Many employers should be very concerned about how they hire contractors yet treat them as employees. The IRS has specific guidelines on how to classify a contractor verses an employee, some employers may have ignored (or are unaware) the guidelines in hopes that the letter or visit will never come. The audit in the past has been stimulated by a complaint from the contractor after they discover how much they owe in SE taxes. The changes in the tax receipts have changed this from a complaint driven process to a hunter process.
We have represented a number of clients who have been audited in this area. In one case the audit occurred after a contract employee claimed that they should have been classified as an employee. The result of the audit was in favor of our client, the contractor in this case was clearly free to set their own hours, work for other companies, and did advertised their trade to other companies.
This article is a good read.

http://articles.moneycentral.msn.com/Investing/top-stocks/blog.aspx?post=1563557&_blg=1,1563557

Another “tax firm” has closed its doors and left their trusting client’s in the lurch. According to their website, Effecture filed Bankruptcy on 9-25-09. If it sounds TOO good to be true , it is. The claims made on the late night TV ads are not true and if you call those firms, the person you will be talking with will be a sales person who understands only how to sell/trick you into agreeing to hire them so they can get a commission/percentage of your hard earned money. Be smart, check the BBB and online complaints about any company before you agree to hire them

Last July we received a visit from the an agent from the Department of the Treasury, he informed us that our company name IRS/State Tax Relief Associates, Inc was potentially in violation of a U.S. code regarding the misuse of Department of Treasury names, symbols, etc. The fact that the IRS approved our name years ago and apparently that the IRS was not even aware of the code makes this more amusing and the fact that hundreds of tax returns have been sent to IRS with our company name as preparer had no bearing on how the code was to be interpreted.

After several months of not hearing back, we contacted the agent to ask when we would receive the determination and he informed us he was still working on the file. We did get the chance to voice our frustration that time could spent on our name while dozens of “phony tax firms” were all over TV & the radio every day promising impossible outcomes and stealing from clients while the U.S. Treasury watched without interference was a strange to say the least. We met today to discuss what we should do and decided that a name change is inevitable so we have put the name change process into motion. Now we have to decide on what to change it to. This is a pain! We are sure there is a silver lining to this mess, guess we just have to look harder. More to come.

The IRS will make changes to Allowable Living Expenses, Transportation, Housing and Utilities, on October 2007.  The new standards are not completely known at this time, but the some of the changes are regarding health and living expenses, cell phone use, and transportation.  The IRS will have a new standard for health expenses for taxpayers under 65-years-old and thankfully a separate standard for taxpayers over 65-years-old.  The proposed changes for Allowable Living Expenses are vague at this point, the IRS is stating that “it will be more fair” for all taxpayers and that household income will not be determining factor anymore.  With transportation changes will be the area of the allowance for public transportation and operation costs for a second vehicle.  Cell phone expenses are now being included as an allowed expense. These changes will impact Offer In Compromise and Installment Agreements.  It is not known at this time of existing OIC’s will reviewed under the new standards

The Internal Revenue Service today alerted taxpayers to the latest versions of an e-mail scam intended to fool people into believing they are under investigation by the agency’s Criminal Investigation division.

The e-mail purporting to be from IRS Criminal Investigation falsely states that the person is under a criminal probe for submitting a false tax return to the California Franchise Board. The e-mail seeks to entice people to click on a link or open an attachment to learn more information about the complaint against them. The IRS warned people that the e-mail link and attachment is a Trojan Horse that can take over the person’s computer hard drive and allow someone to have remote access to the computer.

The IRS urged people not to click the link in the e-mail or open the attachment.

Similar e-mail variations suggest a customer has filed a complaint against a company and the IRS can act as an arbitrator. The latest versions appear aimed at business taxpayers as well as individual taxpayers.

The IRS does not send out unsolicited e-mails or ask for detailed personal and financial information. Additionally, the IRS never asks people for the PIN numbers, passwords or similar secret access information for their credit card, bank or other financial accounts.

