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Tax Day still on the horizon in 5 states

How accommodating is your state's tax system? Kiplinger lists the top 10 most tax-friendly states.

Most U.S. taxpayers are breathing a sigh of relief as this week winds down. They made it through Tax Day 2019, getting their annual federal return to Uncle Sam.

Millions also filed their state returns at the same time. They live in the 43 states and District of Columbia that collect some sort of personal income tax.

The majority of those state tax departments follow the Internal Revenue Service's filing time frame.

But not all.

Five states have return due dates that are a tad later than the mid-April federal deadline. They are:

• Hawaii, April 20 
• Delaware, April 30 
• Iowa, April 30 
• Virginia, May 1 
• Louisiana, May 15 

Weekend rules apply: Don't freak out Aloha State taxpayers. You don't have to get your Form N-11 to the Hawaii Department of Taxation by tomorrow.

But you might have to work on it over the weekend.

Since Hawaii's April 20 state tax return filing deadline falls on a weekend this year, you get until the next business day. That's Monday, April 22.

And a quick reminder for all y'all in the First, Hawkeye, Old Dominion and Pelican States. If you didn't already file your state returns when you submitted your federal taxes, you need to start looking at your state's tax requirements now.

Your state's tax deadline will be here before you know it.

File for free: The good news is that all of these states offer free online filing for their residents.

Remember, though, that if you owe and pay by credit card, those payments are handled by private vendors and they collect a fee for getting your money to your state tax collector.

Get state free file details at the individual state tax departments' websites. The links in the bullet list above will take you there.

You also might find these items of interest:

• Don't forget about your state taxes
• Dakota residents have biggest federal tax bills, says study
• Unpaid state & federal debts could mean smaller IRS refunds

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source https://www.dontmesswithtaxes.com/2019/04/tax-day-still-on-the-horizon-in-5-states.html

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How about making April 30th Celebrating Taxpayers Day?

How about making April 30th Celebrating Taxpayers Day? 

A few things lead me to suggest this. The reasons mostly tie to my recent research and writing on improving transparency of our tax systems.*  I like all principles of good tax policy (I hope we all do). I think that two on the AICPA set of principles of good tax policy need more attention because doing so will help tax systems to better meet the other ten principles the AICPA promotes. These two principles:

• Transparency and visibility - Taxpayers should know that a tax exists and how and when it is imposed upon them and others.
• Accountability to taxpayers - Accessibility and visibility of information on tax laws and their development, modification and purpose are necessary for taxpayers.

If people better understand our tax rules and policies, they are more likely to question why, for example, a special rule exists or was introduced or enacted, why permanent or temporary, how a deduction benefits those in higher brackets more than those in lower brackets (unless there is a phase-out), marginal tax rates and relevance, and that the amount of one's refund has little to do with their total tax liability. They would ask better questions of elected officials and those running for office. They would be better aware of the taxes they and others owe. And, hopefully, compliance would improve and be something we are proud of and celebrate.

Here are three recent events that lead me to suggest starting a Celebrating Taxpayers Day.

1. IRS Commissioner Rettig issued a message on April 12 thanking taxpayers. The first two paragraphs follow:

"As the tax filing deadline approaches on April 15, I’d like to thank taxpayers for taking the time to file and pay their taxes. Our nation’s tax system is built around the concept of voluntary tax compliance, meaning citizens comply with their civic duty each year by preparing and filing their taxes – without direct government intervention.
  This principle has helped make our tax system a model for the entire world. Thanks to taxpayers, this system helps fund our great nation. Each year, 95% of the gross receipts of our country flows through the IRS – about $3.5 trillion last year – funding critical aspects of the U.S., ranging from roads and schools to the nation’s military."

Why not make this "thank you" an annual event on a specified date with an explanation of why taxpayers should be thanked, the importance of voluntary compliance, and seize an opportunity to build and support positive tax morale.

2. In my research I came across a 2015 OECD report, Building Tax Culture, Compliance and citizenship: A Global Source Book on Taxpayer Education. It lists activities of 28 developing countries for promoting tax compliance. A few of them have celebration days. For example, Rwanda has an annual Taxpayers Day celebrating compliance and helping citizens understand and appreciate how taxes and the country's development are connected. The president officiates at the event and a report on tax revenue data and tax agency challenges is released. Bangladesh holds a National Income Tax Day 15 days before the tax due date. There are street processions, workshops, conferences and tax clinics. They also show documentaries and dramas on taxation. 

   Celebrating Taxpayers Day in the U.S. could be educational and a reminder of the importance of taxes to our economy and society. It could also be a day where state and local governments help explain their taxes and budgets to their citizens, an opportunity for debates on current tax issues, and release of important government reports about our tax and budget systems. All levels of government release many tax and budget reports throughout the year, why not highlight some key ones on April 30 to draw greater attention to them?

3. Our tax gaps are growing - The IRS estimates the federal tax gap at $458 billion per year. This is more than we collect from the corporate income tax even before the corporate rate was lowered by the Tax Cuts and Jobs Act. A report from the Treasury Inspector General for Tax Administration (TIGTA), Expansion of the Gig Economy Warrants Focus on Improving Self-Employment Tax Compliance (2/14/19) reports some alarming data that indicates we need greater taxpayer education and to better support positive taxpayer morale. Among many findings was that 25% of individuals in a sample of 3.8 milion gig workers filed a 1040, but didn't report their gig income on either the other income line or Schedule C. And, 13% with self-employment tax income who received Form 1099-K did not include Schedule SE or pay their SE tax with their 1040. The IRS also found a 237% increase from 2012 to 2015 in discrepancies between Forms 1099-K filed and what was reported on Forms 1040. 

