Billion Dollars in IRS Refunds Still Unclaimed

More than $1.1 Billion in Tax Refunds Still Unclaimed

Washington, D.C. (February 28, 2011)

By Michael Cohn

Refunds totaling more than $1.1 billion may be waiting for nearly 1.1 million people who did not file a federal income tax return for 2007, according to the Internal Revenue Service.

To collect the money, a return for 2007 must be filed with the IRS no later than Monday, April 18, 2011. The IRS estimates that half of these potential 2007 refunds are for $640 or more.

Some people may not have filed because they had too little income to require filing a tax return even though they had taxes withheld from their wages or made quarterly estimated payments, the IRS noted. In cases where a return was not filed, the law provides most taxpayers with a three-year window of opportunity for claiming a refund. If no return is filed to claim a refund within three years, the money becomes property of the U.S. Treasury.

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For 2007 returns, the window closes on April 18, 2011. The law requires that the return be properly addressed, mailed and postmarked by that date. There is no penalty for filing a late return qualifying for a refund. The IRS reminded taxpayers seeking a 2007 refund that their checks will be held if they have not filed tax returns for 2008 and 2009. In addition, the refund will be applied to any amounts still owed to the IRS, and may be used to offset unpaid child support or past due federal debts such as student loans.

By failing to file a return, people stand to lose more than a refund of taxes withheld or paid during 2007. In addition, many low-and-moderate income workers may not have claimed the Earned Income Tax Credit, the IRS noted. The EITC helps individuals and families whose incomes are below certain thresholds, which in 2007 were $39,783 for those with two or more children, $35,241 for people with one child, and $14,590 for those with no children. For more information, visit the EITC Home Page.

The IRS provided a table showing the number of individuals and potential refunds, state by state:

Checking the Status of Your Refund

If you already filed your federal tax return and are due a refund, you have several options to check on your refund. Here are eight things the IRS wants you to know about checking the status of your refund:

1. Online Access to Refund Information Where’s My Refund? or ¿Dónde está mi reembolso? are interactive tools on http://www.irs.gov and are the fastest, easiest way to get information about your federal income tax refund. Whether you split your refund among several accounts, opted for direct deposit into one account, used part of your refund to buy U.S. Savings Bonds or asked the IRS to mail you a check, Where’s My Refund? and ¿Dónde está mi reembolso? give you online access to your refund information, 24 hours a day, 7 days a week. It’s quick, easy and secure.

2. When to Check Refund Status If you e-file, you can get refund information 72 hours after the IRS acknowledges receipt of your return. If you file a paper return, refund information will generally be available three to four weeks after mailing your return.

3. What You Need to Check Refund Status When checking the status of your refund, have your federal tax return handy. To get your personalized refund information you must enter:

• Your Social Security Number or Individual Taxpayer Identification Number
• Your filing status which will be Single, Married Filing Joint Return, Married.
• Filing Separate Return, Head of Household, or Qualifying Widow(er).
• Exact whole dollar refund amount shown on your tax return.

4. What the Online Tool Will Tell You Once you enter your personal information, you could get several responses, including:

• Acknowledgement that your return was received and is in processing.
• The mailing date or direct deposit date of your refund.
• Notice that the IRS could not deliver your refund due to an incorrect address. In this instance, you may be able to change or correct your address online using Where’s My Refund?

5. Customized Information Where’s My Refund? also includes links to customized information based on your specific situation. The links guide you through the steps to resolve any issues affecting your refund. For example, if you do not get the refund within 28 days from the original IRS mailing date shown on Where’s My Refund?, you may be able to start a refund trace.

6. Visually Impaired Taxpayers Where’s My Refund? is also accessible to visually impaired taxpayers who use the Job Access with Speech screen reader used with a Braille display and is compatible with different JAWS modes.

7. Toll-free Number If you do not have internet access, you can check the status of your refund in English or Spanish by calling the IRS Refund Hotline at 800-829-1954 or the IRS TeleTax System at 800-829-4477. When calling, you must provide your or your spouse’s Social Security number, filing status and the exact whole dollar refund amount shown on your return.

8. IRS2Go This is the IRS’ first smartphone application that lets taxpayers check on the status of their tax refund. Apple users can download the free IRS2Go application by visiting the Apple App Store. Android users can visit the Android Marketplace to download the free IRS2Go app.

Links:

• Where’s My Refund?

