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IRS warns about a new scam which uses a website looking just like the “real” IRS site.

The address of the “real” IRS site is www.irs.gov. Beware of contacts from folks proclaiming they are IRS (but are not), though their websites end in.com, .net, .org or other designations instead of .gov.

If you run across one of these, the real IRS wants to know about it, urging that you contact them, addressing your email to phishing@irs.gov. State in your subject line, “suspicious website.”

Also remember that IRS never initiates contact with taxpayers by email requesting personal or financial information.

And if you have a little time on your hands, and want to learn about other scams on the IRS warning list, go to www.irs.gov, and search the site using the term “phishing.”

Get on the horn (or the emailer) and contact thy Congressperson if you don’t want to get slammed by the dreaded alternative minimum tax (AMT) this year!

In a recent letter to Utah Senator Orrin Hatch, acting IRS Commish Steven Miller pointed out that he had instructed his staff to leave the IRS computers alone – left to operate ‘as is’ – with respect to the AMT, postponing any re-programming efforts until and if Congress actually takes action regarding the need for a “patch,” designed to save some 28 million of we and thee from an unexpected (not to mention unwelcome) AMT charge on our 2012 income tax returns!

If and when Congress gets back from vacation, and decides to take action regarding this mess before New Years Eve, it might just enable some 60 million of us to actually file our 2012 returns on time. Otherwise, later action would cause IRS to delay implementation of extensive computer overhauls, resulting in, per Miller, the need for a “magnitude and complexity of changes,” such that taxpayers would not be able to file until late March 2013, if not even later.

We won’t know for sure until the politicians get things sorted out, but many commentators think one upshot of the pending deal-making will be some form of limitation on itemized deductions.

Obama has repeatedly called for a cap on itemized deductions.  His latest proposal for 2013 would limit the benefit of deductions in the case of certain higher-income taxpayers (who, of course, must pay their “fair share.”), not to mention some above the line deductions (including pretax employee contributions to defined contribution retirement plans and contributions to traditional IRAs) to amounts which would effectively limit the tax benefit from such items to 28%.

Reminiscent of the Clinton days in which the “3%” limitation on itemized deductions crept into the law – a somewhat disguised way of increasing the taxpayer’s effective tax rate.

IRS reports (“Statistics of Income” Bulletin) that in tax year 2010, folks with AGI of $250,000 and up, on the average, sustained about $91,000 of total itemized deductions, including about $20,000 of contributions.  We’re sure the nonprofit organization community will find this an unwelcome development if it does materialize.

IRS Commissioner Douglas Shulman, in a recent speech before the AICPA, touted accomplishments of his term as the 47^th IRS Commissioner, just as that term was about to officially come to a close.

Among other things, Shulman observed that in 1998, the IRS hit “rock bottom” with only 32 percent of respondents to the (American Customer Satisfaction) Index survey voicing satisfaction with how IRS was doing its job.  But in 2011, the Index showed satisfaction with the tax filing experience reaching 73 on a scale of 100 among all individual tax filers.  “That is our highest score since we began participating in the survey in 1994.  I am especially proud of our continued progress in this metric, given the new responsibilities handed to the IRS in recent years…the increasing complexity of the tax code…and our continued drive to cut costs…..The IRS is now recognized as a highly efficient and effective institution to carry out important and high profile government initiatives.”

We guess the Commissioner hasn’t had an opportunity to call one of his own toll-free numbers, lately, in an effort to resolve a problem.

The 9^th Circuit Court of Appeals recently sided with the government in denying a taxpayer’s bad debt deduction for advances made to a company in which he was an officer and a shareholder.  In Ramig v. Comm, the Court citesits 1970 decision in A.R. Lantz Co., Inc. v. U.S. wherein guidelines were established for purposes of clarification as to exactly what constitutes a debt investment, as opposed to an equity investment, including:

• Maturity dates are specified for ostensible “loans,” though principal was never paid and the dates were extended
• “Notes” were not protected by collateral, an acceleration clause, or a sinking fund
• “Noteholders” had a right to enforce payment, though there was considerable testimony that payment would not be enforced
• There was a complete identity of interest between the parties
• The “notes” were quickly subordinated by the only other creditor
• Shareholders never received dividends but did receive irregular interest on their “notes”
• The “notes” for the most part were in proportion to shareholdings
• The trial court found that there was “…an atmosphere created by the testimony which indicates that all advances were treated in the same way”

 There have been instances in which illness has been an allowable excuse for late filing of certain tax returns.  But the recent case of Margaret Stine v. U.S. wasn’t one of them, according to the Court of Federal Claims.

