Archive for the ‘IRS’ Category

« Older Entries
Newer Entries »

Form 8300, Cryptocurrency, and Gambling: An Update

Monday, January 8th, 2024

Last August I wrote a post noting that as of January 1, 2024 cryptocurrency is considered to be cash for Form 8300 reporting requirements.  Here’s what I wrote last August:

A Twitter/X post from John Reed Stark reminded me about an issue that may soon impact you if you are a professional gambler playing on one of the current US-facing sites such as Ignition or America’s Card Room (ACR).  FINCEN (the Financial Crimes Enforcement Network) Form 8300 requires anyone in business–this includes individuals (sole proprietors), partnerships, LLCs, and corporations–to report cash transactions of more than $10,000.  This law isn’t new, and like almost anything related to money laundering/FINCEN there are draconian penalties for not complying.  What is new is that cryptocurrency is considered “cash” for this purpose under Section 6050I of the Infrastructure Act (which passed in November 2021).  This section of the law takes effect on January 1, 2024.

Form 8300 requires you to inform FINCEN (or the IRS if you’re not subject to electronic filing rules) within 15 days of any transaction of more than $10,000:

“Who must file. Each person engaged in a trade or business who, in the course of that trade or business, receives more than $10,000 in cash in one transaction or in two or more related transactions, must file Form 8300. Any transactions conducted between a payer (or its agent) and the recipient in a 24-hour period are related transactions. Transactions are considered related even if they occur over a period of more than 24 hours if the recipient knows, or has reason to know, that each transaction is one of a series of connected transactions.”

I am receiving a steady stream of questions regarding this, so here’s a primer.

  1. There are two elements needed to have to report cryptocurrency you receive.  You need to (a) be in a trade or business and (b) receive more than $10,000 in cash (or cryptocurrency) in one or more related transactions.  If both elements aren’t there, no reporting is required.
  2. If you are an American professional gambler, you are covered by this rule.
  3. The rule covers only receiving cryptocurrency, not sending cryptocurrency.
  4. It only covers receiving cryptocurrency as part of a trade or business.  Let’s say you purchase $20,000 of cryptocurrency for investing; this generally wouldn’t be covered by the reporting requirements of Form 8300.
  5. Reporting is not required if the transaction occurs entirely outside of the United States.

So let’s look at a couple typical examples.

  1. You are a professional gambler residing in the United States.  You cash out from an online gambling site based in Costa Rica and receive $10,500: $5,000 as a bank transfer and $5,500 of cryptocurrency.  The transaction must be reported on Form 8300.
  2. You are a professional gambler.  You are “staked” (backed) by June.  She sends you a personal check for $20,000 to stake you.  Personal checks are specifically exempt from Form 8300 filing requirements.  “Cash does not include…[p]ersonal checks drawn on the account of the writer, a cashier’s check, bank draft, traveler’s check or money order with a face value of more than $10,000.”  (Similarly, wire transfers are not reportable on Form 8300.)

From the instructions of Form 8300 it is absolutely doable to report a cashout from an online gambling site such as America’s Cardroom.  You do not need to include a taxpayer identification number for a non-US business: “You are not required to provide the TIN of a…foreign organization that…[d]oes not have an office or place of business, or a fiscal or paying agent, in the United States.”  You may need to put a comment on Form 8300 (at the bottom of page 2) to note this. You likely also need to comment that the “cash” received was (say) Bitcoin.

Of course, we’re dealing with the federal government so there are issues.  While Form 8300 was revised as of  December 31st, the revision doesn’t include a place for cryptocurrency.  While it’s possible to report a business sending cash, the reporting always asks for the individual who sent it.  Well, that won’t be doable for most cryptocurrency transactions–again, a comment will be needed.

I suspect this will be a mess as FinCEN hasn’t thought this through; indeed, I think they’re just superficially aware of this issue and are really concentrating on BOI reporting.   In any case, I’ll see what comes of yet another government mandate.

