From time to time issues related to taxes arise that are interesting, informative or humorous that is not directly related to the preparation of a tax return but are related issues associated with federal taxation.

Passports Could Be Revoked for Delinquent Taxpayers – The U.S. Senate has unanimously approved a provision added to a highway transportation bill that would revoke the passports of people with seriously delinquent tax debts. The provision gives the State Department the right to deny, revoke, or limit a passport for individuals whom the Internal Revenue Service certifies as having a “seriously delinquent tax debt.” A seriously delinquent tax debt is defined as a debt in excess $50,000 (adjusted for inflation in subsequent years) for which a notice of federal lien or levy has been filed. The House of Representatives will take up the bill in the next few weeks. Only time will tell if this potential provision will become law.

Unexpected Result for Charity Volunteering – If an employer fails to pay over its payroll taxes, the IRS can seek to collect a trust fund recovery penalty equal to 100% of the unpaid taxes from a “responsible person.” A responsible person is a person who is responsible for collecting, accounting for, and paying over payroll taxes and willfully fails to perform this responsibility.

Payroll taxes withheld from an employee’s salary are monies the employee paid toward his or her tax liability and are not funds that belong to the employer. An employer that uses those funds to pay other expenses is using someone else’s money, and the IRS takes a very dim view of that act, since the government’s only recourse is with the employer and has to credit the employee with the withholding.

Case in point: an individual volunteered (unpaid position) to aid a financially struggling non-profit organization and became actively involved in the financial affairs of the non-profit, including writing the checks for the organization. The organization was behind on its trust fund payments, and the volunteer paid other liabilities ahead of the trust fund deficiency. As a result, the IRS assessed him the penalty of almost $200,000, which he paid and then went to tax court to get back. The tax court ruled in the IRS’ favor.

The case once again demonstrates the perils faced by a taxpayer who becomes involved in running a financially distressed company (for profit or non-profit) and chooses to pay other liabilities ahead of trust fund payments.

Tax Fraud on the Upswing – When a tax return is e-filed, the IRS’s computer will verify that the Social Security number(s) (SSN) on the return have not been previously used on another return for the same year, and will reject the e-file if it has. This most commonly occurs when both of the divorced or separated parents claim their child or children as dependents.

However, recently tax preparers are seeing more and more clients’ returns rejected because the taxpayer or spouse’s SSN has already been used. What is happening is thieves are stealing the taxpayer’s identity and filing phony returns to claim fraudulent refunds, leaving the taxpayer with the task of explaining to the IRS and all the other problems associated with identity theft.

If you believe you have been a victim of identity theft, you should immediately review the guidance provided by the IRS and follow the recommended procedures. If you need assistance, please give this office a call.

Now that tax season is upon us, so are the e-mail scammers pretending to be the IRS. Most of these scams fraudulently use the IRS name, logo, and/or website header as a lure to make the communication appear more authentic and enticing. They lead you to believe you had a refund of some sort coming and request personal information. The goal of these scams¾known as phishing – is to trick you into revealing your personal and financial information. The scammers can then use your information – like your Social Security number, bank account, or credit card numbers – to commit identity theft or steal your money.

DON’T BE A VICTIM – THE IRS DOES NOT INITIATE E-MAIL CORRESPONDENCE

The Internal Revenue Service receives thousands of reports each year from taxpayers who receive suspicious e-mails, phone calls, faxes, or notices claiming to be from the IRS. If you find something suspicious, you should immediately call this office before responding. In fact, it is a good policy to check with this office before responding to any inquiry from the IRS or state or local tax agencies.

Here are some tips you should know about phishing scams.

1. The IRS never asks for detailed personal and financial information like PIN numbers, passwords, or similar secret access information for credit card, bank, or other financial accounts.