Seems Margaret was suing for a refund of penalties and interest associated with failure to timely file her gift tax return, and pay the related taxes.  She argued that her health problems, including pneumonia, respiratory infections, knee pain, knee replacement surgery, a thyroid growth, heart palpitations, and cataract surgery should be enough of an excuse.

But the Court found that her various ailments were treated, and did not continuously incapacitate her during all of the time available to her in which she did not exercise ordinary business care and prudence to meet her deadlines.

And further, record of the fact that she completed several real estate transactions during the period of her bad health also worked against her in the Court’s analysis.

A recent audit (issued September 19, 2012) by the Treasury Inspector General for Tax Administrating (TIGTA) found that IRS isn’t quite on the ball when it comes to consistent application of abatement of failure to file (FTF) and failure to pay (FTP) penalties.

It’s not widely known that since 2001, IRS has had “administrative waiver” capability, pursuant to which FTF and FTP penalties for taxpayers who had demonstrated full compliance over the prior three years could be waived.  The purpose for granting the waiver, called a First-Time Abate (FTA), is to reward past tax compliance and promote future tax compliance.  But most taxpayers with compliant tax histories are not offered and do not receive the FTA waiver, according to TIGTA, who estimated that for tax year 2010, about 250,000 taxpayers with FTF penalties and some 1.2 million taxpayers with FTP penalties did not receive penalty relief even though they qualified under the FTA waiver criteria.

TIGTA estimated the unabated penalties totaled more than $181 million, and further that the FTA waiver is not used to its full potential as a compliance tool because it is granted to taxpayers before they demonstrate full compliance by paying their current tax liability.

The pending expiration of the “Bush tax cuts” should make most folks give thoughtful consideration to their capital gain tax planning, as the year comes to a conclusion.

This year, long-term capital gains are taxed at a maximum of 15%, though that rate will move upward in 2013 absent Congressional action. Not to mention the imposition of the new 3.8% “unearned income Medicare contribution tax” which will also apply in 2013 to realized capital gains (as well as other forms of income). Say you own some appreciated stock which you think may continue to grow even more in value. Consider selling in 2012, pay the favorable 15% tax rate, and then buy the stock back, which will therefore also increase your tax basis in the repurchased stock.

Likewise, if you are planning on selling your primary residence, and are among the fortunate few whose residence has appreciated in value to the extent that your long term capital gain upon sale may exceed the $500,000 joint filer exclusion, try to close before year end in order to secure that favorable 15% tax rate and avoid the 3.8% Medicare surtax which would also apply to a transaction of this nature.

Sometimes, it seems that no matter what you do via the usual channels of communication, you get absolutely nowhere in dealing with the behemoth IRS. If that is you, consider the Taxpayer Advocate Service (TAS), an independent organization within the IRS, whose mission is to helptaxpayers who are experiencing economic harm because of IRS actions, taxpayers who are seeking help in resolving problems with the IRS, and those who believe an IRS system or procedure is not working as it should. The TAS helps taxpayers whose problems are causing financial difficulty or significant cost, including the cost of professional representation.

The TAS service is free, and there is at least one TAS office in every state. Check out Publication 1546 – “Taxpayer Advocate Service – Your Voice at the IRS”, and if you need help, call (toll free) 1-877-777-4778.

The alternative minimum tax (AMT) was enacted decades ago, to attempt to assure that folks with the power to orchestrate their tax liability, and assure that they paid little or none, would be trapped, and thus be required to pay at least something.

But according to the Congressional Research Service (CRS), unless Congress acts (Who would expect they will, given their recent track record?), the combined effects of inflation and reductions in the “regular” income tax rate will cause something like 30 million taxpayers (approximately 20% of all taxpayers) to be trapped by AMT in 2012!

The problem seems to be that Uncle Sam has become just a little too happy to receive AMT revenues – according to CRS, if AMT were repealed without some other adjustments to the regular income tax scheme, the lost revenue would be over $1.3 trillion between 2011 and 2022 if the “Bush tax cuts” are not extended, and over $2.7 trillion if they are.