IRS Announces New Effort to Help Struggling Taxpayers Get a Fresh Start

IRS Announces New Effort to Help Struggling Taxpayers Get a Fresh Start; Major Changes Made to Lien Process

WASHINGTON — In its latest effort to help struggling taxpayers, the Internal Revenue Service today announced a series of new steps to help people get a fresh start with their tax liabilities.

The goal is to help individuals and small businesses meet their tax obligations, without adding unnecessary burden to taxpayers. Specifically, the IRS is announcing new policies and programs to help taxpayers pay back taxes and avoid tax liens.

“We are making fundamental changes to our lien system and other collection tools that will help taxpayers and give them a fresh start,” IRS Commissioner Doug Shulman said. “These steps are good for people facing tough times, and they reflect a responsible approach for the tax system.”

Today’s announcement centers on the IRS making important changes to its lien filing practices that will lessen the negative impact on taxpayers. The changes include:

• Significantly increasing the dollar threshold when liens are generally issued, resulting in fewer tax liens.
• Making it easier for taxpayers to obtain lien withdrawals after paying a tax bill.
• Withdrawing liens in most cases where a taxpayer enters into a Direct Debit Installment Agreement.
• Creating easier access to Installment Agreements for more struggling small businesses.
• Expanding a streamlined Offer in Compromise program to cover more taxpayers.

“These steps are in the best interest of both taxpayers and the tax system,” Shulman said. “People will have a better chance to stay current on their taxes and keep their financial house in order. We all benefit if that happens.”

This is another in a series of steps to help struggling taxpayers. In 2008, the IRS announced lien relief for people trying to refinance or sell a home. In 2009, the IRS added new flexibility for taxpayers facing payment or collection problems. And last year, the IRS held about 1,000 special open houses to help small businesses and individuals resolve tax issues with the Agency.

Today’s announcement comes after a review of collection operations which Shulman launched last year, as well as input from the Internal Revenue Service Advisory Council and the National Taxpayer Advocate.

Tax Lien Thresholds

The IRS will significantly increase the dollar thresholds when liens are generally filed. The new dollar amount is in keeping with inflationary changes since the number was last revised. Currently, liens are automatically filed at certain dollar levels for people with past-due balances.

The IRS plans to review the results and impact of the lien threshold change in about a year.

A federal tax lien gives the IRS a legal claim to a taxpayer’s property for the amount of an unpaid tax debt. Filing a Notice of Federal Tax Lien is necessary to establish priority rights against certain other creditors. Usually the government is not the only creditor to whom the taxpayer owes money.

A lien informs the public that the U.S. government has a claim against all property, and any rights to property, of the taxpayer. This includes property owned at the time the notice of lien is filed and any acquired thereafter. A lien can affect a taxpayer's credit rating, so it is critical to arrange the payment of taxes as quickly as possible.

“Raising the lien threshold keeps pace with inflation and makes sense for the tax system,” Shulman said. “These changes mean tens of thousands of people won’t be burdened by liens, and this step will take place without significantly increasing the financial risk to the government.”

Tax Lien Withdrawals

The IRS will also modify procedures that will make it easier for taxpayers to obtain lien withdrawals.

Liens will now be withdrawn once full payment of taxes is made if the taxpayer requests it. The IRS has determined that this approach is in the best interest of the government.

In order to speed the withdrawal process, the IRS will also streamline its internal procedures to allow collection personnel to withdraw the liens.

Direct Debit Installment Agreements and Liens

The IRS is making other fundamental changes to liens in cases where taxpayers enter into a Direct Debit Installment Agreement (DDIA). For taxpayers with unpaid assessments of $25,000 or less, the IRS will now allow lien withdrawals under several scenarios:

• Lien withdrawals for taxpayers entering into a Direct Debit Installment Agreement.
• The IRS will withdraw a lien if a taxpayer on a regular Installment Agreement converts to a Direct Debit Installment Agreement.
• The IRS will also withdraw liens on existing Direct Debit Installment greements upon taxpayer request.

Liens will be withdrawn after a probationary period demonstrating that direct debit payments will be honored.

In addition, this lowers user fees and saves the government money from mailing monthly payment notices. Taxpayers can use the Online Payment Agreement application on IRS.gov to set-up with Direct Debit Installment Agreements.

“We are trying to minimize burden on taxpayers while collecting the proper amount of tax,” Shulman said. “We believe taking away taxpayer burden makes sense when a taxpayer has taken the proactive step of entering a direct debit agreement.”

Installment Agreements and Small Businesses

The IRS will also make streamlined Installment Agreements available to more small businesses. The payment program will raise the dollar limit to allow additional small businesses to participate.

