9-21-2017  Installment Agreements and streamlined installment agreements – Taxpayers are entering into agreements they cannot afford.

The Taxpayer Advocate (September,  2017) has posted concerns  about the disturbing long term effects on taxpayers entering into installment agreements that prevent them paying basic living expenses.  The following are key points:

1.  Taxpayers are routinely entering into and making payments on installment agreements despite having monthly income lower than their Allowable living Expenses.

2.  Collection alternatives (e.g., Offer in Compromise, installment agreement, currently not collectible), should be designed to set a taxpayer up for success in meeting tax obligations. This includes paying current taxes.

3.  The IRS Allowable Living Expenses do not adequately capture all necessary expenses.

4.  Installment agreements are the most common collection alternative for taxpayers.

5.  Installment agreements that disregard the taxpayer’s ability to pay AND meet basic living expenses, is an agreement set up for failure.

6.  The “streamlined” installment agreement is the most frequently used form of installment agreement (in fiscal year 2014,   94.9 percent of installment agreements were streamlined; in fiscal year 2016,   84.4 percent of installment agreements were streamlined).

7.   Using a Streamlined installment agreement means that there is NO financial analysis and NO application of the Allowable Living Expense “standards”. The IRS simply divides the balance due by 72 or even 84 months.  As a consequence, the required monthly payment bears no relationship to what the taxpayer can actually afford to pay.

8.   Disturbing long term effects – study found that 40 percent of all taxpayers who entered into installment agreements in 2014 had income levels below their Allowable Living Expenses – meaning those taxpayers could not meet their basic living expenses.

9.   Over 400,000 taxpayer accounts in the study qualified for Currently Not Collectible. Thus, payments to the IRS created economic hardship. The taxpayer making payments were thus foregoing basic living expenses (such as utilities, food and a place to live).

10.  The study found that taxpayers who had gone through a financial analysis (through the Advocates Office) to determine if  the taxpayer could actually afford the streamline installment agreement payments (without foregoing basic living expenses) had a lower default rate than taxpayers who had not. During this financial analysis, consideration wass given to: the ability to pay basic living expenses, whether there is  sufficient withholding to make sure current taxes are full paid, and that self-employed persons have sufficient income to make their estimated tax payments.   Read More Here

9-20-12017   IRS Allowable Living Expense Standards Do Not Provide Taxpayers With a Sustainable Standard of Living

The Taxpayer Advocate (August, 2017) has made findings as to the method the IRS uses to determine the amount of basic living expenses it should take into account concerning payment of tax debt over time. The following are the key points:

1.  Congress directed the IRS to make sure taxpayers who enter into offers in compromise still have enough money to cover their basic expenses.

2.  Congress told the IRS to “develop and publish schedules of national and local allowances designed to provide that taxpayers entering into a compromise have an adequate means to provide for basic living expenses.” 

3.  The IRS Allowable Living Expenses (ALE) standards have come to play a large role in many types of collection cases (e.g., non-streamlined installment agreements, claiming economic hardship... ).

4.  ALE standards are used by the IRS to calculate a taxpayer’s monthly expenses, which in turn affects the resolution of the taxpayer’s case because it reflects how much he or she can afford to pay the IRS. ALEs cover common expenses such as food, clothing, transportation, housing, and utilities.

5.  The Taxpayer Advocate identified the following problems with the current ALE standards:

     a. "The standards are based on what taxpayers pay, not what it costs to live. And since many of the IRS standards are based on average expenditures, there is a chance the taxpayer’s expense is greater than the survey average."

     b.  "Spending habits are not consistent over income levels. For instance, while housing costs now account for about 25 percent of a family’s pre-tax income, among low income renters, some may spend up to half of their pre-tax income on rent."

     c. "The ALE standards are outdated and should include all expenses necessary to maintain the health and welfare of households today, including an allocation for digital technology access, child care, and retirement savings." 

     d.  "The IRS decreased the amounts for some of the expenses in 2016 based on its belief that expenses are going down. This was done despite the fact that the IRS and TAS reached a joint agreement in 2007 saying “the allowance amount for any ALE category cannot be decreased unless something economic changes significantly, such as a major sustained recession or depression.” Even with TAS’s concerns with the IRS decision last year, the IRS again decreased ALE standards in 2017. All of our research shows that costs are going up.  More importantly, the average taxpayer is facing more financial strain."

     e.  "Until there is improvement, the ALE standards won’t truly capture what it costs for a taxpayer to pay for basic expenses. And any taxpayer who is unable to resolve their tax debt will be vulnerable to IRS collection action otherwise prohibited by Congress."

                   Read More HERE

9/19/2017 IRS Telephone Impersonation Phone Scam – Still in the Dirty Dozen. Taxpayers to remain alert and Report.

 For over 10 years, the IRS has provided on its web site the “Dirty Dozen” of tax scams.  The IRS telephone impersonation scam is again included in the IRS’s 2017 “Dirty Dozen” list.