2. The IRS does not initiate contact with taxpayers by e-mail to request personal or financial information. If you receive an e-mail from someone claiming to be a representative of the IRS or directing you to an IRS site:

• • Do not reply to the message.
• • Do not open any attachments. Attachments may contain malicious code that will infect your computer.
• • Do not click on any links. If you clicked on links in a suspicious e-mail or phishing website and entered confidential information, you may have compromised your financial information. If you entered your credit card number, contact the credit card company for guidance. If you entered your banking information, contact the bank for the appropriate steps to take. The IRS website provides additional resources that can help. Visit the IRS website and enter the search term “identity theft” for additional information.

3. The address of the official IRS website is www.irs.gov. Do not be confused or misled by sites claiming to be the IRS but ending in .com, .net, .org or other designations instead of .gov. If you discover a website that claims to be the IRS but you suspect it is bogus, do not provide any personal information on the suspicious site.

4. If you receive a phone call, fax, or letter in the mail from an individual claiming to be from the IRS but you suspect he or she is not an IRS employee, contact the IRS at 1-800-829-1040 to determine if the IRS has a legitimate need to contact you. Report any bogus correspondence. You can forward a suspicious e-mail to phishing@irs.gov.

If you have any questions or doubts related to a letter, phone call, or e-mail from the IRS or other taxing authorities, please call this office before responding or providing any financial or personal information. Better safe than sorry!

This month’s guest post is courtesy of Theresa Payton, the Chief Advisor and CEO of Fortalice, LLC.

Have you ever had your credit card company reverse a charge on your card because it was not you?  Sounds reassuring, right?  Well, if you are a business owner, those same protections do not extend to you.  Cybercriminals know this!  Business owners are a prime target of cybercriminals.  The cybercriminals target your business using hundreds of thousands of computers in their control, often called bots, short for robots.

It is a business owner’s worst nightmare – Imagine logging into your business banking account to make your payroll and the balance is zero.  Unlike your personal card or bank account which are protected under a law known as Regulation E, many people do not realize that banks are not always held liable. (more…)

It seems like every day now a new figure in the government is getting into “trouble” for tax issues. I use the word “trouble” lightly because most of them are getting no more than a slap on the wrist when if it were you or I, we would certainly be feeling the wrath of the IRS. During the election, the now President Obama promised us “change” in Washington. I guess this is his definition of “change.” Never before have I seen so many tax-happy politicians skirting their own taxes. Let us review the short list. I will not go into great detail on any of them, but just list the highlights (otherwise, it would be a book – hey, there is an idea!)

Timothy Geithner.  This is one of the more publicized issues at least in the national media.   President Obama’s Treasury Secretary designate owed $34,000 in back taxes when he was selected. Geithner failed to pay self-employment taxes for several years and was busted during an IRS Audit. I don’t even begin to comprehend how this is acceptable. The man is going to be the Treasury Secretary, yet he can’t file and pay his own taxes accurately? He is supposed to be over the IRS, yet he can’t even manage his own taxes? It is beyond me how President Obama could have had such poor judgement in this selection. The fact that Geithner is the Treasury Secretary is shocking.

Tom Daschle.  President Obama selected the former U.S. Senator from South Dakota for the job of Secretary of the Department of Health and Human Services. It was uncovered that Daschle cheated his fellow taxpayers when he failed to disclose and pay taxes on hundreds of thousands of dollars of income.   Of course Daschle was sorry about the incident after he “realized” the errors on his return.

Rahm Emanuel.   There is increasing pressure on President Obama’s Chief of Staff over Emanuel’s rent free residence of 5-years at a Capitol Hill townhome owned by Rep. Rosa De Lauro (D-Conn) and her husband, pollster Stan Greenberg. Emanuel did not pay taxes on his rent-free use of the townhouse, and he also did not disclose this on his congressional ethics forms. During the time that Emanuel lived in the townhome, he served as the Chairman of the Democratic Campaign Committee and rewarded Greenberg’s firm with massive polling contracts. Many experts agree that this “free rent” was taxable income and could have totaled more than $100,000 over the five year period. Read more on Emanuel’s tax and ethics issues here: Rahm’s ‘Rent” Is Just the Tip of Ethics Iceberg

