Accounting News

Tuesday, March 20, 2012
Tax Scam Mastermind Guilty

Ronald L. Brekke has been found guilty of conspiracy and wire fraud. He helped almost 1,000 people file fraudulent claims for $14 million. Most of the people filing for the refunds were Canadians. Most of the fraudulent claims were caught before being paid out but they think two percent did get through.

Brekke committed what is called 1099 OID fraud. It is the false belief that you can get a refund for interest expected from financial instruments that won't mature for at least year. He told his clients that US citizens were entitled to a refund to pay off debts.

It is not surprising that people were caught committing the fraud. They were claiming refunds of $350,000 and more. These amounts will always trigger audits. Brekke is now facing up to 65 years in prison.

The Accounting Aisle can help you only pay what you owe on your taxes. If you are looking for someone to break they law you will  have to look up Brekke in Federal prison.


Accounting News

Thursday, March 15, 2012
Charity Follow Up

We recently talked about how to pick a charity for clients. One suggestion was to review their status with the IRS. Right on queue the IRS has released a new website to help you out. The site allows users to find an exempt organization and check its federal tax status and filings. The site includes:

  1. Whether the organization is eligible to receive tax-deductible donations.
  2. If their tax-exempt status has been revoked
  3. If they have filed their annual form 990-N
The one thing left to improve is the speed of the data. It is currently only updated monthly.

Accounting News

Tuesday, March 13, 2012
Passports Tied to Taxes

The Senate has passed a provision that would allow the State Department to deny passports to citizens with "seriously" delinquent taxes. They define seriously as more than $50,000 but that amount would adjust for inflation in future years. There would also be exceptions when the tax payer has a payment plan with the IRS or a hearing is pending.

The provision is part of the highway transportation bill. That bill is expected to go for a final vote later this week. The house is planning on taking up the bill next week. So this provision has several steps before it can become law.

This comes on the heals of the decision to allow deportation for unpaid taxes. It appears that the IRS will use all the levers at their disposal to ensure payment.

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Accounting News

Wednesday, March 7, 2012
Forclosures, Short Sales, and Taxes

As the housing bubble continues through the system we are still seeing a tremendous amount of questions about what are the tax implications for a short sale or a foreclosure. The problem is there are no easy answers. Here are some guidelines but make sure you work with a tax CPA to get the full answer for your situation.

The first thing that will affect the tax implications is whether the house is a primary residence, investment, or business. The Mortgage Debt Relief Act of 2007 lets tax payers exclude income for discharged debt on your primary residence for foreclosures. In other terms, if you sell your home for less than the mortgage owed you do not need to declare the difference as income as would have been the case before 2007.

Some key exceptions. You can only deduct the first $2 million. The mortgage must also be for the home. If you have a home equity line of credit or a loan you took out on the house but was not used for home improvements then it is forgiven debt and subject to taxation.  A form 982 must be filed for any forgiven debt. Your mortgage company should give you a 1099-C if debt was forgiven over $600.

Short sales are a different matter. Any debt that was forgiven must be reported as income on form 982. The biggest exception is if this is part of a title 11 bankruptcy.

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Accounting News

Monday, March 5, 2012
IRS Refund Delay Update

The IRS has issued an update on their problems with issuing refunds. The problem was disclosed to tax prepares back in January and we last reported on the issue on 2/21. WTOL has reported that the IRS is two million refunds behind schedule.

The IRS says the problems have been resolved and they are no longer experiencing delays. Tax returns filed after 2/13 should get their refunds on schedule. They say they have sent out 45.2 million refunds this year; slightly more than the 45.1 million sent over the same period last year.

So there are no more excuses to getting your taxes filed. Accountants are ready to help you out. Remember that as we approach April 17 their time will fill up and may push you into an extension.

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Accounting News

Friday, March 2, 2012
NYC Tax Preparers in Sweep

The New York City of Department of Consumer Affairs recently did a sweep of tax preparers. They inspected 850 locations and wrote 1,000 violations for around $1 million in fines. Around one third of all locations visited had at least one violation.

The biggest source of the fines was from refund anticipation loans and client fees. In general the loans have very high interest rates. Many locations failed to disclose the actual interest rates. The second area of fines was for not disclosing the total cost of the return.

It would be interesting to know how much of the problem was from EAs or CPAs. I would wager that the problems were largely from the tax preparation industry that survives on the high interest refund loans that come close to usury. They can charge less than a CPA but make it up on the loan.

When you are ready for an accountant to handle your taxes then we are ready to help you out.

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