IRS Goes Digital

August 11, 2023 by admin

IRS Moves Forward On Their Plan to Monitor All Taxpayer Activity

Recently, I wrote about the danger of the IRS gathering our tax data electronically and using Artificial Intelligence and Machine Learning to monitor taxpayer activity – your activity.

Today the IRS announced plans to go paper-free by 2026 using the funding in the Inflation Reduction Act. I pointed out that the IRS will use that money more for improving their information infrastructure, than auditing individuals and businesses. It wasn’t too long ago the IRS announced the “Free” tax return filing system. And now with the push to paperless filing – all that data will be ripe for data mining.

The IRS says this new initiative will improve customer service and efficiency. But do we really want an efficient IRS? The new IRS Commissioner, Danny Werfel, recently boasted about the IRS introducing the scanning of paper 1040s. He thought that was “history in the making.” Hey Werfel, it’s 2023! Scanning paper has been around for decades.

We have two things to hope for. First, the IRS continues its history of incompetence when it comes to modernizing IRS technology. After all, they have promised improvements since the 1960s, and we are still told how antiqued the IRS computer system is.

Second, Congress cuts more of that $80 billion giveaway in the Inflation Reduction Act. Congress did manage to cut $21 Billion from the IRS budget last May in the debt ceiling negotiations. Let’s hope for more. The IRS budget is still close to $20 Billion a year!

IRS launches paperless processing initiative

https://www.irs.gov/newsroom/irs-launches-paperless-processing-initiative

Remarks by IRS Commissioner Danny Werfel on the paperless processing initiative

https://www.irs.gov/newsroom/remarks-by-irs-commissioner-danny-werfel-on-the-paperless-processing-initiative

Steven A. Leahy is a tax attorney in Illinois. He was the host of the long-running popular Radio Show “The IRS Radio Hour” heard every Sunday evening on AM 560 The Answer. Attorney Leahy is also the author of the book “Deal With Your IRS Problems Today!” You can get a FREE copy of this important book at FreeIRSBook.com. Or Call 24/7 (312)664-6649

Who Wants an Efficient IRS?

July 22, 2023 by admin

The Inflation Reduction Act bankrolled the IRS to double in size. There has been lots of speculation about drastically increasing the number of auditors and, therefore, audits. The IRS “Enforcement” budget increased by more than $45 billion. What has been missed is the increased budget, more than $30 billion, directed at the IRS for “Operations Support” and “Business Systems Modernization.” You can read that as “information technology.” And don’t overlook that part of the enforcement budget that will be used for information technology as well.

That’s a huge commitment.

There are two major initiatives underway right now at the IRS:

1. IRS Direct File. Building a “Free” tax preparation system. Gathering more taxpayer data.

2. Implementing Artificial Intelligence Algorithms and Models. Analyzing taxpayer data.

Taken together, these initiatives will give the IRS, and therefore the government, easy access to the most intimate pieces of taxpayer information. According to Kaschit Pandya, IRS deputy chief information officer, “The idea is to take all of our data from within the IRS, place it in an enterprise data warehouse, and then build the analytics layer on top of it so that everyone has access to the data that they need in order to carry out an action or research something,”

By focusing on the increased audits, we are missing the real danger here. You can protect yourself from audits in large part. How do you protect yourself from the government gathering all your most intimate information and using it against you?

We have already seen the push to mandate our banks to provide all our banking information to the IRS – don’t think that push is over. We also see the move to digitalize our currency, which would give the government enormous power over when, where, and how we spend our money. And the revelations contained in the “Twitter Files” about government restrictions on what it deems “Misinformation,” should give us all pause.

Information Technology can free us – or imprison us. Which will it be? Personally, I don’t like the direction the IRS is headed.

1099-K Rule Delayed: What You Need To Know

December 29, 2022 by admin

Wednesday December 28, 2022 – The Internal Revenue Service (IRS) recently announced that it is delaying the implementation of 1099-K reporting requirements until January 2023. This delay affects businesses and individuals who receive payments from financial organizations and other third parties through electronic payment channels such as PayPal, Venmo, Square, Apple Pay or Google Wallet.