    A 2018 report from the California Franchise Tax Board found that about 70% of gig economy service providers receive no tax reporting form, which increases non-compliance. With understanding of tax rules and recordkeeping low, compliance without reporting forms become a bigger challenge and frustration. A 2018 QuickBooks survey found that 32% of self-employed individuals admit they don't report all of their income.

The above threee items indicate to me that a Celebrating Taxpayers Day would be a positive step in building respect for our tax systems, building a culture of filing and paying and being proud of that fact, and improving understanding of our tax systems. And, hopefully have some fun with it!

Why April 30?  Well, people are still busy on April 15 filing and sometimes due to weekends and Emancipation Day, filing day falls on April 16 or 17 or 18.  April 16 is Emancipation Day (the day in 1862 when President Lincoln signed an emancipation decree for the District of Columbia). April 30 gives preparers time to recover, and individuals getting refunds to hopefully have them in time for the celebration. In history, April 30 is the day George Washington was inaugurated (1789), the U.S. Navy was formed (1798), San Jose State University formed** (1857), the ice cream cone was unveiled in the U.S. at the World's Fair in St. Louis (1904), and the World Wide Web emerged in the public domain by Tim Berners-Lee (1989) and its source code was released to the public in 1993.

Yes, there is something called Tax Freedom Day® by the well-respected Tax Foundation. They describe this day as the one marking "how long Americans as a whole have to work in order to pay the nation’s tax burden." For 2019, it is April 16. It isn't a national celebration day though. Also, this information is useful, but I find it is easily misunderstood. Most people do not work until April 16 to pay their taxes but think they do when they hear this information, which harms understanding of our tax system. But it would be a good topic for discussion for April 30 Celebrate Taxpayers Day, to help improve tax literacy and transparency.

So, Celebrating Taxpayers Day on April 30. What do you think?


*See for example, Nellen, "'Oh, I See': Suggestions for Greater Tax Transparency," State Tax Notes, 11/20/17. Also, Nellen, Suggestions for Improved Transparency and Accountability of California Taxes and Related Information, 10/12/18.

**I'm not suggesting April 30 for the SJSU connection. In fact, I wasn't focused on the exact date of the founding of Minns' Evening Normal School (how SJSU started in San Francisco); on campus, we all just say SJSU was founded in 1857 (btw, I'm one of SJSU's historians).

source http://21stcenturytaxation.blogspot.com/2019/04/how-about-making-april-30-celebrating.html

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Tax Reform Ideas to Reflect How Small Businesses Operate in the Modern World

The Tax Cuts and Jobs Act brought several improvements for small businesses, most notably, favorable accounting methods such as use of the cash method and not having to deal with the Unicap rules. The AICPA Tax Section recently posted a position paper noting 13 more changes that would further help modernize the Code to reflect how small businesses operate. Some of these would more completely simplify what Congress started with the TCJA.

For example, the TCJA increased the Section 179 expensing amount to $1 million, adjusted for inflation annually. But, despite the fact that intangibles are important to all sizes of businesses today (and for the past two decades), it only applies to tangible assets (and off-the-shelf software), not intangible assets, such as acquisition of a patent or domain name.

The TCJA also allows for use of the cash method by businesses with average annual gross receipts in the prior 3-year period of $25 million or less ($26 million starting in 2019). Yet, despite the higher Section 179 amount and the use of the cash method, a small business might still be amortizing such items as acquired intangibles, start-up expenditures and organizational expenditures.

Here is the list of the 13 items from the AICPA Tax Section:

1. Expand section 179 to also include intangible assets
2. Further simplify accounting method rules for small businesses (such as allowing completed contract accounting).
3. Increase the deduction thresholds under sections 195, 248 and 709 and adjust them for inflation.
4. Simplify retirement plan options and rules for self-employed individuals.
5. Modernize the definition of tax shelter (the one used in the TCJA is from 1986 before we had the passive activity loss limitation rules and before LLCs were used in all states as a common business vehicle).
6. Repeal the individual and estate and trust AMT - the corporate AMT was repealed; this should have also have at least been done with respect to business preferences for all taxpayers.
7. Relax the exclusive use requirement for a home office deduction (anyone taking their smartphone into their home office likely has violated the exclusive use requirement).
8. Allow a deduction for health insurance of self-employed individuals in computing self-employment tax.
9. Increase the current, longstanding $400 self-employment earnings threshold.
10. Provide similar treatment for all businesses with respect to deducting state and local income taxes - corporations can deduct all of their taxes, all businesses should be allowed the same treatment. Today, the $10,000 SALT cap also applies to income taxes attributable to an individual's sole proprietor, partnership or S corp income.
11. Limit section 461(l) and the 80% limitation on NOLs of section 172 for start-up businesses.
12. Repeal section 465.
13. Require all estimated tax payments to be due on the 15th day after quarter end.

For details, see the complete position paper here.

I think it's a great list of ideas (truth in writing - I proudly chair the AICPA Tax Executive Committee who assembled this list with help from other tax section volunteers and staff). Blog posts are my own.

What do you think?

source http://21stcenturytaxation.blogspot.com/2019/04/tax-reform-ideas-to-reflect-how-small.html

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Federal gas tax increase gaining support, but political potholes remain

Driving vacations are much more enjoyable when gasoline is cheap and the person behind the wheel isn't as amped up as this guy!

The surest sign that summer is on the way is not temperature changes, but increasing gasoline prices.