 

Posted in FINCEN, Gambling, Information Returns, IRS | Comments Closed

It’s Time to Start Your 2024 Mileage Log

Wednesday, January 3rd, 2024

I’m going to start the new year with a couple reposts of essential information. Yes, you do need to keep a mileage log:

Yesterday was the first business day of the new year for most. You may have resolved to keep good records this year (at least, we hope you have). Start with keeping an accurate, contemporaneous written mileage log (or use a smart phone app–with periodic sending of the information to yourself to prove that the log is contemporaneous).

Why, you ask? Because if you want to deduct all of your business mileage, you must do this! IRS regulations and Tax Court rulings require this. Written is defined as ink, so that means you need a paper log or must be able to prove your smart phone log is contemporaneous.

The first step is to go out to your car, and note the starting mileage for the new year. So go out to your car, and jot down that number (mine was 133,599). That should be the first entry in your mileage log. I use a small memo book for my mileage log; it conveniently fits in the center console of my car. It’s also a good idea to take a picture of the odometer and email that picture to yourself. This will give you a time-stamp showing you accurately noted your beginning mileage.

Here’s the other things you should do:

On the cover of your log, write “2024 Mileage Log for [Your Name].”

Each time you drive for business, note the date, the starting and ending mileage, where you went, and the business purpose. Let’s say you drive to meet a new client, and meet him at his business. The entry might look like:

1/4 133900-133935 Office-Acme Products (1234 Main St, Las Vegas)-Office, Discuss requirements for preparing tax return, year-end journal entries.

It takes just a few seconds to do this after each trip, and with the standard mileage rate being $0.66/mile, the 35 miles in this hypothetical trip would be worth a deduction of $23. That deduction does add up.

Some gotchas and questions:
1. Why not use a smartphone app? Actually, you can but the current regulations require you to also keep a written mileage log. You can transfer your computer app nightly to paper, and that way you can have the best of both worlds. Unfortunately, current regulations do not guarantee that a phone app will be accepted by the IRS in an audit.

That said, if you backup (or transfer) your phone app on a regular basis, and can then print out those backups, that should work. The regular backups should have identical historical information; the information can then be printed and will function as a written mileage log. I do need to point out that the Tax Court has not specifically looked at mileage logs maintained on a phone. A written mileage log (pen and paper) will be accepted; a phone app with backups should be accepted.

2. I have a second car that I use just for my business. I don’t need a mileage log. Wrong. First, IRS regulations require documentation for your business miles; an auditor will not accept that 100% of the mileage is for business–you must prove it. Second, there will always be non-business miles. When you drive your car in for service, that’s not business miles; when you fill it up with gasoline, that’s not necessarily business miles. I’ve represented taxpayers in examinations without a written mileage log; trust me, it goes far, far easier when you have one.

3. Why do I need to record the starting miles for the year? There are two reasons. First, the IRS requires you to note the total miles driven for the year. The easiest way is to note the mileage at the beginning of the year. Second, if you want to deduct your mileage using actual expenses (rather than the standard mileage deduction), the calculation involves taking a ratio of business miles to actual miles.

4. Can I use actual expenses? Yes. You would need to record all of your expenses for your car: gas, oil, maintenance, repairs, insurance, registration, lease fees (or interest and depreciation), etc., and the deduction is figured by taking the sum of your expenses and multiplying by the percentage use of your car for business (business mileage to total mileage driven). Note that once you start using actual expenses for your car, you generally must continue with actual expenses for the life of the car. Be careful if you (or your family) have multiple vehicles. You will need to separate out your expenses by vehicle.

So start that mileage log today. And yes, your trip to the office supply store to buy a small memo pad is business miles that can be deducted.

Tags:
Posted in IRS | Comments Closed

The 2023 Tax Offender of the Year

Friday, December 29th, 2023

So many try every year for my award–The Tax Offender of the Year.  It’s not really something to be proud of; after all, to win this award you need to commit really big tax fraud or a series of Bozo-like actions (ideally, both).  As usual, there are plenty of candidates but there can only be one “winner.”

