Sanders Paid $27,653 in 2014 Taxes on Income of $205,271

WASHINGTON, D.C. (APRIL 18, 2016)
BY JOHN VOSKUHL

BLOOMBERG

(Bloomberg) Vermont Senator Bernie Sanders and his wife earned $205,271 in adjusted gross income in 2014 and paid $27,653 in taxes—an effective rate of about 13.5 percent, according to documents released Friday.

The Democratic presidential candidate, who has said Jane Sanders files the couple’s federal income taxes, provided paperwork listing $56,377 in 2014 deductions. They paid $24,509 in state and local income taxes and property taxes and $22,946 in home mortgage interest while making $8,350 in charitable contributions.

Sanders earlier had released the first two pages of his 2014 tax return last year but had provided no detail about the deductions.

Sanders’s taxes have become an issue in his campaign for the Democratic presidential nomination. He has released information for the 2014 tax year only, far less than front-runner Hillary Clinton.

Jane Sanders told Bloomberg Television’s “With All Due Respect” on Monday that she does the couple’s taxes using tax-preparation software and that the 2015 version—“a pretty simple return”—would be released as soon as it’s ready. Monday is the annual deadline for filing individual income-tax returns in most of the U.S.

The couple’s return is “remarkable for just how unremarkable it is,” said Tony Nitti, a partner in the Aspen, Colorado, office of the accounting firm WithumSmith+Brown. The return may add to Sanders’s image as an “everyman” candidate, Nitti said. Given the lack of explosive detail, he added: “What was the problem? What was the delay in getting this thing out there?”

Sanders’s campaign didn’t immediately respond to questions about his taxes.

Most of the couple’s 2014 income was attributable to Sanders’s salary of $174,000 a year as a U.S. senator. They also reported $46,213 in Social Security benefits that year, $39,281 of which was taxable income, and $4,982 in taxable pension income that Sanders receives for having been mayor of Burlington, Vermont. The 2014 form also listed $4,900 in business income that Jane Sanders received as a member of a commission on the management of low-level radioactive waste disposal.

Trump’s Taxes
Among the 2016 major-party presidential candidates, Sanders’s lack of transparency regarding his taxes had been second only to Republican front-runner Donald Trump before Friday’s release. Trump has said he’s under an audit, and won’t release any returns until it’s over. The other Republican candidates—Senator Ted Cruz of Texas and Governor John Kasich of Ohio—have posted several years’ worth of partial returns online.

Clinton has disclosed eight years of full returns, including detailed schedules, on her campaign website, and there are decades of returns for her and Bill Clinton available online. The Clintons’ 2014 return, which is the most recent her campaign has released, showed that the couple reported $27.9 million in adjusted gross income—about 136 times the amount reported by Sanders and his wife that year.

Tad Devine, a political adviser to Sanders, said the candidate would release returns from previous years “soon” after this year’s filing is finished by Jane Sanders. “Bernie is happy to be transparent,” Devine said in an interview on CNN.

In 2014, the senator and his wife reported $2 in income from ordinary dividends and $11 in taxable interest. Their $56,377 in deductions for the year is higher than average for their income level, according to a 2014 Congressional Research Service report, which found that in 2011, taxpayers reporting adjusted gross income from $200,000 to $250,000 claimed an average of $39,470 in itemized deductions.

 

IRS Exposed Taxpayer ID Numbers on Offers in Compromise

WASHINGTON, D.C. (APRIL 12, 2016)

The Internal Revenue Service failed to fully redact Social Security Numbers and Employer Identification Numbers from hundreds of its Offer in Compromise files that are available to the public, according to a new report.

The report, from the Treasury Inspector General for Tax Administration, found that files available for public review contained visible Taxpayer Identification Numbers, such as SSNs and EINs. TIGTA identified and documented more than 300 instances of visible Taxpayer Identification Numbers in files accessible to the public. TIGTA provided the IRS with photographs of the redaction omissions and advised IRS management to suspend public inspections until a full review could be completed. The report noted that ineffective redaction practices put sensitive and legally protected taxpayer information at risk.

The IRS took immediate action during the evaluation, according to TIGTA, so it did not make any recommendations in the report. However, TIGTA plans to conduct a follow-up review to see whether the issues have been addressed.

