Category Archives: IRS Announcements

Taxpayer Advocate ‘From the Government, and Here to Help’

In 1996, the law allowed for the creation of the Office of the Taxpayer Advocate (in replacement of the former Office of the Taxpayer Ombudsman), whose functions are:

  1. To assist taxpayers in resolving problems with the Internal Revenue Service;
  2. To identify areas in which taxpayers have problems in dealings with the Internal Revenue Service;
  3. To the extent possible, propose changes in the administrative practices of the IRS to mitigate those identified problems; and
  4. To identify potential legislative changes which may be appropriate to mitigate such problems.

In 1997, the National Commission on Restructuring the Internal Revenue Service called the Taxpayer Advocate the “voice of the taxpayer.”

In 1998, Congress renamed the Taxpayer Advocate as the National Taxpayer Advocate, provided that the National Taxpayer Advocate could not be an officer or employee of the IRS for two years preceding or five years following his or her tenure, and provided for Local Taxpayer Advocates in each state of the Union.

When you find yourself getting nowhere in your dealings with the bureaucrats, try contacting your Taxpayer Advocate!

IRS Names ‘Dirty Dozen’ Tax Scams for 2012

Every year IRS publishes its list of the most obnoxious tax scams for the year – taking the name from a famous movie of decades ago:  “The Dirty Dozen.”

It’s always amusing to review the list, while at the same time recognizing that there are real crooks out there, trying to steal not only from unsuspecting taxpayers, but also from Uncle Sam himself.

“Taxpayers should be careful and avoid falling into a trap with the Dirty Dozen,” says IRS Commissioner Doug Shulman.  “Scam artists will tempt people in-person, on-line and by e-mail with misleading promises about lost refunds and free money.  Don’t be fooled by these scams.”

Number one on this year’s list is identity theft, generally first brought to the attention of the target taxpayer who receives a notice from IRS that more than one return was filed in that taxpayer’s name or that the taxpayer received wages from an unknown employer.  Folks who suspect for one reason or another, that their personal identity has been stolen and used for tax purposes should contact IRS – check out www.IRS.gov/identitytheft for the procedures.

And if you are interested in the rest of the “Dirty Dozen,” get hold of IRS News Release 2012-23, issued just last week.

Post authored by Jeffrey A. Quinn

IRS Gets Tough on Identity Theft

Seems IRS, working with the Justice Department, just completed a major crackdown on suspected perpetrators of identity theft.

“This unprecedented effort against identity theft sends a strong, unmistakable message to anyone considering participating in a refund fraud scheme this tax season,” noted IRS Commissioner Shulman.  “We are aggressively pursuing cases across the nation with the Justice Department, and people will be going to jail.  This is part of a much wider effort underway at the IRS to help protect taxpayers.”

As noted in IR-2012-7 released last week, this crackdown is part of a comprehensive identity theft strategy the IRS has embarked on that is focused on preventing, detecting and resolving identity theft cases as soon as possible.  In addition to the law-enforcement crackdown, the IRS has stepped up its internal reviews to spot false tax returns before tax refunds are issued as well as working to help victims of the identity theft refund schemes.

Folks looking for additional information can consult Taxpayer Guide to Identity Theft or the IRS Identity Theft Protection Page.

More from Nolo: Identity Theft During Tax Time: Protecting Yourself.

IRS Clarifies Physical Injury Income Exclusion

IRS has issued final regulations under Code Section 104 regarding the exclusion from gross income of amounts received due to personal injury or physical sickness. The final regs reflect amendments made by the Small Business Job Protection Act of 1996 (SBJPA), and remove the requirement that in order for damages to qualify for exclusion they must be based upon “tort or tort type rights.”

Code Section 104 as amended by SBJPA provides that (1) punitive damages do not qualify for the income exclusion and (2) the income exclusion generally is limited to amounts received on account of personal “physical” injuries or “physical” sickness, and further provides that even though emotional distress is not considered a physical injury or a physical sickness, damages not in excess of amounts paid for “medical care” for emotional distress are excluded from income. The final regs reflect these statutory amendments and also provide that a taxpayer may exclude damages received for emotional distress “attributable” to a physical injury or physical sickness.

The regs apply to damages paid pursuant to a written binding agreement, court decree, or mediation award entered into or issued after September 13, 1995, and received after January 23, 2012.

Learn more:

Taxpayer Advocate Service — Here to Help

Believe it or not, everything the IRS does is not necessarily bad for your health!  Some folks don’t realize that they actually do have a “voice” within IRS:  called the National Taxpayer Advocate.

This is an independent organization within IRS, whose mission is to help taxpayers who may be experiencing economic harm, or taxpayers seeking help in resolving problems with IRS and not having any success with the “normal” IRS channels of communication.