Just missing out of the top three were Ali Jaafar and Yousef Jaafar of Watertown, Massachusetts.  They came up with the not-so-brilliant idea of unlawfully claiming 14,000 winning Massachusetts lottery tickets, laundering the $20 million in proceeds, and lying on their tax returns.  They each get to spend five years at ClubFed and make restitution of $6,082,578 and must forfeit their profits on the scheme.

Also just missing the top three was Las Vegas resident Scott Lawrence.  Mr. Lawrence operated a real estate business that did quite well from 2009 through 2019; he just didn’t want to pay the $1,905,325 in taxes he owed.  He elected to deliberately thwart efforts to levy his bank account and caused his attorney to send a misleading letter to the IRS; he then deliberately paid his taxes using an overdrawn bank account.  He’ll enjoy a year and a day at ClubFed and must make restitution.

Coming in third place was Stephen Schechter, a resident of Monaco.  Mr. Schechter is an investment advisor and is doing quite well.  Back in 2011 he sold an apartment in Monaco for about €14,000,000.  Now, that wasn’t all profit–but quite a bit was.  Unfortunately, that sale didn’t make it onto his 2011 tax return.  Nor were various foreign financial accounts where the money went noted on his FBAR (FinCEN Form 114, the Report of Foreign Bank and Financial Accounts).  Somehow, the interest and dividends from those accounts also didn’t make it onto his returns.  Mr. Schechter pleaded guilty to concealing over $5,130,000 in income from the IRS.

Walter “Terry” Douglas Roberts II, of Flat Rock, North Carolina just missed out on the brass ring.  Mr. Roberts is an appraiser, and he did lots of appraising of conservation easements.  The IRS looks at Syndicated Conservation Easements as part of their “Dirty Dozen” tax scams. Now, not all conservation easements (or syndicated conservation easements) are scams; many are legitimate.  However, when you admit to fraudulently inflating the values of the easements by “…not following normal appraisal methods, making false statements and either personally manipulating or relying on knowingly manipulated data to reach a targeted appraisal value – communicated to him by co-conspirators…,” you’re looking at a problem.  And when those 18 appraisals end up having fraudulent tax deductions totaling $466,961,000 and a tax loss of $129 million, you’re talking big tax fraud.  He has to make restitution of that $129 million plus spend 12 months at ClubFed.

Back in 2004, Congress passed the “American Jobs Creation Act of 2004.” Included within this law was a biodiesel tax credit.  It was extended through various other legislation and allows a tax credit for the production of various biodiesel fuel.  The tax credit $1.00 per gallon of biodiesel and renewable diesel fuel.

Various businesses began throughout the United States to take advantage of this credit and produce environmentally “good” diesel fuel.  One such company was Washakie Renewable Energy, founded by Jacob Kingston.  As noted on their website,

Committed to producing fuel that is sustainable, clean-burning, and domestically accessible, Washakie Renewable Energy (WRE) is the most significant producer of biofuel in the Intermountain West region. By operating the largest seed crush press in the US, and relying on recycled waste materials like used kitchen grease and cooking oil, Washakie Renewable Energy produces over ten million gallons of biodiesel annually.

The biodiesel produced by WRE is the only alternative fuel to complete the EPA’s study under the Clean Air Act regarding emissions and health effects. In comparison to conventional diesel, biodiesel produces only 14% of the greenhouse gases, 33% of the hydrocarbon emissions, and 53% of the particulate matter, while also being quickly biodegradable and less toxic than common table salt.

Washakie Renewable Energy’s commitment to conscientious resource management includes distributing several useful byproducts of its biodiesel operation, including high-quality animal feed and refined glycerin.

That seems great, doesn’t it? A business making money, giving back to the community, and helping the environment.  What could be wrong with that? Let’s just say that you can only sell 100% of something and follow along with what happened.