 The Treasury Inspector General for Tax Administration Semiannual Report to Congress (October 1, 2016 – March 31 2017) advises that between October, 2013 and March 31, 2017, the Treasury Inspector General for Tax Administration logged more than 1.9 million contacts from taxpayers who reported that they had received telephone calls from individuals who claimed to be IRS employees.

 During these telephone impersonation calls, the impersonators told the victims that they owed additional tax and that if they did not immediately pay they would be arrested, lose their driver’s licenses, or face other adverse consequences.

 The scam involves substantial monies.  As of March 31, 2017, the TIGTA reports that more than 10,300 victims reported that they had paid the impersonators a total amount in excess of $55 Million.

 Although almost every State has victims, the top five states where victims suffered financial losses are: California, Florida, Illinois, New York, and Texas.

 In addition to investigations, the TIGTA has developed other steps to counter this scam and protect taxpayers.  Such have included identifying the impersonation scam telephone numbers and requesting the telephone carrier to take shut the number down;  posting the scam-related telephone numbers on the Internet so that potential victims could search to determine if the call they received was part of the scam; and a TIGTA auto-dialer to call back the impersonators with a message ordering them to stop their criminal activity (occupied the impersonators time and telephone lines).

 Technology is being looked at to stop the spoofed calls. In one situation almost two million calls were blocked that had been spoofed to appear as though the calls were being made from the IRS.

 The companies used by the impersonators to monetize the scam have been cooperative in using techniques to help warn consumers. For example, when a prepaid debit card is purchased, there is a fraud warning that now appears on the signature screen.  MoneyGram has placed banners on its kiosks advising customers “that if they have been told to pay their taxes by MoneyGram, it is a scam and they should not proceed with the transaction”.  iTunes cards have been used by the impersonators as a means of cashing in on the fraud about 70 to 80 percent of the time.  Nationwide,  distribution of warning messages have been made at grocery and convenience stores.

 TIGTA is continuing to urge taxpayer to remain on HIGH ALERT. 

 If you believe you have been a victim of an IRS Impersonation Scam, you can fill out a form at the TIGTA website. The link is here:      https://www.treasury.gov/tigta/contact_report_scam.shtml

 A copy of the Treasury Inspector General for Tax Administration Semiannual Report to Congress (October, 2016 – March 31 2017) is HERE.

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Note: The TIGTA website Alert, as of September, 2017,  states the following:  

“As of June 13, 2016, TIGTA has received additional information that callers impersonating Internal Revenue Service (IRS) or Treasury Department employees are demanding payments not only on iTunes Gift Cards but on other gift cards as well. Scam callers may also request payment of taxes on Green Dot Prepaid Cards, MoneyPak Prepaid Cards, Reloadit Prepaid Debit Cards, and other prepaid credit cards. These are fraudulent calls.’

“As a reminder, any call requesting that taxpayers place funds on an iTunes Gift Card or other gift cards to pay taxes and fees is an indicator of fraudulent activity! No legitimate United States Treasury or IRS official will demand that payments via Western Union, MoneyGram, bank wire transfers, or bank deposits be made into another person’s account for any debt to the IRS or Treasury. Hang up on these fraudulent callers and go to the TIGTA scam reporting page to report the call. …”

9/6/2017- Federal Payment Levy Program: The New IRS Automated Levies on Military Retirement Payments May Be Harming Veterans Experiencing Economic Hardship.

The Taxpayer Advocate has reported on the above in a two part series.

The Taxpayer Advocate expressed concerned about a recent IRS change in its policy regarding adding military retirement payments as a payment stream to the Federal Payment Levy Program. Under this program, an automated system identifies taxpayers with unpaid tax liabilities who receive certain payments from the federal government.  A continuous levy for up to 15% of federal payments due these taxpayers can be made for the unpaid federal liabilities.

This IRS policy change has not been widely publicized.

The Taxpayer Advocate states, in part:

“I am deeply concerned that the IRS has decided to target retired service members, not long after recent military engagements in Iraq and Afghanistan have decreased in intensity. Serving in the United States Armed Forces requires years of tremendous sacrifice, challenging and dangerous assignments, frequent moves across the country, long separations from family, and fairly meager pay. Whether viewed as the sole means of income or a reward from the U.S government for serving 20 years in the Armed Forces, a service member’s retirement pay should not be considered another automatic FPLP funding stream.”

The Taxpayer Advocate advises that the IRS’s data provided as justification for its actions are inaccurate and misleading.

The Taxpayer Advocate concludes in stating:

“...I therefore find it baffling that he IRS refuses to apply the LIF [Low Income Filter] to military retirees who may be experiencing economic hardship.

… I am disappointed the IRS has refused to adopt the recommendation to run all military retirees through the LIF  [Low Income Filter]  and believe its failure to do so will cause the agency to issue a significant number of levies it will be required by law to release because of the taxpayer’s economic hardship. 