Oil companies traditionally take advantage of the seasonal shift, as families here in Texas and elsewhere across the country load up their cars — and fill up the gas tanks — to hit the road.

Not too long ago, I topped off my tank with regular at $1.89 per gallon. Today the lowest price I've seen in the area is $2.36.

True, that's about half of what we saw at gas stations a couple of years ago. But we've been spoiled by low pump prices.

That may be why some lawmakers in Washington, D.C., are talking about, gasp, raising the federal gas tax.

Fuel tax timing: One school of thought is if they can slip the tax through while fuel prices are relatively low, maybe the increase won't cause to much of an uproar, especially if it is phased in over several years.

That's the plan now being discussed by both Republicans and Democrats on Capitol Hill.

It's also gotten the support the U.S. Chamber of Commerce, the American Trucking Associations and, back in 2017, even Donald J. Trump.

When Trump met with trucking industry representatives and drivers two years ago, he indicated he was amenable to increasing the gas tax as long as the funds went to highway projects.

The federal gas tax has been stuck at 18.4 cents per gallon since 1993. The corresponding diesel fuel rate also has remained at 24.4 cents since then.

Opponents of any federal gas tax increase
fear it would push pump prices
into these extraordinary ranges.

Most drivers opposed: Professional truck drivers are likely the only motorists who support the increase.

Most Americans, however, have consistently balked at the prospect of paying more for gas due to a fuel tax increase. We love our fossil-fueled cars (sorry Tesla and other electric vehicle makers) and fuel price increases can have a major impact on many drivers' budgets.

I get it. I grew up in West Texas where a round trip of 100 or more miles to run errands or eat at a fancy restaurant was (and still is) not unusual.

Also, outside of major cities, sparse public transportation options (yes, I'm looking at you, Austin, Texas) makes driving the only viable way for a lot of folks to get around.

But the realization that America's bridges and roads are in alarming disrepair — insert your own infrastructure week joke here — is starting to sink into the public and political consciousness.

States taking fuel tax lead: Many states have recently (both in 2017 and 2018) bumped up their fuel taxes. The latest increase came this week in the politically important heartland state of Ohio.

The increases are needed, say the supporters, because newer vehicles get better mileage, meaning drivers don't fill up as often, cutting into the fuel tax revenue.

Others jurisdictions are spreading the fuel tax burden by imposing fees on electric vehicles since those drivers use the same roads, but escape the gas tax completely.

Some have even experimented with a per-miles-traveled tax. A similar national demonstration project has been proposed by a couple of House members, one a Republican and the other a Democrat.

But when it comes to the national fuel tax rates established 26 years ago, most federal lawmakers have resisted any increases.

Now, however, it's starting to look like some are ready to take a gas tax detour.

Replenishing the road fund: Part of the political shift is coming from industry support of the fuel tax increase.

Private sector buy-in has always been important, so much so that early in his presidency Trump proposed formal partnership between government and investors who would finance projects in return for revenue from tolls or other user fees.

That's still an outside possibility, but most in the public and private arenas are leaning toward the old-fashioned revenue raising option. They want to increase the federal fuels tax amounts to bulk up the Highway Trust Fund (HTF).

The HTF is where Uncle Sam gets the money to pay for roadways, bridges and mass transit. It was established in 1956 to provide a more dependable source of federal funding for the construction of the interstate highway system.

Dependable, however, is a relative term.

The HTF's two sub-funds, the Highway Account that's largely devoted to construction and maintenance of highways and bridges and the Mass Transit Account that's used toward buses, rail, subways, ferries and other types public mass transit.

The balances of both of those funds have been dropping.

Source: Federal Highway Administration, U.S. Department of Transportation

The reason is because the HTF receives around 90 percent of its revenue from the federal fuel excise taxes. Taxes on tires and heavy vehicles (trucks) make up the rest of the fund’s income.

Since the federal gas tax is not pegged to inflation and has not been raised since 1993, the purchasing power of the revenue has eroded over time. If the current fuel tax rates had been indexed to inflation, the Congressional Research Service says that in 2017 the amounts would have been 31.7 cents for a gallon of gas and 42.1 cents for diesel.

The Peter G. Peterson Foundation estimates that the HTF's ability to pay for transportation projects has been cut by more than 40 percent since the last tax rate hike.

Private sector support: That's why many on Capitol Hill and beyond are supporting a gas tax increase.

The tax hike option is the easiest (relatively speaking; more on this in a minute) to implement and have minimal administrative costs since they already are being collected.

The U.S. Chamber of Commerce has endorsed a 25-cent increase over five years. The American Trucking Associations has endorsed a 20-cent increase over four years.

Leaders of the groups made their arguments last month at a Ways and Means Committee hearing on, as the committee's chairman described it, "our nation's infrastructure crisis."

Chamber President Thomas Donohue told Congress it should increase both the gas and diesel taxes by a total of 25 cents, then index the new tax rates for inflation so that there would be no need to revisit this issue in the future.

"The proposal would raise $394 billion over the next 10 years, which would be invested in our highways, bridges, and transit systems in a fiscally responsible fashion," said Donohue.

Chris Spear, president and CEO of the American Trucking Associations (ATA), offered the lawmakers a similar proposal:

"ATA's proposed solution to the highway funding crisis is the Build America Fund. The BAF would be supported with a new 20 cent per gallon fee built into the price of transportation fuels collected at the terminal rack, to be phased in over four years. The fee will be indexed to both inflation and improvements in fuel efficiency, with a five percent annual cap. We estimate that the fee will generate nearly $340 billion over the first 10 years. It will cost the average passenger vehicle driver just over $100 per year once fully phased in."