The conspiracy began in 2010 and continued through 2018 and involved multiple fraudulent schemes. One involved purchasing biodiesel from the East Coast of the United States (which had been produced by others who had already claimed the renewable fuel tax credit) and exporting it to foreign countries, including Panama, then doctoring transport documents to disguise and import the biodiesel as “feedstock.” Washakie used this false paperwork to claim it had produced biodiesel from the feedstock to support its filing of fraudulent claims for IRS biofuel tax credits. Washakie also fraudulently obtained millions of EPA renewable identification numbers that were then sold for approximately $65 million. Later, Dermen and the Kingstons conspired to purchase millions of gallons of biodiesel and rotate it though the U.S. shipping system to create the appearance that qualifying fuel was being produced and sold by Washakie. Washakie applied for and was paid by the IRS over $300 million for its claimed 2013 production and over $164 million for its claimed 2014 production. Evidence at Dermen’s trial showed that, to further create the appearance of legitimate business transactions, Dermen and the Kingstons schemed to cycle their and other co-conspirators’ fraud proceeds in more than $3 billion in financial transactions through multiple bank accounts.

I can’t say it was all a scam; however, it appears to have mostly been a scam.  Lots of the biodiesel they produced had already been produced and the biodiesel tax credit already taken.  So Washakie had low production costs (after all, they didn’t really produce it), a high profit margin, and lots and lots of refundable renewable fuel tax credits.  Indeed, the individuals involved: Lev Dermen, Jacob Kingston, Isaiah Kingston, Rachel Kingston, and Sally Kingston caused over $1 billion in fraudulent tax credits with $511 million paid to Washakie.

Where did that money end up?  A 150-foot yacht named the Queen Anne (seized in Lebanon and sold for over $10 million in Cyprus), $700,000 of land in Belize that was going to go for a casino, a 2010 Bugatti Veyron (worth $1.8 million), a Lamborghini and Ferrari, and a $3.5 million mansion; investments in other businesses; and, of course, millions sent to friends and family.

The individuals involved attempted to hide their actions by moving money to various countries outside the United States (primarily Turkey and Luxembourg).  Mr. Dermen also made an assurance to Jacob Kingston: “…Dermen falsely assured Jacob Kingston that Kingston and his family would be protected by Dermen’s “umbrella” of corrupt law enforcement and immune from criminal prosecution.” Oops.

Lev Derman (the president of Washakie) was found guilty back in 2020 of conspiracy to commit mail fraud, conspiracy to commit money laundering, and money laundering.  Jacob Kingston pleaded guilty in 2019 to various fraud and tax charges.  Isaiah Kingston and the other members of the Kingston family likewise pleaded guilty in 2019.

Mr. Dermen, who is 56, was sentenced to 40 years (essentially a life sentence), Jacob Kingston received 18 years with other members of the Kingston family receiving between six and 12 years at ClubFed.  Dermen was also ordered to make restitution of $442.6 million and to pay a money judgement of $181 million.  Jacob and Isaiah Kingston were each ordered to pay $511 million in restitution to the IRS. Meanwhile, the Department of Justice is continuing efforts to seize various assets to satisfy the $511 million in restitution.

A helpful hint to all: The Producers is a great play (and movie), but (a) don’t try to sell more than 100% of something and (b) conspicuous consumption while committing fraud usually doesn’t end well.  Lev Derman and the Kingston Family are worthy winners of the 2023 Tax Offender of the Year award.

That’s a wrap on 2023.  I wish all of you and your families a happy, healthy, prosperous and safe New Year!

Tags:
Posted in International, IRS, Tax Fraud | Comments Closed

An IRS Identity Protection Unit Saga: Part 5

Monday, December 18th, 2023

When I last updated this saga (on September 22nd), I hadn’t heard a thing from the IRS or my request for the Taxpayer Advocate Office to take a look at the missing refund for my client (call him John Smith).  So in mid-November, I again called the Identity Protection Unit requesting status.  I discovered that this case had been assigned to the Taxpayer Advocate.  However, the IRS Identity Protection Unit couldn’t tell me who at the Taxpayer Advocate was assigned to the case: either they didn’t know or they’re simply not allowed to talk about anything assigned to the Taxpayer Advocate.