Small businesses with $25,000 or less in unpaid tax can participate. Currently, only small businesses with under $10,000 in liabilities can participate. Small businesses will have 24 months to pay.

The streamlined Installment Agreements will be available for small businesses that file either as an individual or as a business. Small businesses with an unpaid assessment balance greater than $25,000 would qualify for the streamlined Installment Agreement if they pay down the balance to $25,000 or less.

Small businesses will need to enroll in a Direct Debit Installment Agreement to participate.

“Small businesses are an important part of the nation’s economy, and the IRS should help them when we can,” Shulman said, “By expanding payment options, we can help small businesses pay their tax bill while freeing up cash flow to keep funding their operations.”

Offers in Compromise

The IRS is also expanding a new streamlined Offer in Compromise (OIC) program to cover a larger group of struggling taxpayers.

This streamlined OIC is being expanded to allow taxpayers with annual incomes up to $100,000 to participate. In addition, participants must have tax liability of less than $50,000, doubling the current limit of $25,000 or less.

OICs are subject to acceptance based on legal requirements. An offer-in-compromise is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed. Generally, an offer will not be accepted if the IRS believes that the liability can be paid in full as a lump sum or through a payment agreement. The IRS looks at the taxpayer’s income and assets to make a determination regarding the taxpayer’s ability to pay.

Related Items:

• IRS Begins Tax Season 2009 with Steps to Help Financially Distressed Taxpayers; Promotes Credits, e-File Options (IR-2009-2)
• IRS Speeds Lien Relief for Homeowners Trying to Refinance, Sell (IR-2008-141)
  
  

Don’t be Scammed by Fake IRS Communications

The IRS receives thousands of reports each year from taxpayers who receive suspicious emails, phone calls, faxes or notices claiming to be from the Internal Revenue Service. Many of these scams fraudulently use the Internal Revenue Service name or logo as a lure to make the communication more authentic and enticing. The goal of these scams – known as phishing – is to trick you into revealing personal and financial information. The scammers can then use that information – like your Social Security number, bank account or credit card numbers – to commit identity theft or steal your money.

Here are five things the IRS wants you to know about phishing scams:

1. The IRS doesn’t ask 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 taxpayer communications through e-mail and won’t send a message about your tax account. If you receive an e-mail from someone claiming to be 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, visit the IRS website and enter the search term 'identity theft' for more information and resources to help.

3. The address of the official IRS website is http://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 and report it to the IRS.

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 they are 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.

5. You can help shut down these schemes and prevent others from being victimized. Details on how to report specific types of scams and what to do if you’ve been victimized are available at http://www.irs.gov, keyword “phishing.”

Links:

• Protect your personal information! The IRS does not initiate taxpayer communications through e-mail
• Suspicious e-Mails and Identity Theft

Ten Important Facts About Capital Gains and Losses

Did you know that almost everything you own and use for personal or investment purposes is a capital asset? Capital assets include a home, household furnishings and stocks and bonds held in a personal account. When a capital asset is sold, the difference between the amount you paid for the asset and the amount you sold it for is a capital gain or capital loss.

Here are ten facts from the IRS about gains and losses and how they can affect your Federal income tax return.

1. Almost everything you own and use for personal purposes, pleasure or investment is a capital asset.
2. When you sell a capital asset, the difference between the amount you sell it for and your basis – which is usually what you paid for it – is a capital gain or a capital loss.
3. You must report all capital gains.
4. You may deduct capital losses only on investment property, not on property held for personal use.
5. Capital gains and losses are classified as long-term or short-term, depending on how long you hold the property before you sell it. If you hold it more than one year, your capital gain or loss is long-term. If you hold it one year or less, your capital gain or loss is short-term.
6. If you have long-term gains in excess of your long-term losses, you have a net capital gain to the extent your net long-term capital gain is more than your net short-term capital loss, if any.
7. The tax rates that apply to net capital gain are generally lower than the tax rates that apply to other income. For 2010, the maximum capital gains rate for most people is 15%. For lower-income individuals, the rate may be 0% on some or all of the net capital gain. Special types of net capital gain can be taxed at 25% or 28%.
8. If your capital losses exceed your capital gains, the excess can be deducted on your tax return and used to reduce other income, such as wages, up to an annual limit of $3,000, or $1,500 if you are married filing separately.
9. If your total net capital loss is more than the yearly limit on capital loss deductions, you can carry over the unused part to the next year and treat it as if you incurred it in that next year.
10. Capital gains and losses are reported on Schedule D, Capital Gains and Losses, and then transferred to line 13 of Form 1040.