… military retirees are an easy target for the IRS because retirement benefits are an easily identifiable levy source. By cherry-picking retired service members’ pensions for automated levies without taking into consideration individual taxpayers’ facts and circumstances, the IRS violates these taxpayers’ right to fair and just tax system, right to be informed, and right to quality service. (See Taxpayer Bill of Rights (TBOR)).”

You can read the Taxpayer Advocate two part series HERE.

August, 21, 2017 - IRS REHIRES BAD AND ROTTEN APPLES

 The TREASURY INSPECTOR GENERAL FOR TAX ADMINISTRATION has issued its July, 2017 report concerning The Internal Revenue Service Continuing to Rehire Former Employees With Conduct and Performance Issues. The report is dated July 24, 2017 (Reference Number: 2017-10-035) (copy is here). (Also, copy of prior report is here)

 The report advises: "Given the substantial threat of identity theft and the magnitude of sensitive information that the IRS holds, hiring employees of high integrity is essential to maintaining public trust in tax administration and safeguarding taxpayer information."

 The findings of the report were: "...While most employees who are rehired do not have prior conduct or performance issues, TIGTA found that more than 200 (approximately 10 percent) of the more than 2,000 former employees who were rehired between January 2015 and March 2016 were previously terminated from the IRS or separated while under investigation for a substantiated conduct or performance issue. More than 150 of these employees (approximately 75 percent) were seasonal. Four of the more than 200 employees had been terminated or resigned for willful failure to properly file their Federal tax returns; four separated while under investigation for unauthorized accesses to taxpayer information; and 86 separated while under investigation for absences and leave, workplace disruption, or failure to follow instructions. This includes positions with access to sensitive taxpayer information, such as contact representatives."

It is clear that hiring employees of high integrity is essential to not only maintaining public trust in tax administration, but also safeguarding taxpayer information.

 The Treasury Inspector General Report shows that the IRS is continuing to hire employees with a history of unauthorized access to taxpayer information, failure to follow instructions, and workplace disruptions. .... Such actions are in direct contravention of the Taxpayer Bill of Rights. For example, this is a threat to, inter-alia, a taxpayer's Right to Privacy, and Right to Confidentiality (..."Taxpayers have the right to expect appropriate action will be taken against employees,  ... who wrongfully use or disclose taxpayer return information...").

 The TIGTA report also found that:

  “27 former employees failed to disclose a prior termination or conviction on their application, as required, and were rehired by the IRS. … , TIGTA has serious concerns about the IRS’s decision to rehire certain employees, such as those who willfully failed to meet their Federal tax responsibilities."

 The TIGTA report states:  "In reviewing prior IRS employment issues associated with rehired employees, we considered some of the issues to be significant. In addition, we noted that applicants with prior IRS conduct and performance issues sometimes repeated past behaviors within 19 months of returning to work at the IRS. ... Given the substantial threat of identity theft and the magnitude of sensitive information that the IRS holds, hiring employees of high integrity is essential to maintaining public trust in tax administration and safeguarding taxpayer information."

 Citation is made to a previously issued TIGTA report which had likewise found that the IRS had been hiring prior employees with substantiated conduct or performance issues.

 A Table of Examples of Significant Prior IRS Conduct Issues for Rehired Former Employees shows multiple categories, including the rehiring of former IRS employees who had Falsified Employment Forms, Official Documents, or Unofficial Documents.  Two rehired employees had repetitively falsified employment forms by omitting prior convictions or terminations. One rehired employee had several misdemeanors for theft and a felony for possession of a forgery device, and another rehired employee had threatened his or her co-workers.

 So, you are advised by the IRS that your information is secure, that you are to provide all of your information, and as far as personal security when at an IRS office – just trust the government.  After all, you don’t know anything about the IRS employee, but the IRS does.

August, 2017 - Reminder the temporary increase of the Streamlined Processing Criteria that raises the limit to total tax liability of $100,000 is due to end Sept 30, 2017. 

https://www.irs.gov/businesses/small-businesses-self-employed/streamlined-processing-of-installment-agreements

June, 2017

IRS Reopening Preparer Tax Identification Number (PTIN) System

On June 1, 2017, the United States District Court for the District of Columbia upheld the Internal Revenue Service’s authority to require the use of a Preparer Tax Identification Number (PTIN), but enjoined the IRS from charging a user fee for the issuance and renewal of PTINs.  As a result of this order, PTIN registration and renewal was suspended on June 2.

The IRS, working with the Department of Justice, is still considering how to proceed, but will make PTINs available while deciding how to address the court order.  The IRS is resuming the issuance of PTINS, without charge, on June 21, 2017.  As additional information becomes available, it will be posted on the IRS Tax Pros page.

June 1, 2017- IRS Tax Preparer Identification "FEE" illegal.