I called the Taxpayer Advocate hotline and was told the name of the individual who was assigned to the case.  I then called him, got his voice mail, and left a message with a promised callback coming within two weeks.  It’s been a month, and unsurprisingly (given how this case has gone) there’s been no callback.  I left another message requesting status this morning.  We’ll see if we have a callback by January 2nd (I’m not holding my breath).

Neither my client nor I have ever received any communication from the Taxpayer Advocate Office stating that the case has been assigned to someone.  We haven’t received any communications from anyone, for that matter, since my client successfully verified his identity.  Meanwhile, the interest owed to my client has passed $4,500–something you and I will be paying for.  It’s hard to see my client receiving his refund for at least another month; by the time this saga ends it’s likely interest will exceed $5,000.

Consider individuals who desperately need their tax refunds, and this large refund (approximately $30,000) is needed to pay bills.  Do I need say more? It shouldn’t take nine weeks to have a return processed after identity verification (but it does); my client has been waiting 39 weeks (and counting).

I will update this saga in the New Year.

Previous posts on this:

An Identity Protection Unit Saga: Part 1
An Identity Protection Unit Saga: Part 2
An Identity Protection Unit Saga: Part 3
An Identity Protection Unit Saga: Part 4

Tags:,
Posted in IRS | Comments Closed

IRS Announces 2024 Standard Mileage Rates

Thursday, December 14th, 2023

This morning, the IRS announced the 2024 standard mileage rates for automobile usage.  Those rates will be:

  • 67ȼ per mile for business use, up from 65.5ȼ per mile in 2023;
  • 21ȼ per mile for medical purposes, down from 22ȼ per mile in 2023; and
  • 14ȼ per mile for miles driven in service of charitable organizations (set by statute and unchanged for 2024).

I question how the annual study showed that any automobile expenses are less than in 2023, but the IRS conducts a study and that’s what the results show nationally.  Here in Nevada, costs have definitely risen from 2023 but “it is what it is.”

If you do use a car for business, remember to keep a mileage log (or use an app).

Tags:
Posted in IRS | Comments Closed

IRS Announces One-Year Delay in $600 1099-K Requirement

Tuesday, November 21st, 2023

The IRS announced today a one-year delay in the $600 1099-K threshold.  Additionally, the IRS announced that they will phase-in the requirements with a $5,000 threshold for the 2024 tax year.  While the IRS phrased the announcement as resulting from “…feedback from taxpayers, tax professionals and payment processors…,” I strongly believe that the IRS isn’t ready for the tsunami of 1099-K’s that are coming.

In any case, we have a delay for one year, with a $5,000 threshold for next year (2024 1099-K’s filed in 2025) and a $600 threshold for the 2025 tax year (1099-K’s filed in 2026).

Tags:
Posted in IRS | Comments Closed

The Almost-End of the 2023 Tax Season

Thursday, November 16th, 2023

It’s been a while since I posted: family issues, tax deadlines, and paper in every direction has made me concentrate on serving my clients, and not the blog.  I’ll have a recap of the 2023 Tax Season soon, but today is a celebratory day: Today is the almost-end of the 2023 Tax Season.  Thursday, November 16th is the filing deadline for California taxpayers (except for four counties in the northeast portion of the state).  I believe we have one signature document outstanding, but otherwise our outstanding California returns were filed.

It’s not the end of the 2023 Tax Season, though: taxpayers impacted by hurricanes in Florida (most of the state except for the Miami-Palm Beach area), South Carolina, Maine, and Massachusetts have until Thursday, February 15, 2024 to file their extended 2022 tax returns.  We have four such clients.

The IRS will be turning off electronic filing of individual returns this weekend until sometime in January.  The ancient IRS computer system (it dates to 1959) takes two months or so to be reprogrammed for the following year taxes.  If you need to electronically file a 2020 tax return (or a 2020 amended return), now is a great time to do so because after Friday you won’t be able to.

I’ll also soon have a preview of the upcoming paperwork tsunami disaster and what it means for both the 2024 Tax Season and Automated Underreporting Unit notices in 2025.

