by r Hampton | Jul 8, 2019 | Tax News
For some years now we’ve heard about how the Information Technology systems inside the Internal Revenue Service need major upgrades. A new audit by the Treasury Inspector for Tax Administration finds that the lack of current technology is also raising administrative costs for the IRS.
The Audit
Within the IRS, the Information Technology (IT) division provides and maintains the computers, software and services the IRS needs to do its job. This includes providing information technology services to maintain IRS operations, implement legislation, maintain taxpayer data security, and ensure the timely delivery of the individual tax return filing season. TIGTA says the audit was aimed at evaluating the effectiveness of IRS efforts to prioritize computer programming requests in support of tax administration.
The Findings
The audit found that the allocation of information technology resources within the IRS is set by the IT division, with minimal involvement from the business operating divisions. So instead of the business operating divisions relaying what IT services they need, the IT division effectively tells the rest of the agency what services it will provide.
“In addition, due to insufficient resources, projects are not started that would reduce taxpayer burden, protect revenue, and save significant IRS resources,” the audit report notes. “For example, there were 82 requests denied in Calendar Year 2016. IRS executives informed us that this had negative impacts on tax administration, such as the potential for billions of dollars in lost revenue, taxpayers not receiving proper credits, and the IRS having to pay a large amount of interest due to withholding that was not credited to taxpayer accounts.”
The audit also found that the system used to track IT requests doesn’t accurately reflect the status and action taken for some requests. Not all denied request are tracked for example, and for the ones that are tracked, not all included a description of the reason the request was denied. In addition IT resources and contractor costs weren’t always recorded as required.
Recommendations
TIGTA recommended that the Chief Information Officer coordinate annual meetings with business operating division executives and IRS chief officers to discuss priorities in allocating IT organization resources.
TIGTA also recommended that all key work requests are submitted through the IT organization’s tracking system and that a process is established to track estimated and actual resources needed to complete a work request by system or application.
Finally, TIGTA recommended that internal guidelines be updated to ensure that the information documented in the work request tracking system accurately reflects the status of the request, the IRS system or application to which the request applies, and the reason the request was denied.
Of the seven recommendations from the audit, IRS management agreed with five. The agency disagreed with the need to update internal guidelines so that users are required to identify the IRS system or software applicable to the work request. The IRS believes it has procedures already in place that require it. Management also partially agreed to set up a process to track estimated and actual resources needed to complete a work request. Tracking will be possible by system or by application.
The IRS also pledged to work with information technology suppliers to evaluate and assess the benefits of new systems versus their costs or burdens.
To see the full report from the Treasury Inspector General for Tax Administration, click here.
– Story provided by TaxingSubjects.com
by r Hampton | Jul 8, 2019 | Tax News
The Tax Cuts and Jobs Act (TCJA) made sweeping changes to the tax code, but one important change didn’t affect tax year 2018 tax returns. That’s why the IRS issued a tax tip reminding taxpayers that the TCJA changed how alimony and separate maintenance payments will be treated for divorces executed in 2019.
Prior to the TCJA change, payments made were deductible and payments received were treated as income. The IRS noted that this previously applied to “divorce decrees,” “separate maintenance decrees,” and “written separation agreements.” Now, that arrangement is basically turned on its head.
According to the IRS release, the TCJA changes could have a significant impact on some newly divorced taxpayers’ returns: “Beginning Jan. 1, 2019, alimony or separate maintenance payments are not deductible from the income of the payer spouse, or includable in the income of the receiving spouse, if made under a divorce or separation agreement executed after Dec. 31, 2018.”
Divorces executed this year aren’t the only agreements that may be affected. Those that are modified in such a way that “changes the terms of the alimony or separate maintenance payments” or simply choose to adopt the new rules will also be subject to the TCJA changes.
The IRS provided links to Publication 504, Divorced or Separated Individuals and Publication 5307, Tax Reform Basics for Individuals and Families for those who want to learn more about the new rules.
Source: Tax Reform Tax Tip 2019-88
– Story provided by TaxingSubjects.com
by r Hampton | Jul 7, 2019 | Tax News
The IRS released a tax tip just in time for the long Independence Day weekend. In the press release, the agency lists tips for spotting identity theft tax refund fraud (IDTTRF). Since tax scams can take many forms, the IRS broke them down into two categories: “phone scams” and “email phishing scams.”
How can I tell if it’s a phone scam?
When it comes to phone scams, the first thing the IRS points out is that they won’t “leave pre-recorded, urgent, or threatening messages.” Scammers bank on the average taxpayer being afraid of the IRS, leveraging that fear and mistrust to convince victims to hand over personally identifiable information (PII) or money.
The threats often include telling victims that failing to comply with the demands will result in being jailed or deported—one scam even promises to cancel the victim’s Social Security Number. To make things more confusing, the IRS said fraudsters are able to make caller ID display any number they want—even official IRS phone numbers.
How can I tell if it’s an email phishing scam?
If your first communication from the IRS is an email, you should probably be suspicious. According to the IRS, they will never “initiate contact with taxpayers by email to request personal or financial information.” Instead, the agency will usually send a physical letter for notification, though, on occasion, they will “call or come to a home or business.”
The tactics for email scams are almost identical to phone scams—threats, information or payment demands, and the like—except that it can be even easier to trick victims. Scammers often put links in their emails that contain malware or send victims to fake government websites. With one click, a victim might inadvertently download a virus that tracks everything they type, even usernames and passwords.
