disclosures.

Since Mr. Trump is the new commander in chief, it seems as if this will cause the IRS to audit him in a different manner. The reasoning behind this is due to the president having the power to appoint the IRS’ head and give a budget which than have to go through congress for approval.

Technically, they’re auditing their boss. Richard Shickel, who spent over 30 years as the IRS’ senior revenue officer, believes this unique situation will add “lots of pressure for them to do the audit in a certain way.” Basically, whatever the White House wants from the IRS, they get, since the president is the one who provides the funding.

The IRS rules are designed for the protection of taxpayers. But, Trump will have the authority to decide whether or not he wishes for public scrutiny of any kind. Luckily for taxpayers, there are federal laws set in place that doesn’t allow the IRS to discuss specific taxpayers. The IRS continues to stress that the exam process has many safeguards set into place. The procedures that goes into the selection process helps to re-iterate fairness throughout the organizations.

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IRS Warns of 2017 Tax Refund Delays

If you owe taxes in April, as opposed to getting a refund, then this won’t affect you. For those who are expecting a tax refund in April, you’re in for a rude awakening. Adjusting your tax withholding may be beneficial, due to the Internal Revenue Service stating that certain taxpayers will have to wait longer than usual for their returns.

The reason for this announcement is due to the IRS commissioner John Koskinen not wanting taxpayers to be “caught by surprise if they receive a refund” later than usual. These delays are the effect of a new tax law that will be enforced in the year 2017. The law forces the IRS to hold refunds longer than usual for early filers who claim the Earned Income Tax Credit, and Additional Child Credit.

The entire refund will be withheld until at least February 15th and not just the money you’ll receive from the tax credits.

Another reason for delay is due to the increase of identity theft. Although, this reason may bring a peace of mind to taxpayers, it can still prolong the process. Koskinen wants individuals to know that one of their biggest goals is to “protect taxpayers from identity theft.”

The question now becomes; what steps can you take to avoid a tax refund delay? Simple, take home more money now, and receive a refund smaller in size. This is done by adjusting your withholdings. We know 2016 is coming to a close, but it’s not too late.

The issue then becomes deciding how much to hold and how much to keep. Balance is key here. However, anyone who earns income besides wages and salary, such as; self-employment money, dividends, and interest, etc. should be very careful. You are required to pay taxes 4 times a year, unless your tax due is less than $1,000 after taking away withholdings and credits if you fall into this category. There have been more than 102 million refunds issued in 2016 so far, which many of those refunds were over $2,700 dollars per taxpayer.

Although tax refunds are expected to be delayed, one should still expect most refunds to be dispersed within 21 days or less since the IRS is still trying to work diligently. The main point is; don’t be surprised by delays, as that is expected for the up and coming tax season. Withhold more of your money now, and get your refund faster.