In response to the report, IRS officials pointed out that public viewing requests of Offers in Compromise are rare, so the risk that sensitive taxpayer information was exposed was minimal. Nevertheless, the IRS said it is pursuing safeguards and enhancements of Offer in Compromise public inspection file redaction procedures.

“Your investigation revealed instances in which certain taxpayer information had not been fully redacted from public inspection file,” wrote Karen Schiller, commissioner of the IRS’s Small Business/Self-Employed Division. “When TIGTA alerted IRS to this issue, the IRS immediately removed the files from availability for public inspection until the required redactions were completed.”

TIGTA agreed there is limited opportunity for the disclosure of sensitive taxpayer information but pointed out that each taxpayer has a right to expect that the IRS will protect their sensitive information in all circumstances. TIGTA said it believes the IRS needs to be committed to safeguarding the identity of all taxpayers in administering programs, whether large or small, high-profile or little known. Identity theft continues to be a serious and evolving issue which has a significant impact on tax administration, TIGTA noted.

Trump’s Tax Lawyers Say 2002-2008 Returns No Longer Under Audit

NEW YORK (MARCH 31, 2016)
BY LYNNLEY BROWNING

BLOOMBERG

(Bloomberg) Republican presidential candidate Donald Trump’s income tax returns for the years 2002 through 2008 are no longer under federal audit, though more recent filings remain under review, according to an unusual letter his campaign released Wednesday night.

The campaign didn’t say whether it’s prepared to release any of the documents, a standard practice for presidential candidates. Trump, a billionaire real estate developer and former reality TV show host, has refused to release his returns, citing what he described as a 12-year-long Internal Revenue Service audit.

The letter, dated March 7 and written by two lawyers at law firm Morgan, Lewis & Bockius LLP, says the Internal Revenue Service has ended its scrutiny of the tax years 2002 through 2008. The agency is continuing to examine returns from 2009 forward, according to the letter.

Trump has been under pressure from political opponents to release his returns. The 2012 Republican presidential nominee, Mitt Romney, in February called on Trump to release the documents, saying they may contain a “bombshell.” Trump is the only remaining major-party candidate for president who hasn’t made at least some portion of his tax returns public.

Trump campaign spokeswoman Hope Hicks didn’t immediately respond to requests for comment.

It’s unclear why the campaign posted the letter Wednesday night, more than three weeks after it’s dated.

The three-paragraph letter says that Trump’s returns had been “under continuous examination by the Internal Revenue Service since 2002.” It also said that examinations of returns for 2002 through 2008 had been closed “without assessment or payment, on a net basis, of any deficiency.” The letter’s authors, tax lawyers Sheri Dillon and William Nelson, don’t explain in the letter what they mean by “on a net basis.” Nelson is a former IRS chief counsel.

Elliot Frieder, a spokesman for the Morgan Lewis firm, said last night that the firm doesn’t discuss clients’ business.

‘Complex Businesses’
Trump disclosed in July that he is the sole or principal owner in roughly 500 business entities—most of them partnerships. As a result, his “personal federal income tax returns are inordinately large and complex for an individual,” according to the letter by Dillon and Nelson. It says the continuous audits of Trump’s personal returns are “consistent with the IRS’s practice for large and complex businesses.”

The letter’s last paragraph also says that in a sense, the IRS examinations for 2009 forward “are continuations of prior, closed examinations.” That’s because Trump’s later returns “report items that are attributable to continuing transactions or activities that were also reported on returns for 2008 and earlier.” However, it’s unclear whether the returns include new sources of income or other disclosures that might have also drawn IRS scrutiny.

Dennis Brager, a tax lawyer in Los Angeles and former senior IRS trial attorney, told Bloomberg after reading the letter that its references to examinations for 2002 through 2008 that were closed and to later examinations that concerned matters in 2008 and earlier “contradict each other.”

Brager said it’s possible the issue under scrutiny involves a so-called timing loss, meaning that Trump might have declared a tax-deductible loss in one year that the IRS disallowed, then claimed it again in another year.

“The letter appears to be internally inconsistent,” Brager said.

Democratic front-runner Hillary Clinton released full tax returns for the years 2007 through 2014 last year. Combined with earlier releases from her 2008 presidential campaign, and with returns released earlier by her husband, former President Bill Clinton, she has released tax information for every year since the late 1970s.

On the Republican side, Trump’s rivals, Texas Senator Ted Cruz and Ohio Governor John Kasich, have each released a number of partial returns, excluding schedules that would provide such details as their itemized deductions and business income.