The delay provides financial organizations and their customers with a valuable reprieve from the compliance and administrative costs associated with the new requirements. More importantly, the IRS doesn’t have the capabilities to process the huge increase in information returns. In 2020 the IRS processed 3.2 billion information returns – 30 million of which went unprocessed. In 2021 the IRS processed 4.7 billion information returns. It isn’t clear if the IRS left any unprocessed.

For both businesses and individuals receiving payments through these online platforms, this announcement offers interim relief from an onerous process for filing 1099-K forms for income earned through digital payment methods to report to the IRS. The original deadline was in 2021, but now has been extended for two years. There have been Congress members, on both sides of the aisle, proposing legislation to change the parameters. The current law triggers a 1099-K after just $600 of activity. With that low trigger, it is clear the number of returns were set to explode.

The extension also provides additional time for employers to develop additional safeguards or systems that protect taxpayers from being charged taxes on amounts that should be exempt from taxation, as commercial activity tax laws vary between different states. It is important to bear in mind that while this delay may provide comfort to some businesses, they are still required to comply with all applicable federal tax laws when it comes to reporting any income received through digital payment channels starting January 2023.

Attorney Steven A. Leahy looks at this new development on Today’s Tax Talk

https://www.irs.gov/newsroom/irs-announces-delay-for-implementation-of-600-reporting-threshold-for-third-party-payment-platforms-forms-1099-k

https://www.jdsupra.com/legalnews/irs-delays-reporting-requirements-on-3732485/

https://nypost.com/2022/12/26/cheer-irss-delay-of-congress-ugly-rule-socking-the-gig-economy-but-it-should-die-entirely/

https://www.cpapracticeadvisor.com/2022/05/13/report-irs-destroyed-30-million-paper-tax-documents/49460/

The IRS Has A Billion Dollars to Hand Out

March 9, 2017 by admin

Steven A. Leahy

The IRS Has A Billion Dollars to Hand Out

You may have heard the news that the IRS is searching for over a million tax payers to hand out more than a billion dollars. Here is what is happening. The IRS has ten years to collect delinquent taxes from taxpayer. This is referred to as the Collection Statute Expiration Date (CSED). However, if the IRS owes taxpayers refunds for tax years with unfiled tax returns, the taxpayer only has three years from the due date to collect this refund. And, if the taxpayer is also entitled to an Earned Income Tax Credit, those funds too, must be claimed within three years of the tax return due date.

If taxpayers have unfiled tax returns and it appears to the IRS there will be a tax liability, the IRS takes it upon themselves to file a Substitute for Return (SFR). The SFR is not a service, it is a penalty! They prepare your taxes in order to assess a tax – the IRS can’t collect a tax that has yet to be assessed. Generally, the SFR overstates the true tax obligation of the taxpayer. However, the IRS begins collection efforts to collect the assessed tax. It may take the IRS some years to assess the tax for an unfiled return – and the CSED does not begin until the tax is assessed. So, the IRS has additional time, from the date of assessment – not from the date the tax return is due, to collect the assessed tax.

If it appears the taxpayer has a refund due, the IRS does not complete the SFR. Therefore, a tax is never assessed, so the IRS does not calculate what your refund would be. They leave it to the taxpayer to calculate that number.

This year, 2017, tax-day is April 18th. This is the second-year tax-day has landed on April 18th rather than April 15th. The reason that is revolves around a little-known Washington DC Holiday, Emancipation Day. Here is the rule:

Generally, if a due date for performing any act for tax purposes falls on a Saturday, Sunday, or legal holiday, the act is considered to be performed timely if it is performed no later than the next day that isn’t a Saturday, Sunday, or legal holiday. The term legal holiday means any legal holiday in the District of Columbia. The calendars provided in this publication make the adjustment for Saturdays, Sundays, and legal holidays. But you must make any adjustments for statewide legal holidays, as discussed later.

Emancipation Day is a Washington DC holiday every April 16th. The holiday celebrates the DC Compensated Emancipation Act of 1862 that ended slavery in Washington DC. When April 16 falls on a Saturday, the holiday shifts to Friday. That’s why 2016 tax-day was moved to the next Monday, April 18th. This year, 2017, the holiday falls on a Sunday, so the holiday shifts to the next Monday, April 17th. And, because April 15th is a Saturday, the next day that is not a Saturday, Sunday or holiday is Tuesday April 18th.