For more information about reporting capital gains and losses, see the Schedule D instructions, Publication 550, Investment Income and Expenses or Publication 17, Your Federal Income Tax. All forms and publications are available at http://www.irs.gov or by calling 800-TAX-FORM (800-829-3676).

Links:

• Publication 17, Your Federal Income Tax (PDF 2015.9K)
• Publication 550, Investment Income and Expenses (PDF 516K)

Pub 17 - Comprehensive summary of tax info from IRS

Whether you prepare your own return or ask a CPA to do it for you, knowing the tax law will save you money. We want our clients to be knowledgeable so they know the questions to ask as well as comprehend the advice offered.

Pub (or publication) 17 is a comprehensive summary of tax information for the individual.

Starting with “What’s New for 2010” IRS Publication 17, Your Federal Income Tax, takes you step by step through each part of your individual Federal Income tax return. This comprehensive booklet explains the tax law in a way that will help you better understand your taxes so that you pay only as much as you owe and no more.

Here are the top six things the IRS wants you to know about Publication 17.

1. Publication 17, Your Federal Income Tax, is available on the IRS website at http://www.irs.gov and contains a wealth of information for individual taxpayers.
2. The online version of Publication 17 contains electronic links that make finding your answer simple. Both the downloadable PDF and online 2010 Publication 17 have thousands of helpful hyperlinks.
3. Publication 17 is packed with basic tax-filing information and tips on what income to report and how to report it.
4. Publication 17 also includes information on figuring capital gains and losses, claiming dependents, choosing the standard deduction versus itemizing deductions, and how to claim valuable tax credits.
5. Publication 17(SP) El Impuestos Federal sobre los Ingresos is available in Spanish.
6. You can get a hard copy of Publication 17 for free. To get a copy, visit http://www.irs.gov or call 800-TAX-FORM (800-829-3676).

Links:

• Publication 17, Your Federal Income Tax
• Publication 17, Your Federal Income Tax (PDF 2085K)

DOJ Cracks Down on False Tax Credit Claims

Department of Justice Cracks Down on False Tax Credit Claims
http://www.accountingtoday.com/news/DOJ-Cracks-Down-False-Tax-Credit-Claims-57265-1.html?zkPrintable=true

Washington, D.C. (February 10, 2011)

By Accounting Today Staff

The Justice Department has filed six lawsuits in five states to stop tax return preparers from fraudulently claiming the First-Time Homebuyer Tax Credit and the Earned Income Tax Credit.

The filings of those civil injunction complaints coincided with the indictment of a Philadelphia man on criminal charges of fraudulently claiming the first-time homebuyer credit. According to the indictment, Jonathan Brownlee of Philadelphia was charged with 16 counts of filing false federal income tax returns that contained fraudulent claims for the First-Time Homebuyer Credit. He allegedly obtained personal information about several individuals through false pretenses and used that information to make false claims for the credit to the Internal Revenue Service, along with requests that refunds be deposited into bank accounts that he controlled or could access.

Brownlee allegedly knew the individuals whose names he used were not entitled to the credit because they had neither purchased a home nor signed a contract to do so. If convicted, he faces a maximum prison sentence of 80 years and a maximum fine of $4 million.

In addition, three of the announced injunction complaints involved the First-Time Homebuyer Credit:

• A complaint filed in federal court in McAllen, Texas, alleges that tax return preparer Jose Cabrera and his business, JEC Business Consulting of Pharr, Texas, prepare federal income tax returns on which they falsely claim the First-Time Homebuyer Credit for their customers. Prosecutors allege that Cabrera makes no attempt to determine if his customers qualify for the credit and that he repeatedly claimed the credit on his customers’ tax returns even though he knew the customers had not purchased new homes. Cabrera allegedly claimed at least $985,000 in credits in 2009.

• The government has asked a federal court in Philadelphia to stop Friday James, a former high school math teacher from Lansdowne, Pa., from preparing any federal tax returns for others. The complaint alleges that James and his business, Frika Tax Services, falsely claim the First-Time Homebuyer Credit and claim false business expense deductions for his customers, many of whom are West African immigrants with little or no knowledge of the credit. The government alleges that James repeatedly claimed the credit on his customers’ returns when he knew they had not purchased homes within the applicable time period and that he fabricated the date of purchase on forms he submitted to the IRS. James allegedly claimed at least $1.2 million in credits in 2009.

