Category Archives: Personal Tax

IRS Stuck with $153.3M in Undelivered Tax Refunds

WASHINGTON, D.C. (NOVEMBER 30, 2011)

BY MICHAEL COHN, ACCOUNTING TODAY

The Internal Revenue Service said Wednesday that it has $153.3 million in undelivered tax refund checks waiting to be sent to 99,123 taxpayers across the country.

In what has turned into an annual ritual for the service, the IRS said it has a fortune waiting in its coffers that could not be delivered to taxpayers because of mailing address errors. Taxpayers can still claim their refunds, though, and can probably use a little help from their accountants. The average size of an undelivered refund check this year is $1,547, which makes a nice stocking stuffer for the holidays.

Taxpayers who believe their refund check may have been inadvertently returned to the IRS as undelivered should use the “Where’s My Refund?” tool on IRS.gov.  The tool will provide the status of their refund and, in some cases, instructions on how to resolve the delivery problems with the IRS and the local post office.

Taxpayers checking on the status of their still-pending refunds over the phone will receive instructions on how to update their addresses. Taxpayers can access a telephone version of “Where’s My Refund?” by calling 1-(800) 829-1954.

Only a small percentage of checks mailed by the IRS are returned as undelivered, the agency noted, but taxpayers can put an end to lost, stolen or undelivered checks by choosing direct deposit when they file their tax returns, either on paper or electronically. Last year, more than 78.4 million taxpayers chose to receive their refund through direct deposit. Taxpayers can receive refunds directly through their bank account, split a tax refund into two or three financial accounts, or more recently buy a savings bond with the money.

The IRS also strongly encourages taxpayers to file their tax returns electronically, because e-file is supposed to eliminate the risk of lost paper returns. The agency has also begun requiring most professional tax preparers to file electronically.

E-file also reduces errors on tax returns and speeds up refunds. Nearly eight out of 10 taxpayers chose e-file last year, the IRS noted. E-file, combined with direct deposit, should help most taxpayers and tax preparers avoid refund problems.

The IRS also warned the public that it does not contact taxpayers by email to alert them of pending refunds and does not ask for personal or financial information through email.  Such messages are common phishing scams, the IRS noted.

The agency urges taxpayers who receive such messages not to release any personal information, reply, open any attachments or click on any links to avoid malicious code that can infect their computers.
The best way for an individual to verify if she or he has a pending refund is by going directly to the IRS’s Web site, IRS.gov, and using the “Where’s My Refund?” tool.

IRS Could Send Balance-Due Notices Faster

Washington, D.C. (November 8, 2011)
By Michael Cohn, Accounting Today

The Internal Revenue Service may be able to collect more money by sending out balance-due notices on a more frequent basis to delinquent taxpayers, according to a new government report.

The report, by the Treasury Inspector General for Tax Administration, found that the IRS allows 35 days between notices to give taxpayers enough time to respond. The first notice sent out the IRS to taxpayers with unpaid tax liabilities appears to be the most effective by a wide margin. In most cases, the IRS was able to collect the greatest amount of money and receive the most responses from taxpayers. However, the probability of collection diminishes as time goes on. By reducing the time between sending notices by seven days, TIGTA estimated the notice stream could potentially collect an additional $363 million each year, although a study analyzing the impact of reducing the time would be needed to quantify the benefits. In addition, taxpayers could potentially save $1.8 million each year in interest payments.

TIGTA also found that the notice stream does not always treat taxpayers with more than one delinquency the same. As a result, the IRS may not use collection resources most effectively.

“The notice stream is the least costly of the IRS’s three-phase approach to collecting unpaid taxes,” said TIGTA Inspector General J. Russell George in a statement. “While the notice stream collects billions of dollars in delinquent taxes annually, reducing the time between notices could potentially result in the collection of millions more. Further, if the IRS does not effectively pursue collection of unpaid tax through the notice stream, it could create an unfair burden on the majority of taxpayers who fully pay their taxes on time.”

TIGTA recommended that the IRS consider reducing the time between each notice by seven days and establish a business rule to address taxpayers with multiple balance due modules entering the notice stream at the same time.

