Proposal to Increase IRS Oversight of Tax Preparers

Many tax attorneys are keeping their eye on the Biden administration’s proposal to increase the Internal Revenue Service budget, giving it more resources to catch tax cheats while reducing the number of audits completed on a regular basis. According to Biden’s American Families Plan, these two goals can be met by allowing the IRS to have more oversight of tax preparers, who are largely unregulated.

The White House cites a high number of errors in returns prepared by certain kinds of tax preparers, and some believe that these preparers collect fluffed-up fees from taxpayers while simultaneously exposing them to expensive tax audits. The Biden Administration has stated that because such professionals play a vital role in the tax filing process, such as helping numerous filers claim the new credits available, they should also be subject to IRS oversight. President Biden has called upon Congress to put forth bipartisan legislation that would give that authority to the IRS.

Tax Preparation Companies

Our tax lawyers in San Francisco have learned that the U.S. Department of the Treasury has stated in its own American Families Plan that filers frequently use unregulated tax preparers, and that the latter often lack the ability to give tax assistance that is error-free and precise. According to the U.S. Department of the Treasury, preparers who fall into this category complete and submit more returns than all other types of preparers combined, including professionals who specialize in tax problems and tax attorneys. In the past, unregulated preparers have subjected their clients to expensive mistakes leading to audits. Some have even been caught defrauding taxpayers intentionally for their own gain.

President Biden’s Plan Would Expand IRS Authority

Biden’s plan calls for expanding the authority of the IRS to create safeguards in the tax preparation industry. It would include heftier penalties for deceitful or unscrupulous tax preparers who do not identify themselves on the filers’ returns, such as “ghost preparers,” as they are often called, and preparers who would otherwise defraud honest, tax-paying filers.

Fortunately, there are many honest tax professionals, IRS tax attorneys, and CPAs who are dedicated to assisting their clients with returns and ensuring that they get the most of their legitimate tax breaks without using any shady practices to get them more than they’re entitled to.

Sadly, the bad apples in the bunch create tax problems for members of the profession who are aboveboard and reputable. It also causes problems for the IRS and the U.S. Department of the Treasury when some people get away with cheating.

IRS office

A Long-Term, IRS Regulatory Goal May Be Achievable Under the Biden Administration

Regulating tax preparers has been attempted in the past with little success, as most states have their own rules and regulations regarding this process. However, the courts have stated that if Capitol Hill gives the IRS the okay to regulate the industry, then oversight may finally be written into law at the federal level.

Certain Congress members propose bills every so often that would give the IRS oversight authority, but in almost all cases they have stalled due to pushback from numerous tax professionals and their representative trade organizations. In addition, because the IRS’s prime targets would be independent preparers, there was significant pushback from that group as well.

Because the legislative process for the American Families Plan has only recently begun, it will take some time before we know exactly how it is going to play out. However, tax preparer regulation is merely one of several pro-IRS measures the new administration has begun trying to put in place. Taxpayers in need of tax advice or who have concerns about a return should seek the services of a qualified tax attorney at their earliest convenience.

 

Proposal to Increase IRS Oversight of Tax Preparers

Proposal to Increase IRS Oversight of Tax Preparers

Many tax attorneys are keeping their eye on the Biden administration's proposal to increase the Internal Revenue Service budget, giving it more resources to catch tax cheats while reducing the number of audits completed on a regular basis. According to Biden’s...

The $1.9 Trillion Stimulus Plan Includes These Four Changes

Both chambers of Congress have passed the $1.9 Trillion Stimulus Package, a plan based on President Biden’s proposal. Our tax attorneys in San Francisco have learned that the plan includes four primary tax changes to assist taxpayers in several different income brackets. The package was designed to help lessen a bit of the financial stress and tax problems that came from last year’s pandemic and the subsequent shutdown. Listed below are the proposed tax changes.

Tax stimulus plan

 

Child Tax Credit

The current Child Tax Credit would increase for the 2021 tax year from $2,000 per child under 17 years of age to $3,000 per child under 18 years of age, and $3,600 per child under six years of age. It would also be a fully refundable credit for 2021, meaning filers would get a refund for the credit even if the amount ends up being more than the amount of their owed taxes. Previously, the credit was only partially refundable.

The full credit is available for heads of household earning $112,500 or less annually, those who file jointly or surviving spouses earning $150,000 a year or less, and for single filers earning $75,000 or less annually. After that, the credit amount is lowered by $50 for each $1,000 the filer earned above the threshold. Beginning in July, 50 percent of the credit may be advanced to families over a six-month period based on tax information available from either 2019 or 2020.