Earlier this month, Spear reiterated his group's support of a higher gas tax and placed the possibility of passage on Trump.

"If the president puts his full weight behind this and wants infrastructure and wants real money to fund it, I am confident that the votes are there, both chambers, House and Senate," Spear said on an April 3 conference call with reporters.

Political potholes ahead: But any tax increase, even one characterized as a user fee, faces obstacles. Yep, here's that political component I mentioned a few paragraphs earlier.

Although members on both sides of the aisle support to some degree an increase in the gas tax, it's unclear whether there are enough to ensure passage of even a modest hike in such a politically polarized Congress.

That concern is exacerbated by the 2020 election. It will be here before we realize. Please, please hurry. I am already sooooo tired of the campaigning by all White House wannabes. But I digress.

No candidate or party, especially in a presidential election year, wants to be tagged in campaign ads as the embracer of any tax increase, even one that would ultimately improve services most of us use on a daily basis.

The best chance any gas tax increase could happen would be for it to pass this year, providing time for any drivers'/voters' anger to subside before Tuesday, Nov. 3, 2020.

You also might find these items of interest:

• Mileage tax deduction rates for 2019 bumped up a bit
• Auto tariffs could cost low-income earners tax cut money
• RVs; Comfy, kitschy and possibly tax deductible

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source https://www.dontmesswithtaxes.com/2019/04/federal-gas-tax-increase-gaining-support-but-political-potholes-remain.html

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GM joins Tesla in losing value of electric vehicle tax credit

Tax credits for buying a Chevrolet Bolt, left, or Volt are going down on April 1. (Photo courtesy Driving Canada)

The climate change debate rages on in political circles, but on U.S. roadways, many folks are voting, as the old saying goes, with their pocketbooks. They're buying more energy efficient and less polluting cars.

And Uncle Sam has been part of that sales campaign.

A federal tax credit that can be as much as $7,500 has convinced some Americans to trade in their gas guzzlers for electric autos.

That tax break, however, doesn't last forever. Once an electric vehicle becomes popular, based on its total number of sales, the tax credit is reduced.

That happened first to Tesla, which lost some of its credit value on Jan. 1.

General Motors joins the more sales/less tax break club in less than a week. The credit for its electric vehicles, both of which wear the company's Chevrolet bowtie badge, will start phasing out on April 1.

Credit sales pitch: The biggest overall winner has been Tesla, the electric auto brainchild of billionaire businessman Elon Musk.

But more mainstream U.S. car companies are following the Tesla route, albeit while hedging their bets.

American drivers remain committed to SUVs, in part because gas prices have been relatively low for years, so the U.S. auto industry has shifted its production to those models.

However, smaller and less fossil fuel dependent vehicles are popular globally. To compete in those markets, American automakers also are keeping some electric vehicles, referred in the industry as EVs, on their assembly lines.

They're hoping that U.S. drivers, at least those in more congested cities, will eventually trade in their large autos for the smaller EVs.

Government help for domestic market: In the short-term, Uncle Sam has been helping underwrite that U.S. EV sales plan.

The Energy Improvement and Extension Act of 2008 included a tax credit for, in the legislation's words, plug-in electric drive motor vehicles. Over the years, the credit has been extended, basically offering EV buyers a tax break for purchasing eligible passenger vehicles and light trucks.

It's not a perfect sales solution. The tax credit doesn't affect an auto's purchase price, but rather the buyer collects it against his or her taxes when filing a tax return the year after buying the EV.

But it still is used as a sale pitch. And the opportunity to reduce your overall tax bill by as much as $7,500 — remember, a tax credit offers a dollar-for-dollar reduction of the total tax you owe — for buying an IRS-approved EV could help convince a buyer to choose one electric car make over another.

More sales means smaller credit: All good things and many tax breaks, however, eventually must end. That's the case for EV credit, which is losing its value for Teslas and Chevy Volts and Bolts.

Like the tax credit for hybrid vehicles upon which the EV break was based, the all-electric auto tax credit is phased out once a car maker hits certain a specific sales mark. For EVs that's 200,000.

Last year, Tesla became the first to face the credit phaseout when it reported to the IRS that it had sold more than 200,000 EV-credit-eligible vehicles eligible during the third quarter of 2018.

Tesla credit reductions schedule: That triggered the start of Tesla's credit phaseout, beginning with EVs sold on and after Jan. 1, 2019. From the start of this year through June, the Tesla tax credit will be $3,750.

Tesla Model S

On July 1, the credit will be reduced to $1,875 for the remainder of the year. After Dec. 31, Tesla buyers won't get a federal tax credit.

GM credit reductions schedule: Now GM joins Tesla in the EV credit reduction. When GM sold its 200,000th qualifying electric car in the final quarter of 2018, that started the credit drop clock ticking.

You basically have this week to get the full $7,500 for buying a new Chevy Bolt or Volt. Come next Monday, April 1, the full $7,500 federal tax credit for GM electric cars will no longer apply.

From April 1 through Sept. 30, the credit will be $3,750 for the GM EVs.

On Oct. 1, the credit will drop to $1,875 for the next two quarters. After March 31, 2020, there will no longer be an EV tax credit for the GM autos.

Political fight ahead: The phaseout of the credits could be the least of the EV market's problems.

Many on Capitol Hill are opposed to the tax breaks. Some don't think it's a good general tax policy. Other think the auto industry has received enough help in recent years. Some believe the credit is a costly sop to the climate change sector.