Hilda Solis (D-Calif.).  The confirmation hearings for Labor-secretary appointee Hilda Solis were delayed last week when it was learned that Representative Solis’ husband, Sam Sayyad, had tax liens filed against him. USA Today uncovered 15 tax liens dating back to 1993 against his business. Both Solis and Sayyad deny that they knew about the tax liens and went out last week to pay them in full. See more from USA Today at Tax snafus add up for Obama team

Nancy Killefer.  President Obama’s selection for the government’s first Chief Performance Officer failed to “perform” in the payment of her nanny taxes. Unlike many of the other appointees, Killefer had the dignity to withdraw her candidacy. The interesting thing is that she only owed $947 ($298 of back employment taxes, $600 in penalties, and $49 in interest). Not a large amount, but it was enough to have a lien placed on her home. I don’t know why so many people in Killefers position keep getting hit with Nanny tax issues. Don’t they know by now that they have to pay these taxes?

Charlie Rangel.   His tax issues are almost too much to detail here. It seems every time I turn around, this guy has done something illegal. Whether the issue is Rangel receiving the homestead exemption on a home he owned in Washington while living in rent-stablized apartments in NY City or contributions or pledges made to the Charles B. Rangel Center for Public Service or Rangel’s failure to pay taxes on $75,000 in rental income on a beach house, the important thing to remember here is that Rangel is the Chairman of the House Ways and Means Committee. That means that he is the head honcho of the committee that makes the tax law. Yes, you read that right. And he can’t pay his taxes accurately? He obviously knows the laws – he helped write them! I am not sure why Rangel is still in office. He is obviously not ethical. Why hasn’t Obama spoken up and requested that he resign for the good of the Country?

Rangel’s tax cheating has become so publicized that Congressman John Carter (R-TX) introduced H.R. 735, “The Rangel Rule Act of 2009″ which would add a new section to the Internal Revenue Code that would prohibit the IRS from charging penalties and interest on back taxes. According to the press release, “under the proposed law, any taxpayer who wrote “Rangel Rule” on their return when paying back taxes would be immune from penalties and interest.  Don’t count on this passing a vote, but it is nice to know that someone in Congress knows that Rangel is unethical and that it isn’t fair that the rest of us have to pay penalties and interest and he doesn’t.

Marion Barry.   While Marion Barry isn’t part of the Obama Administration, he is a Washington D.C. Council member.   His failure to file his 2007 taxes has resulted in a request by prosecutors to urge a judge to revoke Barry’s probation for his past tax offenses and throw him in jail. Barry’s excuse was that his kidney issues have “dominated’ his thinking and that he has been unable to get them filed. I might give the guy a break over this except for the fact that to my knowledge, he still has time to participate on the D.C. Council, and the fact that he has had chronic tax issues. I wonder if Barry is trying to get a Cabinet Appointment here? He would fit right in.

A couple of weeks ago, Politio.com asked the offices of all 99 sitting Senators to complete a short survey to say who prepared their taxes, whether and errors had been discovered on the returns they had filed, and whether they have ever had to pay back taxes. Fifty-six senators responded to the survey, of which eight stated errors had been found in the past and of which 6 states that they had been required to pay back taxes. Click here for details on the Politico.com survey.

Many fear that all of these high level tax cheats will result in taxpayers being more likely to cheat on their returns. The IRS estimates that approximately $300 billion in taxes owed each year goes uncollect every year. Seems like a good deal of this shortfall is in Washington.

Also of note is what is happening to these nominees. Many of them are actually making it through! Imagine what would have happened if Reagan or Bush had nominated these jokers. The Democrats would have never let them be confirmed and they would be back on the street. There is a good editorial on this in the Wall Street Journal: Driving Mr. Daschle