Young, Broke, and Scared of the IRS: The Millennial Tax Trap

NEW YORK (MARCH 28, 2016)
BY POLLY MOSENDZ

BLOOMBERG

(Bloomberg) NOTICE OF INTENT TO LEVY

It wasn’t a very nice way to begin a letter, but then, it was from the Internal Revenue Service, and it got Greg’s attention.

The Athens, Georgia, veteran said the notice, which arrived earlier this year, cited three months of taxes he had failed to pay two years ago—and was the first he’d heard of it.

After leaving the military, Greg , then 27, had taken a job in information technology. “I guess when I filled out my taxes for 2013 I messed something up, so I didn’t get my private-sector job included into the taxes owed,” he said. Now he was into the Treasury Department for more than $1,700.

The IRS doesn’t keep track of how many millennials incur tax debt, but a survey by personal finance adviser NerdWallet found they are more afraid of filing their taxes than any other generation. Eighty percent of millennials, defined by the survey as 18 to 34 years old, fear they will make a mistake, underpaying or overpaying.

Putting aside outright tax cheats, young workers are financially inexperienced and, increasingly, part of a gig economy—driving for Uber, funding their creative work through Patreon—that requires more care with taxes than some are able, or willing, to take. For example, people who work in contract jobs typically don’t have their taxes withheld automatically and need to set up a program of quarterly estimated tax payments on their own.

Digging their tax trap deeper, fewer than 10 percent of millennials go to the IRS when they have a tax question, and only about a quarter seek help from a tax professional, the survey found, compared with 38 percent of all taxpayers who seek help from a tax pro. Instead, most young people turn to friends and family, a largely unreliable if well-meaning group. Millennial taxpayers in particular bemoan the long wait times on the phone with the IRS and the agency’s weird penchant for mail (like, mail).

“It took at least five hours of your life just getting somebody on the phone,” said Greg, who said he placed four or five calls to the agency seeking to confirm the letter’s validity before signing up for a payment plan on its website. “There needs to be more notification and communication on their part.”

This month, Greg made his first contribution to an IRS tax debt repayment plan, which he said was easy enough to set up. He’ll be making a $150 payment every month until he has repaid the debt. Starting this tax season, he’s working with a certified public accountant.

“Someone facing a tax bill they can’t pay can usually set up a payment agreement,” IRS spokesman Eric Smith said. Indeed, even if the agency isn’t so hot on the phone, it will send multiple letters urging debtors to set up plans before threatening them, if necessary, with levies and liens. Resources are available on the IRS website, agents regularly describe payment plans to those who get through on the phone, and accountants work with the agency to devise plans for their clients.

“If you don’t contact us, we can take action to collect the taxes,” Smith said.

That said, millennials are less likely to own homes than generations before them, so the threat of a property lien doesn’t carry the weight it might, and a change of rental address can cut the letters off altogether. Anthony, a 24-year-old based in Washington, D.C., incurred just over $1,000 of tax debt after he tried to claim an education credit on his 2013 taxes that his parents had already claimed. He sent in a correction of the error but then lost his job and couldn’t pay the balance.

When he moved in September of 2014, the letters stopped coming.

“It was an out-of-sight, out-of-mind thing,” he said.

In fact, the IRS was nothing compared to the creditors who were after Anthony for his student debt, he said. The following year, what would have been his tax refund was taken to pay off a portion of the outstanding debt. Employed by that time, he was able to pay the balance.

“I still don’t rank them anywhere near as scary as Sallie Mae,” Anthony said of the IRS. “They were very slow to catch on to it. …With Sallie Mae, they immediately start calling you on the phone—and start calling your parents. Sallie Mae is everything the IRS does, but on ‘roids.”

While credit card companies collecting student debt can affect a debtor’s credit scores immediately, tax debt doesn’t begin to influence them unless levies and liens are issued, and enrolling in a repayment plan won’t affect the scores either. Yet of the seven millennials facing tax debts interviewed for this article, only two were familiar with these plans, and neither of them knew that signing on to one wouldn’t affect their scores.

“I don’t think anyone should be afraid of the IRS, because as long as you’re talking to them, bad things don’t happen,” said Cari Weston, director of taxation for the American Institute of CPAs.