IRS officials agreed with the recommendations and said they are open to modifying the time between each notice, subject to budget constraints and programming issues. However, IRS officials also noted that 35 days between notices were necessary in order to process taxpayer inquiries and correspondence.

The IRS noted that taxpayers could answer the notice in different ways too. “While a taxpayer may respond by simply making a payment, quite often taxpayers respond to balance due notices via telephone, correspondence or on-line to address other issues,” wrote Faris R. Fink, the commissioner of the IRS’s Small Business/Self-Employed Division. “In these instances, it may take additional time to respond dependent upon the issue and how the account is being resolved. The timeframe between notices needs to reflect all types of issues and responses, and allow the Service to respond appropriately before the next notice is issued to avoid causing undue burden on the taxpayer or the Service.”

TIGTA argued, however, that the IRS already has controls in place to prevent the next notice from being sent when taxpayers’ correspondence is being processed.

2010 TAX TIPS

A.D.O.B.E. Meeting in Gold Canyon, AZ

THE TOP 8 TAX QUESTIONS FROM A GOLD CANYON RESIDENT

Some of my friends have taken the RMD’s from their retirement accounts, and others have told me that there is no need to take them this year.  Should I be taking the RMD’s this year?

Yes; If you are over 70 1/2 years old as of April 1, 2010, all employer sponsored retirement plans, including profit-sharing plans, 401(k) plans, 403(b) plans, and 457(b) plans , as well as traditional IRAs and IRA-based plans such as SEPs, SARSEPs, and SIMPLE IRAs have an RMD for 2010.  A RMD is not required to be taken for 2009.  If an individual attained age 70 ½ in 2009 no distribution will be required to be made by April 1, 2010; however, the RMD for 2010 will be required to be made by December 31, 2010.

Will the IRS pay for me to play Golf?

Yes, well some of it; starting in 2009, the IRS has a special credit available for Qualified Plug-in Electric Drive Motor Vehicles on form 8936.  The credit ranges from $2500 to $7500 depending on the type of golf cart you buy.  Please check with the golf cart dealer and your tax accountant for more information on qualifying vehicles.

Will the IRS pay for my home improvements?

Yes, if the improvements qualify; there are many residential energy efficient improvements, such as A/C units, Windows, Doors, Water Heaters, etc that have credits up to $1500 on primary residences.  In addition, certain home improvements, like ramps, railings, even pools may be deductible as medical expenses.

How can I receive tax free money from the equity in my home?

You’ll need to set up a Reverse Mortgage, which is a way of tapping into home equity without creating monthly payments. Instead of making payments, the cash flow is reversed and you receive payments from the bank.  This money is Tax Free, creating ways to decrease other income items, such as Social Security Income, Pensions, etc., which in turn creates a huge tax savings.

I heard many times that the tax rates are increasing, but what can we expect for 2010-12?

On Dec 17, 2010, President Barack Obama extended the Bush Tax Cuts through 12/31/12.  This means that the long-term capital gains & qualified dividend tax rate will be 0% & 15%, which is the same as in the last few years.

Are the Real Estate & New Car Sales Taxes still deductible in excess of the standard deduction?

In 2008 & 2009, certain taxes paid added to the Standard Deduction.  So a married person was able to claim the new car sales tax and up to $1000 of RE taxes paid in 2009.  However, this will not continue in 2010, but amendments can be made to recoup the tax savings from prior years.

My grandson needs a new car so he can drive to school and impress his friends.  How do I give him a car and not suffer taxes on it?

The annual gift tax exclusion for 2010 & 2011 is $13,000, so make sure you buy him a Sentra.

How do I tell Arizona how to spend my taxes and earn interest as well?

Arizona Residents can donate money to certain charities & schools for an AZ credit.  Plus, they can also use the deduction if they itemize their deductions.  For example, a married person with a 15% Federal Tax Rate makes a $400 donation to AJ High.  AZ gives the client a $400 tax credit, plus he has a $60 savings on his Federal Return (i.e. he donates $400, and receives $460 back).