Congressional Democrats have leaned toward making the credits unlimited or extending them for another period of time to renew the benefits for successful EV producers like GM or Tesla.

House and Senate Republicans tend to favor ending the EV program, although some int he GOP have argued for one final renewal period so that they will uniformly expire next decade.

Donald J. Trump has chosen his side. Trump's latest federal budget proposal calls for an end to the credit. The budget's argument is that it would save the United States $2.5 billion in the next 10 years.

If, however, you are committed to an electric auto and don't want to wait on the fate of the EV tax credit, you probably should act now. Like this week if you're leaning toward an electric Chevy.

You might also find these items of interest:

• Electric vehicle tax credits favor the wealthy
• 17 states now impose some fees on electric autos
• As Tesla heads toward solar orbit, Senators seek expanded path for terrestrial electric vehicle tax credits

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source https://www.dontmesswithtaxes.com/2019/03/gm-joins-tesla-in-losing-value-of-electric-vehicle-tax-credit.html

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2019's Dirty Dozen tax scams repeat last year's list

Unfortunately for taxpayers and the Internal Revenue Service, there's nothing new under the sun when it comes to tax scams.

Fortunately for taxpayers and the IRS, the tax agency and its Security Summit partners are still on top of the most common scams that continue to pop up in some form year-round.

These 12 schemes, which have been dubbed the Dirty Dozen tax scams, get added attention, of course, during the main tax filing season.

During these hectic days from Jan. 1 — yes, some folks are ready to file that soon — through April 15, millions of us are trying to get our 1040s to Uncle Sam so we can, in many cases, collect our refunds despite some issues connected to the new tax laws.

Tax criminals try to short cut our legal filing efforts, using a variety of scams to steal personal info and tax identities in order to file for fraudulent refunds.

Repeat offenders: Crooks are creative, but only to a point when it comes to tax scams.

They often fine tune or tweak a con that's worked in the past. But they rarely come up with totally new tricks to try to steal our identities and tax money.

That's why the 2019 version of the Dirty Dozen tax scams contains schemes we've seen before.

As in past years, the schemes run the gamut from simple refund inflation scams to complex tax shelter deals.

Obviously, though, they keep working.

And there's a common theme throughout all the criminal efforts. Scams put taxpayers at risk.

So the IRS, and by extension the ol' blog and my media colleagues, are putting the word out once again about tax trickery to be on guard against this year.

Here goes, with recaps of the 12 scams and links to the IRS announcements that have more details on each.

1. Phishing: Taxpayers should be alert to potential fake emails or websites looking to steal personal information. The IRS will never initiate contact with taxpayers via email about a bill or tax refund. Don’t click on one claiming to be from the IRS. Be wary of emails and websites that may be nothing more than scams to steal personal information. (IR-2019-26)

2. Phone Scams: Phone calls from criminals impersonating IRS agents remain an ongoing threat to taxpayers. The IRS has seen a surge of these phone scams in recent years as con artists threaten taxpayers with police arrest, deportation and license revocation, among other things. (IR-2019-28)

3. Identity Theft: Taxpayers should be alert to tactics aimed at stealing their identities, not just during the tax filing season, but all year long. The IRS, working in conjunction with the Security Summit partnership of state tax agencies and the tax industry, has made major improvements in detecting tax return related identity theft during the last several years. But the agency reminds taxpayers that they can help in preventing this crime. The IRS continues to aggressively pursue criminals that file fraudulent tax returns using someone else's Social Security number. (IR-2019-30).

4. Return Preparer Fraud: Be on the lookout for unscrupulous return preparers. The vast majority of tax professionals provide honest, high-quality service. There are some dishonest preparers who operate each filing season to scam clients, perpetuate refund fraud, identity theft and other scams that hurt taxpayers. (IR-2019-32)

5. Inflated Refund Claims: Taxpayers should take note of anyone promising inflated tax refunds. Those preparers who ask clients to sign a blank return, promise a big refund before looking at taxpayer records or charge fees based on a percentage of the refund are probably up to no good. To find victims, fraudsters may use flyers, phony storefronts or word of mouth via community groups where trust is high. (IR-2019-33)

6. Falsifying Income to Claim Credits: Con artists may convince unsuspecting taxpayers to invent income to erroneously qualify for tax credits, such as the Earned Income Tax Credit. Taxpayers should file the most accurate tax return possible because they are legally responsible for what is on their return. This scam can lead to taxpayers facing large bills to pay back taxes, interest and penalties. (IR-2019-35)

7. Falsely Padding Deductions on Returns: Taxpayers should avoid the temptation to falsely inflate deductions or expenses on their tax returns to pay less than what they owe or potentially receive larger refunds. Think twice before overstating deductions, such as charitable contributions and business expenses, or improperly claiming credits, such as the Earned Income Tax Credit or Child Tax Credit. (IR-2019-36)

8. Fake Charities: Groups masquerading as charitable organizations solicit donations from unsuspecting contributors. Be wary of charities with names similar to familiar or nationally-known organizations. Contributors should take a few extra minutes to ensure their hard-earned money goes to legitimate charities. IRS.gov has the tools taxpayers need to check out the status of charitable organizations. (IR-2019-39)

9. Excessive Claims for Business Credits: Avoid improperly claiming the fuel tax credit, a tax benefit generally not available to most taxpayers. The credit is usually limited to off-highway business use, including use in farming. Taxpayers should also avoid misuse of the research credit. Improper claims often involve failures to participate in or substantiate qualified research activities or satisfy the requirements related to qualified research expenses. (IR-2019-42)