Tags:
Posted in California, Florida, IRS, Maine, Massachusetts, South Carolina | Comments Closed

Maine & Massachusetts Conform to IRS Hurricane Extension

Wednesday, October 4th, 2023

In the US we have a dual system of taxation: federal and state taxes.  Of course, you can be a resident of a state without state income tax like me and not have to deal with state income taxes, but most Americans file two returns. On September 26th the IRS announced they were extending tax filing deadlines for all taxpayers residing in Maine and Massachusetts because of Hurricane Lee. But states do not have to follow federal extensions (New York, for example, recently did not conform to a federal disaster declaration).

I called both the Massachusetts Department of Revenue and the Maine Department of Revenue Services.  Both states are conforming to the federal extension.  There is one additional step needed for taxpayers in Massachusetts: You need to write “STORM” at the top of your Massachusetts return.

This is good news for those impacted by the hurricane.  Do note this is just an extension of time to file, not pay.

Tags:
Posted in IRS, Maine, Massachusetts | Comments Closed

An IRS Identity Protection Unit Saga: Part 4

Friday, September 22nd, 2023

Last week I continued the saga of my client, call him John Smith, who has been waiting and waiting to receive his 2020 tax refund.  His 2020 federal return was selected for identity verification; he successfully completed that process in March 2023.  His refund, though, is nowhere to be seen.  Mr. Smith is not desperate for the funds (luckily, he’s a successful businessman); however, he’d like this resolved.

This morning, I ran yet another IRS Account Transcript to see if there had been any progress with this.  Unfortunately, his return does not show as having been processed.  Yes, the agent I spoke with in August said to allow nine weeks so this isn’t surprising.  But what of my request for the IRS Taxpayer Advocate?

Crickets.  I haven’t heard a thing (nor has Mr. Smith).

Meanwhile, interest continues to pile up on this which you and I are paying for.  To date, the interest totals over $4,000; if the refund is issued exactly a month from today there will be another $241 of interest.  And I’m not particularly hopeful this will be resolved by the end of October.

I’d love to state that this is a one-off in dealing with the Identity Protection Unit and the Taxpayer Advocate.  It’s not.  I dealt with a similar case last year with the Identity Protection Unit; it took nearly a year to get resolved.  (In that case, my client owed tax–which he had paid when he filed the return–but he needed that return to be in the IRS computer system for another matter.)  I strongly believe that the ancient IRS computer systems (the main IRS computer system dates to 1959 and, yes, you read that correctly) has a lot to do with the issues.

I’m also disappointed with the Taxpayer Advocate Office.  Yes, I know they’re buried, but no acknowledgment, no nothing means I’m stuck.  Now as a tax professional I know how to deal with this situation. (If in a month if nothing has changed I’ll be making more phone calls.)

But consider Joe and Mary Doe who are not familiar with the IRS.  They desperately need their $20,000 tax refund…and they’re stuck in limbo.  If they did exactly what Mr. Smith did, they would have done everything correctly…and be stuck in limbo.  If you wonder why there’s frustration with the IRS, and why members of Congress have IRS liaisons, look no further.

The next update on this saga will be in a month (unless Mr. Smith magically receives his refund or I hear from the Taxpayer Advocate).

Tags:
Posted in IRS | Comments Closed

An IRS Identity Protection Unit Saga: Part 3

Monday, September 11th, 2023

One week ago I uploaded Part 2 of my client’s ongoing saga of obtaining his 2020 tax refund.  My client, call him John Smith, was supposed to either receive his refund by mid-August or we were supposed to receive a call.  Mid-August came, and Mr. Smith had not received his refund (and it did not show as having been issued on an Account Transcript) nor had I received a call from the IRS.  On August 16th I again called the Practitioner Priority Service (PPS) to see if there had been any progress.  They couldn’t see any, and again transferred me to the Identity Protection (IP) unit.