The Taxpayer Advocate Service (TAS) is free to all taxpayers, and exists in the form of at least one local TAS office in every state, the District of Columbia and Puerto Rico.  The usual way to start a TAS contact is to complete IRS Form 911, “Request for Taxpayer Advocate Service Assistance (And Application for Taxpayer Assistance Order)”.

And beyond helping you with your specific case situation, also look to TAS for “systemic advocacy” in helping you deal with the IRS morass.  The TAS Office of Systemic Advocacy:

  • addresses issues which impact multiple taxpayers
  • works with individuals, businesses and nonprofits
  • analyzes IRS systems, policies and procedures
  • assesses taxpayer burden and taxpayer rights issues
  • proposes solutions or legislative changes, and
  • monitors progress toward the solutions.

Check out IRS Publication 1546 for more info on the TAS.

IRS: Use of Work Cell Phones No Longer Taxable

In a rare gesture of friendliness toward taxpayers, last week the IRS allowed that personal use of employer provided cell phones generally will now be considered nontaxable — a working condition fringe benefit, the value of which is excludable from the employee’s taxable income.

It has been about a year since cell phones were removed from the “listed property” category if IRC Section 280F. And now, in Notice 2011-72, IRS states that where an employer provides employees with cell phones primarily for noncompensatory business reasons, neither the business nor personal use of the phone will result in income to the employee, and no recordkeeping of usage is required. Further, in most instances, an employer’s reimbursement for employees’ cell phone costs associated with bona fide business use won’t be taxable. This guidance applies for all tax years after 2009.

Notice 2011-72 does not address, however, the treatment of reimbursements received by employees from employers for the business use of an employee’s personal cell phone.

The Notice provides that an employer is treated as having provided an employee with a cell phone primarily for noncompensatory business purposes if there are substantial reasons relating to the employer’s business, other than providing compensation to the employee, for providing the phone.

Examples of substantial noncompensatory business reasons for requiring employees to maintain personal cell phones and reimbursing them for their use include:
1. The employer’s need to contact the employee at all times for work-related emergencies; and
2. The employer’s requirement that the employee be available to speak with clients at times when the employee is away from the office or at times outside the employee’s normal work schedule.

IRS Eases ‘Innocent Spouse Relief’ Rules

The IRS announced this week that it is scaling back its restrictions on filing for innocent spouse relief, making it easier for taxpayers to stay off the hook for tax debts and other tax-related shenanigans committed by their spouses.

When you file a joint income tax return, the law makes both you and your spouse responsible for any tax debts and other liability. Innocent spouse relief is meant to help taxpayers who didn’t know — and had no reason to know — that their spouse was underpaying taxes or failing to pay taxes altogether. Until this week, people trying to qualify for equitable relief as an innocent spouse had to file their request within two years of the time that the IRS’s collection efforts first began.

So, what was the problem with the old two-year limit? It wasn’t unusual for a truly innocent spouse to be unaware of their not-so-innocent spouse’s tax problems (including the IRS’s collection efforts) for over two years. And under the old rules, if you discovered your spouse’s wrongdoing too late (after that two-year window had closed), the IRS said your innocent spouse claim was SOL.

Get details on this week’s IRS announcement here, and for everything you ever wanted to know about innocent spouse claims, check out IRS Publication 971: Innocent Spouse Relief.

IRS Offers Continuing Education Opportunity

Now that the rigors of the tax filing season have eased a bit, it’s time for those of us in the “tax professionals” community to start giving thought to the fulfillment of this year’s continuing education requirements.

And the IRS has come forth with an offer — forums for tax professionals in six cities, starting this summer. Enrolled agents, CPAs, certified finanacial planners and other tax professionals may wish to consider the offer — three day events presented by IRS experts, discussing any number of topics involving federal and state tax issues. Some 40 different topics will be covered, each qualifying for continuing education credit, as may be approved by the various licensing bodies.

The forums will be conducted in the traditional seminar format, and will also feature a two day “expo,” designed to fill tax professionals’ needs, with representatives from IRS and other tax, financial, and business communities, offering their products and services. Attendees will also be exposed to the IRS “Preparer Services Room,” to learn about the IRS’s e-Services, offer comments on various initiatives and programs, or participate in a focus group.

And for those, perhaps, with unresolved pending problems, attendees will be invited to bring their most challenging unresolved case to the “Case Resolution Room,” for some IRS assistance. The Service notes that last year, a total of 1,235 cases experienced a 97% on-site resolution rate.

Check out www.irstaxforum.com for details of dates, cities, costs and continuing education credits available.