“Everyone should beware of these scam artists,” said Kevin M. Brown, Acting IRS Commissioner.  “Always exercise caution when you receive unsolicited e-mails or e-mails from senders you don’t know.”

Recipients of questionable e-mails claiming to come from the IRS should not open any attachments or click on any links contained in the e-mails. Instead, they should forward the e-mails to phishing@irs.gov (the instructions may be found on IRS.gov by entering the term “phishing” in the search box).

The IRS also sees other e-mail scams that involve tricking victims into revealing private personal and financial information over the Internet is known as “phishing” for information.

The IRS and the Treasury Inspector General for Tax Administration work with the U.S. Computer Emergency Readiness Team (US-CERT) and various Internet service providers and international CERT teams to have the phishing sites taken offline as soon as they are reported.

Since the establishment of the mail box last year, the IRS has received more than 17,700 e-mails from taxpayers reporting more than 240 separate phishing incidents. To date, investigations by TIGTA have identified host sites in at least 27 different countries, as well as in the United States.

Other fraudulent e-mail scams try to entice taxpayers to click their way to a fake IRS Web site and ask for bank account numbers. Another widespread e-mail tells taxpayers the IRS is holding a refund (often $63.80) for them and seeks financial account information. Still another email claims the IRS’s ‘anti-fraud commission’ is investigating their tax returns.

A new law makes Private Mortgage Insurace payments deductible for loans that originated in 2007.  This will eliminate the need for those borrowers who can’t put 20% down to obtain a second piggy back loan.  To claim the deduction you will need to itemize and have a HH income of less than $110,000.  Contact your CPA to learn more.

Boiler Room -“ Just by the filing the Power of Attorney by our firm will get the Levy Released the IRS (or state). Surprise the sales sleaze hired by this firm also want a large fee in advance by asking for caller’s credit card or checking account number.

Reality -Unfortunately that it is nonsense, the Power of Attorney or POA is a form to allow a firm to communicate with IRS on the taxpayer’s behalf, it doesn’t have any inherent magical powers nor do these firms. There is defined process to get a Levy release, in some cases complicated and in others very simple.

The only reason the lie works is because client is desperate for help and hears what they want to believe. Having your paycheck or bank account Levied is powerful tool used by the IRS and the fear it generates is understandable, exactly what the “boiler room” firms are counting on. Asking good questions about the process will help you find a reliable firm.

The IRS in an effort to streamline the OIC process or as some claim to cloud the process further made some small changes to the OIC process.  The doubt to liability option will not be included be on the new form nor we dual OIC’s be accepted.  Nothing earth shattering about the changes, the $150 filing fee and OIC offer amount options still exist.  The offer mill firms, firms who crank out bogus and doomed for rejection OIC’s and charge clients in advance for them may have a few more hurdles to overcome convincing the naïve client to sign with them. 

The IRS is proposing that any person, who willfully fails to file tax returns in any three years with any five consecutive year period, and if the aggregated tax liability for the period is above $50,000, would be subject a new aggravated failure to file criminal penalty.  This proposal would classify such failure as a felony, upon conviction, impose a fine not more that $250,000 or imprisonment for not more than five years or both.  The fine for a corporation would be no more than $500,000.  This proposal would be effective for returns that are required to be filed on or after January 1, 2008.  This appears to have a limited chance of becoming law and is an example of how the IRS is looking for new tools to “encourage” non-filers to become compliant

The new Congress is looking to the IRS to collect more unpaid taxes and catch taxpayers who have underreported income to finance an ambitious spending agenda without raising taxes.  Congress believes IRS could collect up to $100 billion by collecting from self-employed taxpayers who are underreporting their income.  The target of the collection efforts will be focused on those individuals whose income isn’t reported through W-2’s or 1099’s.   The proposal would allow the IRS to obtain information about a business’s revenues from credit card companies.  If the income from credit cards were unusual or higher than reported, the IRS would then perform an audit.  The bottom line is the government needs the money and the IRS is going to be charged with finding the dollars no matter where it is.