Call #1 (August 16):  After being on hold for just under an hour, the IP Unit agent picked up.  I explained the situation, and she investigated through her systems.  After another hold-time period of 15 minutes, she said because my Power of Attorney form covered only 2020 she couldn’t talk to me.  I explained that Mr. Smith had already verified his identity and we are just trying to obtain the refund.  “No. I may need to ask questions about 2019, and without that I must let this call end.”  [1]

Call #2 (August 16): Since I knew the IP agent was wrong, I called back.  This call is actually three attempts, but all three ended up getting: “We’re sorry, but due to extremely high call volume in the topic you’ve chosen we cannot take your call at this time.  Goodbye.”

I did have Mr. Smith sign a new POA covering 2019 (though it wasn’t necessary), and submitted it to the IRS on August 17.

Call #3 (August 17): At 7am PDT I called the IP unit again.  I was directed into the callback service (that told me I’d get a return call in 29 minutes, which I did).  I explained the issue to the agent, and he said, “If your client is not on the phone with you I cannot help you.”  I told him that with a signed IRS Power of Attorney form, I’m allowed to act for my client.  “No, you’re not for this purpose.”  And he hung the phone up on me. [2]

Call #4 (August 17): I made another attempt.  However, “”We’re sorry, but due to extremely high call volume in the topic you’ve chosen we cannot take your call at this time.  Goodbye.”  I did not have enough time to try again.

Call #5 (August 18): I again called at 7am, and again received a callback (this time in 38 minutes).  I again explained the situation to the IP unit agent…and we got disconnected. I’ll be generous and state this was an IRS phone system issue and that I wasn’t hung up on, but I have my doubts.

Call #6 (August 18): The sixth time was the charm (sort-of).  I received the promise callback (in 29 minutes), and this agent agreed that I didn’t need a 2019 POA. Unfortunately, he saw nothing having been done.  He put another referral into the sub-unit to get the return processed…but with a nine-week turnaround time.  He said he did see notes of the previous conversations, but this was all he could do.  I also discovered that on April 14th the IP unit supposedly printed my client’s electronically filed return and forwarded it for processing.  [3]

That afternoon I spoke with my client and explained what had happened.  I told him that besides the IP unit referral, the next step would be to complete IRS Form 911–a request for assistance from the IRS Taxpayer Advocate.  I explained that given IRS promises he was likely eligible for assistance.  I faxed Form 911 that afternoon.

I’ll be back next week with more, but let’s take a look at some IRS systemic issues that my client ran into.

[1] and [2].  I’ve been calling the IP unit for years, and many of the agents do not want to speak with authorized representatives.  When a client grants me an IRS Power of Attorney (POA) form that gives me full rights to negotiate and talk with the IRS on any issues that the POA covers.  That includes identity protection issues.  The behavior I saw with Mr. Smith is typical:

  • Agents say years that aren’t required for my POA are.
  • Only the taxpayer, not an authorized representative, can speak to the Identity Protection Unit.
  • When notices are sent by the Identity Protection Unit, previously authorized representatives are not copied.  For example, let’s say I have a POA on file for Jane Brown for the 2022 tax year.  The Identity Protection Unit sends her a notice requesting she verify her identity for her 2022 tax return; I will not be copied.  This is especially troublesome when we have clients who are traveling or reside outside the United States and don’t have reliable mail.

[3] Yes, you’re reading this correctly.  My client electronically filed his tax return, but the only way it can be processed is paper.  It’s not that 2020 returns can’t be electronically filed today (they can, through sometime in November); rather, it’s how the IRS Identity Protection Unit is setup.  Interestingly, TIGTA (the Treasury Inspector General for Tax Administration) issued a report today titled, “The Internal Revenue Service Has Experienced Challenges in Transitioning to Electronic Records.”  Boy, is that true.

Meanwhile, my client is stuck waiting.  And you and I pay for this: My client will (eventually) be paid interest on the refund.  And with his refund being approximately $30,000, that interest will be substantial.

I’ll be back next week with Part 4 of this saga.

Tags:
Posted in IRS | Comments Closed

« Older Entries
Newer Entries »