10. Offshore Tax Avoidance: Successful enforcement actions against offshore cheating show it’s a bad bet to hide money and income offshore. People involved in offshore tax avoidance are best served by coming in voluntarily and getting caught up on their tax-filing responsibilities. (IR-2019-43)

11. Frivolous Tax Arguments: Frivolous tax arguments may be used to avoid paying tax. Promoters of frivolous schemes encourage taxpayers to make unreasonable and outlandish claims about the legality of paying taxes despite being repeatedly thrown out in court. The penalty for filing a frivolous tax return is $5,000. (IR-2019-45)

12. Abusive Tax Shelters: Abusive tax structures including trusts and syndicated conservation easements are sometimes used to avoid paying taxes. The IRS is committed to stopping complex tax avoidance schemes and the people who create and sell them. The vast majority of taxpayers pay their fair share, and everyone should be on the lookout for people peddling tax shelters that sound too good to be true. When in doubt, taxpayers should seek an independent opinion regarding complex products they are offered. (IR-2019-47)

While the scams are repeats, they still should be taken seriously.

"Identity theft is a pervasive crime and stopping it remains a top priority of the IRS," said IRS Commissioner Chuck. "The IRS, with the help of our Security Summit partners, continues to make progress in this area, but we need to continue our significant efforts to protect taxpayers and assist those who have been a victim of identity theft."

The 12 criminal tax enterprises also earn this week's By the Numbers honor.

Dealing with a stolen identity: If you do fall for one of these tax scams, don't beat yourself up. Things happen, especially when crooks use taxes as hook. They know we are vulnerable at tax time, worrying whether we're missing something or making a costly mistake.

Do, however, take steps to mitigate the damage done by the scam.

If your e-filed return is rejected because someone has already filed using your Social Security number, submit IRS Form 14039, Identity Theft Affidavit. You'll need to use the form's fillable version at IRS.gov, print it, then attach it to your paper return and mail the material to the IRS.

Sometimes the IRS contacts possible tax identity theft victims before they file. This IRS outreach will be via a written notice. When you get it, respond immediately by calling the number provided in the notice.

And if you previously contacted the IRS regarding a tax fraud situation and are still waiting for a resolution, contact the agency's specialized identity theft assistance office toll-free at (800) 908-4490.

The IRS also has a special identity theft Web page with links to other information, both within the agency and outside resources, about coping with identity theft.

Among the advice on that page is the theft, are the Federal Trade Commission's identity theft recommendations:

• File a complaint with the FTC at identitytheft.gov.
• Contact one of the three major credit bureaus to place a fraud alert on your credit records:
• • Equifax, www.Equifax.com, 800-525-6285
  • Experian, www.Experian.com, 888-397-3742
  • TransUnion, www.TransUnion.com, 800-680-7289
• Contact your financial institutions and close any financial or credit accounts opened without your permission or tampered with by identity thieves.

The other solid piece of advice is to be skeptical. If you get an unsolicited call, whether it's about your taxes or other personal or financial situations, don't provide any information.

If you've sure it's a scam, simply hang up.

If you think you might have a tax or other financial matter that needs attention, you initiate the calls to the proper offices.

By being alert, you can protect yourself and help the IRS and its Security Summit partners continue to cut into these criminals.

You also might find these items of interest:

• Free credit freezes help with ID theft, but tax fraud prevention requires more
• Tax scam telephone calls seem fewer so far, but are likely to increase as April 15 nears
• Identity and tax thieves don't discriminate by age, targeting both youngsters and the elderly

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source https://www.dontmesswithtaxes.com/2019/03/tax-scams-irs-dirty-dozen-2019.html

IRS offers more underwithholding tax penalty relief, but taxpayer ire over smaller refunds lingers

Top Tax Scams this Tax Season

Obamacare 2018 tax year filing requirements

Summer day camps offer fun for kids, tax break for parents

2019 Federal Tax Regulations List

Since 2011, I've created and maintained websites that list the federal tax regulations issued to date for the year. Perhaps that sounds a bit tax nerdy, but I find it helps me get ready access to current regs and the preamble. It also helps with the tax update presentations I do throughout the year, providing that as a resource to attendees.  The webpage for the 2019 regs has links for all years back to 2011. Note that it's also a good way to see how many tax regs are issued each year. I hope you find it useful.

What do you think?

source http://21stcenturytaxation.blogspot.com/2019/03/2019-federal-tax-regulations-list.html

Summer day camps offer fun for kids, tax break for parents

6 tax tips for divorcing (or divorced) couples

6 tax tips for divorcing (or divorced) couples

FinCEN, FBAR and other tax costs that prompt or slow U.S. expatriations

More than $1.4 billion in tax refunds awaiting claims by taxpayers who didn't file in 2016

Taxes on your St. Patrick's Day green beer

Dakota residents have biggest federal tax bills, says study

Nobody likes to owe taxes at filing time. And if you owe too much, you could face added penalties for not having enough money withheld or underpaying estimated taxes throughout the year.

But every year, lots of folks find they have to write a check to the U.S. Treasury or set up a payment plan with the Internal Revenue Service.

The financial technology company SmartAsset.com recently took a look at where the U.S. taxpayers have the biggest tax bills.

High plains tax bills: Sorry, Dakotans. You are the unlucky winners.

Yep, residents of both South and North and South Dakota owed the most based on SmartAsset's analysis. To create the 50 states plus D.C. rankings, the company analyzed IRS data on all 50 states and the District of Columbia, focusing on the number of tax returns that had underpayments and the total amount of underpaid taxes.