• The Justice Department sued tax-return preparer Delois Warren of Greensboro, Ala., and her business, Branjalo Tax Service, to stop her from preparing federal tax returns for others. Warren allegedly claimed the First-Time Homebuyer Credit on her customers’ returns even after they told her that they did not purchase homes in the applicable tax years. The suit also alleges that Warren prepared returns containing false information in order to fabricate higher tax refunds through overstated earned-income tax credits.

The First-Time Homebuyer Tax Credit was created by the Housing and Economic Recovery Act of 2008, which included a refundable tax credit for first-time homebuyers equal to 10 percent of the purchase price, up to $7,500, for home purchases completed in 2008. The taxpayer was to repay the credit interest free over 15 years. Congress extended the credit in the American Recovery and Reinvestment Act of 2009, increased the maximum allowable amount to $8,000, and eliminated repayment of the credit if the taxpayer retained the residence for more than 36 months. The credit expired in 2010, so eligible taxpayers may still claim it on their 2010 federal income tax returns.

To protect the U.S. Treasury from fraudulent claims for this credit, the Tax Division, the U.S. Attorney’s offices and the IRS have vigorously prosecuted those who have abused the credit. Examples of these criminal prosecutions in 2010 include:

• In December 2010, Kenneth Harris and Lacrecia Ward of Memphis, Tenn., pleaded guilty to conspiring to file false claims against the United States by filing false tax returns claiming the first-time homebuyer credit. Each of them faces a maximum penalty of 10 years in prison and a fine of $250,000 upon sentencing.

• In December 2010, Latricia Ann Williams, Gezelle Helena Amaechi and Shelton DeWayne Tanner were indicted by a federal grand jury in Arizona for conspiracy, wire fraud and aggravated identity theft. According to the indictment, the defendants filed 180 income tax returns falsely claiming more than $1 million in tax refunds based on, among other things, false statements of eligibility for tax credits such as the first-time homebuyer credit.

• In November 2010, Jeffrey Leon Ceaser of Montgomery, Ala., pleaded guilty to conspiring to defraud the United States and identity theft for his role in the filing of 158 federal tax returns that falsely claimed the first-time-homebuyer credit and fuel tax credits. Ceaser faces a maximum of 25 years in prison when sentenced. In December 2010, Ora Mae Adamson of Montgomery pleaded guilty to the same charges before the same court.

• In November 2010, Mary Singleton pleaded guilty in a South Carolina federal court to one count of assisting an individual in filing a fraudulent claim for the first-time homebuyer credit. She faces a maximum prison sentence of three years upon sentencing.

• In November 2010, Georgia Ann Cloud of Tallahassee, Fla., was indicted on 17 counts of assisting individuals in filing fraudulent tax returns with false claims for the first-time homebuyer credit and one count of filing such a tax return herself.

• In October 2010, Roderick Smith was sentenced by a federal court in Peoria, Ill., to 24 months in prison after having pleaded guilty to wire fraud and filing a false tax refund claim with the IRS. The indictment alleged that Smith falsely claimed on income tax returns that his clients were entitled to the first-time homebuyer credit. He was also ordered to pay $73,793 in restitution to the IRS.

• In October 2010, Gregory Carter of Columbus, Ga., was indicted on 25 counts of assisting in the preparation of fraudulent tax returns that included, among other things, false claims for first-time-homebuyer credits.

• In August 2010, Lois Torres of Uvalde, Texas, was indicted on 15 counts of assisting individuals in filing false federal income tax returns falsely claiming the first-time homebuyer credit.

• In July 2010, Byron Meeks of Independence, Mo., was indicted on 15 counts of filing false claims against the United States for, among other things, fraudulent first-time homebuyer credits. In December 2010, Meeks agreed to plead guilty to one of those counts. He faces a maximum prison sentence of five years upon sentencing.

• In April 2010, Kashawn Monique Savery of Los Angeles pleaded guilty to 10 counts of filing false claims against the United States. She admitted filing more than 200 false tax returns claiming more than $1.3 million in refunds based on fraudulently claimed first-time homebuyer tax credits and earned-income tax credits.

In addition, over the past year, the Justice Department has obtained civil injunctions against tax return preparers on the basis of false claims for First-Time Homebuyer Credits, including: Dianelys Armengol Guevara of Pembroke Pines, Fla.; Alberto Camejo of Hialeah, Fla.; and David Santiago , Paula Olivette Patrice, and Henry Ernesto Medina Jr. of Miami.