Next year, 2018, April 15th will be on Sunday and Emancipation Day will fall on Monday Apirl 16th. Next year, tax-day will fall to Tuesday April 17th.
I have several clients with unfiled tax returns, many dating back before 2013. Several of these clients are W-2 employees, and likely have a refund due. So, we are concentrating on getting their 2013 tax returns completed and filed BEFORE Tuesday April 18, 2017 to make sure they receive credit for the refund they have coming.

If you owe the IRS for taxes pre-dating 2013, and you fail to claim your return timely, the IRS WILL NOT use the refund to offset those taxes. In this situation, Taxpayers are hit with a double whammy.

If you have unfiled tax returns dating back to 2013 – call my office today, right now! We can still complete those returns and get them filed so you can claim your refund. You should give me a call – Opem Tax Resolutions & The Law Office of Steven A. Leahy, PC (312) 664-6649. Call NOW to set up your FREE Consultation.

Cash is King! IRS Form 8300

January 6, 2017 by admin

Steven A. Leahy

Cash is King – IRS Form 8300

By Steven A Leahy

Recently, I received a telephone call from a business owner in his accountant’s office. They wanted some information about large cash payments the business received 18 months prior. I immediately shut the conversation down and insisted they come to my office if they wanted to discuss this matter with me. I did that because, with the accountant privy to our conversation, the conversation conflicted with the traditional doctrine of attorney-client privilege. What they were discussing possibly involved illegal activity, and not something you want to talk about in mixed company.

Federal law requires that all cash payments more than $10,000.00 must be reported to the IRS with Form 8300. In general, the law requires that anyone engaged in a trade or business – “in the course of such trade or business, receives more than $10,000.00 in cash in 1 transaction (or 2 or more related transactions)” shall file the proper cash transaction forms. If Form 8300 is required, it must be filed within 15 days after the date the cash transaction occurred. Form 8300 must include “the name, address, and TIN of the person from whom the cash was received.”

Not only must you file IRS Form 8300, you must furnish a “written statement” to each person “from whom the cash was received.” That written statement must be provided “on or before January 31 of the year following the calendar year for which [Form 8300] was required to be made.”

A transaction could be the sale of a machinery, construction work for a home owner, or repair work for a vehicle. The cash payment can be a lump sum of $10,000.00 or more; Installment payments that cause total cash received within one year of the initial payment to total more than $10,000.00, or; Previously unreported payments that cause the total cash received within 12-month period to total more than $10,000.00.

For example, let’s say a customer agrees to buy a piece of equipment for $14,000.00. He pays you $9000.00 in a cashier’s check and the balance 10 days later with $5,000.00 cash. This is a cash transaction and must be reported. You have received more than $10,000.00 cash. Because “Cash” may include cashier’s checks, bank drafts, travelers checks and money orders with a face value of $10,000.00 or less. Confused yet?

Wait, there’s more. The law also requires that you report suspicious transactions. For example, if you suspect the customer is attempting to prevent a Form 8300 from being filed – you must file Form 8300. What you must NOT do – EVER – is help the customer structure the transaction to avoid the Form 8300 reporting requirement.

Failure to file Form 8300, when required, may result in civil penalties. The penalties can amount to millions of dollars. Worse, a person may be subject to criminal penalties. The criminal penalties are generally for willful behavior, and include fines up to $100,000.00 and/or imprisonment up to 5 years, plus the cost of prosecution. The criminal penalties apply to those whom attempt to structure the transaction in such a way that would make it seem unnecessary to file Form 8300.

Receiving cash payments in a transaction can cause BIG problems. Who must file Form 8300, when that form must be filed, what constitutes cash, the transactions that trigger the requirement and the penalties that follow non-compliance are often difficult to understand. Don’t play games – get advice!

So, if you receive large cash payments, you should work with a local law firm that will work with you to stay in compliance with these complicated laws. You should give me a call – Opem Tax Resolutions & The Law Office of Steven A. Leahy, PC (312) 664-6649. Call NOW to set up your FREE Consultation.

IRS Goes Digital

IRS launches paperless processing initiative

Remarks by IRS Commissioner Danny Werfel on the paperless processing initiative

Who Wants an Efficient IRS?

1099-K Rule Delayed: What You Need To Know

The IRS Has A Billion Dollars to Hand Out

The IRS Has A Billion Dollars to Hand Out

Cash is King! IRS Form 8300

Cash is King – IRS Form 8300

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