That calculation shows North Dakota atop the owing list with an average tax payment equaling $6,806.

South Dakota takes second place, averaging about $100 less at $6,697.

The study gets this weekend's Saturday Shout Out. Check it out to see find out your state's tax-owing average and how it compares to the other jurisdictions.

To whet your reading appetite before you click on over, here are a couple more highlights:

• Higher-income states tend to owe more taxes. Seven of the top-10 places with the largest tax bills are also some of the highest earning in the country. Massachusetts, Connecticut, Washington, New Jersey, Washington D.C., California and New Hampshire all rank in the top 15 for median household income.
• States with more self-employed workers have slightly higher tax bills. One of the pitfalls of being self-employed is having to pay your own taxes without automatic withholdings from every paycheck. The top-25 states with the highest average tax underpayment have an average self-employment rate of 10 percent. That figure is a slightly lower 9.5 percent in the bottom-25 states.

And this map of the top 10 tax owing states:

You also might find these items of interest:

• Owe Uncle Sam at tax time? Here are some ways to pay
• Where's your tax refund? Use IRS online tool to find out
• IRS offers tax penalty relief to some who didn't have enough withheld

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source https://www.dontmesswithtaxes.com/2019/03/north-and-south-dakota-federal-tax-bills-largest-in-united-states.html

No, that is not the Taxpayer Advocate Service calling in latest IRS impersonation tax scam

Ways to stymie tax identity theft attempts and scams

Are Online Reviews Hurting Your Business?

Tax breaks can help pay many college costs

Tech observation in President's FY2020 budget proposal for IRS

President Trump released his FY2020 budget proposal on March 12. [A Budget for a Better America – Promises Kept. Taxpayers First, page 82] It slightly increases IRS funding to “expand and strengthen tax enforcement.” Such efforts “are estimated to generate approximately $47 billion in additional revenue at a cost of $15 billion, yielding a net savings of $33 billion over 10 years.  The Budget also includes several proposals to ensure that taxpayers comply with their obligations and that tax refunds are only paid to those who are eligible, including:  improving oversight of paid tax preparers; giving IRS the authority to correct more errors on tax returns before refunds are issued; requiring a valid Social Security Number for work in order to claim certain tax credits; and in-creasing wage and information reporting.”

The budget also notes that there is $290 million for the IRS’ multiyear effort to modernize its IT. The report notes that while about 90% of individuals file electronically, most other interactions between the IRS and taxpayers is via the mail, “which slows the resolution of issues.”

That is a true and interesting observation. 89% of individuals e-file there return. Yet other interactions with the IRS will be by phone or the U.S. Post Office. Will IT modernization include taxpayer accounts where taxpayer not only pay their taxes but can also change withholding, make estimated tax payments, amend their return, etc.?

Today, March 13, the IRS issues a news release that $1.4 billion is waiting to be claimed by individuals who have not yet filed their 2015 returns! [IR-2019-38] If tax compliance were done virtually, with the IRS using data it has, the filing could be done automatically and refunds issued to bank accounts. Or at least the IRS could more easily reach taxpayer via a text message, for example, to let them know they need to file and are likely owed a refund.

What do you think?



source http://21stcenturytaxation.blogspot.com/2019/03/tech-observation-in-presidents-fy2020.html

Tax extenders get W&M hearing, but renewal unclear

Trump's FY 2020 budget proposes more IRS money

NTA suggests greater transparency - great ideas!

https://taxpayeradvocate.irs.gov/reports/2018-annual-report-to-congress/NTA-Purple-Book 

The IRS National Taxpayer Advocate's Annual Report to Congress released in February ( IR-2019-11(2/12/19) + Report) includes the 2nd edition of the “Purple Book” with 59 legislative recommendations to improve taxpayer rights and tax administration. Two of the recommendations aim to strengthen taxpayer rights. They also improve the transparency of the tax system, which is a principle of good tax policy.

The two recommendations:

1. Codify as Section 1 of the Internal Revenue Code:
        a. The Taxpayer Bill of Rights (at present, see Section 7803(a)(3)).
        b. A Taxpayer Rights Training Requirement, and
        c. The IRS Mission Statement

2. Require the IRS to issue all taxpayers a "receipt" that shows how their tax dollars are spent.

For details, see links and all 59 recommendations here.

These are great ideas as they bring greater attention to these important items to help taxpayer better understand the tax system and the federal budget. 

I recommend they go farther:

• Prominently display a link to the Taxpayer Bill of Rights on the IRS website (taxpayers won't read IRC Section 1, although I suspect the training requirement means IRS must help taxpayer to know of the TBOR).
• Create lesson plans for high schools that explain tax basics and the TB)R. The IRS already has some materials on its website, although most likely don't know it is there.
• A taxpayer receipt should be producible on the IRS website and lawmakers should be required to include a link on their websites. Individuals should be instructed where to find their tax liability on their 1040 and W-2 forms. The website should also have a tool for helping the individual estimate how much gasoline, alcohol, tobacco, airline, and other excise taxes they paid. And why not help them understand indirect taxes by including their share of the corporate income tax.
• The receipt should provide additional information such as:
• • Average and marginal tax rates and how they compare to other taxpayers.
  • Highlight tax breaks they received such as credits, itemized deductions such as the mortgage interest deduction, and exclusions such as employer-provided health care, etc. and the tax savings they derived from these preferences (perhaps even refer to them as subsidies).
  • Their share of the national debt (and others in their filing family).
  • Where to get more information to help them understand federal taxes and the budget.
  • Contact information for their elected officials.
  • I have more here - https://www.thetaxadviser.com/newsletters/2016/apr/transparency-for-individual-taxes.html.
    
