Law Amendment Extends Penalties to Tax Preparers
IRS Tax News
Law Amendment Extends Penalties to Preparers of All Tax Returns
On June 11, 2007 the IRS released Notice 2007-54, providing guidance and transitional relieve for the return preparer provisions the Small Business and Work Opportunity Act of 2007 amended. Section 6694 of the Internal Revenue Code previously reserved penalties for income tax return preparers. Those penalties have been extended to preparers of all returns, including excise tax returns, employment tax returns, and estate and gift tax returns. Other amendments include an increase in penalty amounts and a change to the standards of conduct required by return preparers in order to avoid penalties.These changes are effective for all returns prepared after May 25th of this year. These amendments apply to all returns, including amended returns and refund claims due on or before the last day of this year.
The Government Takes Action to Punish Perpetrators of Telephone Tax Fraud
The IRS previously reported criminal investigations involving several tax preparers suspected of telephone tax fraud. Businesses in six locations were temporarily closed while equipment and paperwork were seized pending further investigation. In an effort to punish perpetrators of this crime, the IRS and the Justice Department have recently obtained several indictments involving tax preparers accused of filing thousands of dollars in fraudulent excise refund claims.IRS Acting Commissioner Kevin M. Brown said, “We saw limited but serious instances of abuse. We used our enforcement resources to move swiftly and decisively to protect this valuable refund for the vast majority of taxpayers and tax preparers who are requesting it properly. We want everyone who is eligible for the telephone tax refund to get it but not to inflate the amount requested.”Recognizing the potential for fraudulent returns, the IRS has scrutinized excise tax refund claims for inflated amounts since early January when tax season opened. The IRS has continually warned tax payers to avoid dodgy preparers promising inordinate amounts for their excise tax returns.Regardless of reported abuses, the IRS continued to urge tax payers not to overlook their excise phone tax returns. To request a refund, business owners and non-profit organizations were asked to complete Form 8913, Credit for Telephone Excise Tax Paid and attach it to their regular return. To calculate a refund, tax preparers were to use the new IRS formula: First compare two telephone service statements: April, 2006 and September, 2006. Calculate the tax percentage of each bill (April contains a tax on local and long-distance service while September only includes a tax on local telephone service). The difference between these two percentages must then be applied to the quarterly or annual phone charges to determine a refund. To make calculations easier, the IRS provided standard refund amounts ranging from $30 to $60. You can find more information on the federal telephone excise tax refund at IRS.gov.
Application for Reduced Installment User Fee is Now Available
On June 5th, the IRS announced that the application used to request a reduced fee for entering an installment agreement in order to pay federal taxes is now available. The Application for Reduced User Fee, Form 13844, can be accessed on the IRS website (IRS.gov) in the Forms and Publications section or can be ordered by calling a toll-free number: 1-800-TAX-FORM (1-800-829-3676). Eventually the IRS plans to eliminate this Form by having all requests placed electronically.Beginning January of this year, user fees climbed respectively to $105, $52, and $45 for non-direct debit, direct debit, and reinstatement agreements. Those qualifying with incomes at or below poverty levels will pay a reduced fee of $43 for new agreements.Those hoping to qualify for a reduced fee must submit the application within 30 days of receiving their installment agreement acceptance letter.
The IRS Warns: Protect Tax and Financial Records for Hurricane Season
Anticipating hurricane season the IRS warns taxpayers to place their tax and financial records in a safe place.IRS Acting Commissioner Kevin M. Brown said, “With forecasts calling for an active Atlantic hurricane season, the IRS encourages taxpayers to protect tax and financial documents that can be hard to replace. A little planning can help safeguard valuable information in case a hurricane or other disaster strikes.”The IRS recommends several actions. Moving hardcopies to electronic format is encouraged. You can scan paper tax records onto your computer, back them up on a USB drive and send them to a friend or relative in another city for safekeeping. Other suggestions include documenting valuables, checking on Fiduciary Bonds, and updating emergency plans (including the safeguarding of important documents).The IRS is always willing to help individuals affected by a hurricane. Taxpayers can request copies of any returns and all their attachments by using Form 4506, Request for Copy of Tax Return.