Erik Duemig and his brother Joe, who own a production sound company in Austin, Texas, fell into tax debt when they made what Erik described as a series of clerical errors on a 2014 filing. At 26, the twins had filed taxes only a few times before, and were previously filing as contract employees, not business owners. Eventually, they hired a certified public accountant for $1,200, but only after Joe had been audited.

Few of the Duemigs’ millennial friends hold down a traditional job with its W2 tax form, they said, citing a culture that relies heavily on the gig economy.

“For millennials who are making money on the Internet, like YouTube ad sales and things like Patreon, I imagine that kind of income stream gets really weird to deal with the IRS,” Erik said.

Millennials who find themselves in debt to the agency have more constructive options than neglecting debt letters and less expensive ones than hiring a CPA. Tax tutorials are available online, and the Society of Grownups, a Brookline, Massachusetts, financial literacy group, offers two classes, “Quarterly Schmarterly” and “Get Off Your Tax.” Each costs $30. In one class, a third of those in attendance owed money to the IRS, said Jena Palisoul, director of financial planning.

“Some people get so frightened, they take no action whatsoever,” she said, “and that’s the worst thing to do.”

Smith of the IRS acknowledged “it can be a while” on the phone but said “it’s better than it was last year, as Congress provided us with some increase in funding for the phone operations. We really encourage people to [seek help] online first.”

“I think they are trying to speak to everyone in a more technology-friendly way,” said Weston. “They’re tweeting, they’re trying to get representatives out there … but with all this identity theft they are being very cautious about communicating with taxpayers digitally.”

Even so, “it was all very poorly communicated to us by the IRS,” Duemig said.

He added: “Tax law, it almost feels, like, intentionally complicated. It just tires you out so you just pay more than you need to.”

IRS Keeps a Lid on Conference Spending after Star Trek Video Uproar

WASHINGTON, D.C. (MARCH 21, 2016)

The Internal Revenue Service is doing a better job of controlling its spending on conferences after the IRS faced ridicule three years ago for spending on an embarrassing series of training videos for conferences.

The videos included parodies of “Star Trek,” “Gilligan’s Island,” “Mad Men” and a dance video (see IRS Lifts Veil on Star Trek and Gilligan’s Island Videos, IRS Music Dance Video Released by Congress, and IRS Released “Mad Men” Parody CPE Video). Their release came amidst the uproar over so-called “targeting” of Tea Party and other political groups by the IRS’s Exempt Organizations unit charged with reviewing applications for tax-exempt status, leading to the resignations of several high-ranking IRS officials.

The IRS has since learned from its errors. The Treasury Inspector General for Tax Administration released areport Monday that found the IRS has updated its policies and procedures related to its spending on government conferences.

The report released Monday is a follow-up audit to a May 2013 TIGTA audit report titled Review of the IRS’s August 2010 Small Business/Self-Employed Division’s Conference in Anaheim, California. That report detailed a lack of controls and several questionable expenditures at an IRS conference that cost over $4 million.

The overall objectives of the review were to determine whether the IRS implemented corrective actions in response to TIGTA’s previous recommendations and to evaluate the IRS’s approval and reporting process for conference and event spending exceeding established thresholds.

In the latest audit, TIGTA found that the IRS addressed all nine recommendations that TIGTA made in its 2013 report.

“Our auditors found that, during Fiscal Year 2013 and 2014, the IRS approved and reported, as required, almost 99 percent of the training and conference events we reviewed,” said TIGTA Inspector General J. Russell George in a statement. “It is imperative that agencies effectively manage conference and event spending to ensure that taxpayer funds are used efficiently.”

Excessive conference and event spending by federal agencies has been highlighted by recent Inspector General reports and the subject of congressional hearings. In November 2011, President Obama signed Executive Order 13589 to eliminate excessive spending and promote more efficiency in the federal government, specifically directing agencies to control costs associated with conference spending.

In the new audit report, TIGTA made several additional recommendations on improving the management of event approval and reporting, including issuing a single list of all events with spending budgets over $100,000 to the Treasury Department to ensure public reporting and the centralized retention of event approval and reporting documentation.

In response to the report, the IRS agreed with TIGTA’s recommendations, stating that it has developed and implemented corrective actions to address the recommendations. The actions include plans to provide the Treasury Department, in January of each year, detailed information on events that cost in excess of $100,000 for the preceding year, and, beginning in October 2015, to maintain event approval and reporting information in one centralized location.

CPA, Taxes, Bookkeeping, Payroll, Accounting Services, Insurance

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