• Update Section 7523 which requires Form 1040 instruction books to include a pie chart showing broad categories of federal revenues and another one showing broad categories of federal spending to be on the IRS website and linked on the webpage of other federal agencies and every member of Congress. For more, see my 2012 article on this topic.

I hope these recommendations are enacted. Our tax system and taxpayer benefits from greater transparency as people better understand their taxes and the system as a whole. They can ask better questions of their elected officials as to why rules are written the way they are, how the national debt will be paid down (and how we'll pay the growing interest expense on it).

What do you think?

source http://21stcenturytaxation.blogspot.com/2019/03/nta-suggests-greater-transparency-great.html

Alabama tornado victims' tax deadline now July 31

Picking the perfect tax software

Picking the perfect tax software

Sexual harassment victims can still deduct legal fees

Unpaid state & federal debts could mean smaller refunds

5 Ways to Keep Your Employees Motivated Through the Busy Tax Season

Tax help to take care of aging (and injury prone) parents

Senator demands details on Michael Cohen banking data privacy breach by IRS employee

How to get tax help for your natural disaster losses

Tax law changes mean March tax moves

Don't forget about your state taxes

Tax Season Communications Throughout the Season

2019's average tax refunds finally surpass 2018 amounts

It's taken a few weeks, four to be exact, but the 2019 tax season is finally catching up.

The latest Internal Revenue Service filing season statistics show that while most categories that the agency tracks each filing season are still lagging 2018 figures, the differences are starting to shrink.

And there's even better news for folks who are getting refunds.

The average check amounts issued through Feb. 22 are dramatically larger than the week before.

More notable, those average refund amounts have finally topped the averages of year ago.

Unpleasant tax refund surprises: In case you haven't been following the recent tax refund contretemps, here's a quick backgrounder.

Since the filing season opened on Jan. 28, many taxpayers have been unhappily surprised by refunds that are much less than they expected. And they've tended to lay the blame on the Tax Cuts and Jobs Act (TCJA) changes.

True, one reason for the smaller refunds (and in some cases unexpected tax bills) is due to paycheck withholding changes in order to reconcile them with the new tax law's reduced tax rates and revisions of tax breaks.

But another reason for the refund surprises is that despite warnings by the IRS and tax professionals and tax bloggers, taxpayers didn't adjust their personal withholding to account for the TCJA revisions.

That meant in many cases, they got the money as part of their pay throughout much of 2018 instead of as a refund now for over-withheld taxes.

Bigger refund checks, finally: Early IRS filing season data has underscored disgruntled refund recipients' frustration.

Just a week ago, the total amount of refunds issued were down almost 39 percent from the same time last year.

During that same period that end Feb. 15, the average refund sent to taxpayers, either as a paper check or directly deposited, also was down by around 17 percent from the 2018 amounts.

What a difference a week makes.

Data on filings through Feb. 22 show that the total refunds issued had increased.

More notable, the average check amounts finally surpassed those issued at the same time in 2018.

Week Ending	Feb. 23, 2018	Feb. 22, 2019	% Change
Total refund amounts issued	$125.7 billion	$121.2 billion	-3.6
Total refund average amount	$3,103	$3,143	1.3
Direct deposit amounts delivered	$120.7 billion	$117.2 billion	-2.9
Direct deposit average amount	$3,199	$3,226	0.8

Counting all refunds regardless of how they were issued, the average check for the filing season through last week was up 1.3 percent over last year, coming to $3,143.

Directly deposited refunds were even larger. They increased slightly (0.8 percent) to $3,226.

Slowly catching up: While the refund data is welcome, especially by recipient taxpayers and the GOP tax writers who've been trying to counter the TCJA blow-back, many of the filing numbers so far this year still are behind 2018's pace.

IRS processing of returns is 4.6 percent less than last year. That's actually not too bad, or surprising, since the agency is still the recovering from the backlog created by the longest federal government shutdown in U.S. history.

We taxpayers also bear some of the blame. So far, we've sent in 3.5 percent fewer 1040 forms to the IRS.

A category that's been trending upward for the last couple of filing seasons, taxpayers using software to prepare and file their returns themselves, also grew a bit.

Through Feb. 22, almost 26 million individual taxpayers completed and e-filed their taxes, a 0.9 percent increase over 2018 numbers for the same time frame and a 0.7 bump from the week before.

More online IRS visitors: The biggest winner, however, a month into this 2019 filing season is the IRS' website.

Through Feb. 22, nearly 233 million people clicked on IRS.gov seeking tax information and help. That's a 9.1 percent increase from the slightly more than 213 million visitors the site got at this point in 2018.

As usual, the weekly tax season statistics offer a whole lot of numbers.

But given the taxpayer outrage over smaller refunds, there was no question about what would get this week's early By the Numbers honors. Yes, honors plural.

The average total refund of $3,143 and direct deposit refund of $3,226 both earn the recognition.

I suspect many taxpayers, the IRS and GOP authors of the new tax law also are celebrating these amounts, too.

You also might find these items of interest:

• How to track down your tax refund
• What to do if your tax refund is wrong
• Tax refunds are nice, but savings provide a better payoff

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source https://www.dontmesswithtaxes.com/2019/03/average-tax-refund-check-amounts-in-2019-finally-surpass-2018-amounts.html