What should I do if I’m targeted by a phone scam?
The IRS ended the press release with tips for dealing with a suspected phone scam, separating their advice into two basic categories: taxpayers don’t owe tax and taxpayers who do.
Taxpayers who are confident that they do not owe any tax should start by hanging up the phone and promptly reporting it to the Treasury Inspector General for Tax Administration, Federal Trade Commission, and Phishing@IRS.gov. Those who do (or could) owe tax will need to “call the number on any billing notice they receive or call the IRS at 800-829-1040.”
To read all of the tips for avoiding phone and email scams, check out IRS Tax Tip 2019-87.
Source: Tax Tip 2019-87
– Story provided by TaxingSubjects.com
by r Hampton | Jul 1, 2019 | Tax News
The president has signed a package of IRS reforms into law after the legislation passed both houses of Congress with strong bipartisan support.
Accounting Today reports the Taxpayer First Act overhauls key aspects of the IRS, encourages the agency to modernize its technology and to submit a plan to Congress for overhauling its operations. The legislation beefs up a taxpayer’s right to appeal, creating an independent Office of Appeals and giving taxpayers full notice and protest procedures along with open access to case files.
The new law also mandates that the IRS come up with a comprehensive training strategy for employees that will foster a stronger culture at the IRS while reinforcing taxpayer rights. In addition, the agency is required to come up with uniform guidance for the use of electronic signatures.
On the tech side, streamlined critical-pay authority for IRS tech employees has been reauthorized, making it easier to hire the best technical staffers needed to overhaul IRS computer networks.
Other Provisions
The Taxpayer First Act also protects low-income Americans by permanently authorizing the Volunteer Income Tax Assistance program, as well as providing extra funding for VITA. Accounting Today says the act codifies low-income taxpayer exceptions from fee waivers and lump-sum payments associated with IRS payment plans.
The IRS is also now required to issue a procedure to handle tax refund direct deposits that are sent to wrong accounts.
One of the more significant reforms comes in the area of protections for tax whistleblowers, prohibiting retaliation by employers. These protections include:
- the right to reinstatement and double back-pay
- prohibition of mandatory arbitration
- the right to go to federal court for a jury trial
- compensatory damages such as special damages, attorneys’ fees, and costs.
The new law builds on the existing IRS whistleblower program, permitting full and open communication between the IRS’ Whistleblower Office and the whistleblower to foster cooperation that can help fully prosecute tax frauds.
– Story provided by TaxingSubjects.com
by r Hampton | Jul 1, 2019 | Tax News
Now that the tax year 2018 filing season is over, some teachers may know that the educator expenses deduction was moved to line 23 of the new Schedule 1. To help those unsure about which unreimbursed, job-related expenses qualify, the IRS this week released Tax Tip 2019-83.
The press release outlines the basics of determining eligibility for the unreimbursed educator expenses deduction, like who can claim it and which expenses qualify.
Elementary, middle, and high school staff could be considered eligible to deduct up to $250 in unreimbursed expenses if they “work at least 900 hours a school year.” The IRS said that includes teachers, instructors, counselors, principals, and aides.
As for examples of expenses that qualify for the deduction, the IRS provided the following bulleted list:
- Professional development course fees
- Books
- Supplies
- Computer equipment, including related software and services
- Other equipment and materials used in the classroom
Taxpayers interested in learning more about deducting unreimbursed educator expenses can follow the links from the end of the release: Topic Number 458: Educator Expense Deduction; Publication 17, Your Federal Income Tax for Individuals; and Form 1040NR Instructions.
Source: Tax Tip 2019-83
– Story provided by TaxingSubjects.com
by r Hampton | Jun 30, 2019 | Tax News
The Internal Revenue Service is looking to hire hundreds of new employees in virtually every department. But that doesn’t mean the IRS is adding employees.
Accounting Today Editor Michael Cohn attended New York University’s recent Tax Controversy Forum, where agency officials discussed their hiring plans.
“For those of you who have always wondered what it might be like to work at the Internal Revenue Service if you’ve not been there, come on board,” said IRS Commissioner Chuck Rettig. “We’re hiring across the board.”
AT reports that the “Help Wanted” sign is out for the Chief Counsel’s office, the Large Business and International division, the Small Business/Self-Employed division, Criminal Investigation, and Information Technology unit.
Commissioner Rettig said working for the IRS can be “a tremendous experience.”
Despite the agency-wide drive to hire, Accounting Today reports that the IRS is also being hit by a wave of retirements. Douglas O’Donnell, commissioner of the Large Business and International division, told the forum that the plan is to only a couple of hundred positions overall after the retirements.
“From 2010 or so, we’re down about 40 percent, from 7,100 to 4,300,” he said. “That limits what we can do, and that’s a significant drop. We’ve tried to be very thoughtful in how we’ve deployed our personnel and what type of work we’re going to do. We did get authority this year to hire 500-plus people new to the division, but we’re not growing by 500. We’re hiring 550, but we’ve been losing about 7 percent of our workforce a year to retirement, so the net increase in the division is roughly 200 to 250.”
Accounting Today reports that the Small Business/Self-Employed division is getting a large number of new hires, perhaps as many as 3,200. The Criminal Investigation unit plans to hire some 150 agents this year, which should keep them at current strength after retirements. Next year, AT reports, CI plans to hire up to 250 additional agents.
– Story provided by TaxingSubjects.com
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