Our tax lawyers have not yet discovered if these payments would be distributed on a monthly basis or some other way. The people who will benefit from this change include the bottom 20 percent of earners who have children. People in that category would receive an average benefit of $3,400.

 

Child Care Tax Credit 

President Biden also has plans to expand the Child Care Tax Credit for one year on an emergency basis. Families would receive a tax credit equaling half of their child-care expenses for children 13 years of age or under, up to $4,000 for one child, and up to $8,000 for several children. This credit is refundable as well, and partial credits would be given to families earning between $125,000 and $400,000 per year. Previously, this credit was applied to a smaller portion of child-care expenses, approximately 20 to 35 percent. Middle- and higher-income households are the primary people who would benefit from this change.

 

Earned Income Tax Credit

President Biden’s proposal also expands the current Earned Income Tax Credit (“EITC”) to include the 2021 tax year. The age requirements will be increased, and a larger benefit would be provided to employed individuals who do not have children. Workers without children could claim the credit beginning at 19 years of age; previously, the age limit was 25. This change would also eliminate the previous ceiling age for the benefit, which was 65 years of age.

Workers who qualify for this benefit would receive approximately three times more from the credit, up from $530 to $1,500. This benefit would primarily help lower earners who have experienced disproportionately higher losses than those in other income brackets.

Unemployment Benefits Tax Exemption

Under normal circumstances, unemployment benefits are taxable. However, an amendment to the bill made by the Senate would make the first $10,200 of jobless benefits tax-free for those who earned less than $150,000 in the 2020 tax year. Internal Revenue Service tax lawyers warn that you may need to file an amended tax return to benefit from this new break if you have already filed your taxes. This benefit obviously helps those who had to collect unemployment in 2020 due to job loss as a result of the pandemic.

Anyone who is confused about these changes should contact one of our attorneys in San Francisco for more information or for help with filing an amended tax return.

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Proposal to Increase IRS Oversight of Tax Preparers

Proposal to Increase IRS Oversight of Tax Preparers

Many tax attorneys are keeping their eye on the Biden administration's proposal to increase the Internal Revenue Service budget, giving it more resources to catch tax cheats while reducing the number of audits completed on a regular basis. According to Biden’s...

Alameda Tax Service Allegedly Filed More Than 35 Fake Tax Returns

Each time the new tax season rolls around, it seems like there’s yet another story involving tax evasion or some type of new tax scheme. This year is no different. Recently, the U.S. Attorney’s Office brought charges against two Bay Area tax preparers who allegedly committed a total of 36 different crimes. The two Alameda tax preparers are believed to have conspired to submit several dozen fake tax returns for the purpose of inflating the refunds owed to their clients.

Alleged Conspiracy Uncovered

Tax attorneys in Oakland have learned that Veronica Forbes and her mother, Delphine Blakely, were charged with filing false tax returns and conspiracy to defraud the Internal Revenue Service. These charges are much more serious than a filer’s tax problems. If convicted of these crimes, the two women may find themselves facing fines of up to $250,000 and as many as five years in federal prison.

Court records show that the charges against Forbes and Blakely relate to tax returns filed in 2014 and 2015. The prosecuting IRS tax attorney referred to 35 cases during which either Forbes or Blakely allegedly added fake information to a tax return. The two women worked on Harbor Bay Parkway in Alameda at Blakely’s Income Tax and Bookkeeping Service.

Tax Preparer Gets Jailtime for fake tax returns

Computer Flags Suspicious Returns

Mercury News reported that Forbes and Blakely were investigated after a computer at IRS headquarters flagged suspicious returns coming out of their office. The software was created to red-flag any tax preparer who shows a refund rate of more than 50 percent for the returns they prepare in any one year. Blakely’s Income Tax and Bookkeeping Service far exceeded that percentage, with refund rates of over 70 percent in 2012 and over 80 percent in 2013 and 2014.

After the system flagged the returns, Big Brother sent an undercover agent to the tax service with documents that would show taxes owed to the government if processed correctly. The complaint against the two women states that the undercover agent was allegedly told that he would owe money, but that “one of those charity things” could be “added,” allegedly to reduce the amount owed or produce a refund. The undercover agent was told in so many words that once the return document was signed, the responsibility was on the taxpayer. Blakely allegedly “added” to the return a charitable contribution to the Salvation Army totaling more than $2,000, despite being told by the undercover agent that no money was given to charity that year, according to the complaint.

Blakely Allegedly “Felt Sorry” for Filers Who Owed Money

Following the undercover operation, agents interviewed some of Blakely’s other tax clients and identified an additional 35 returns that appeared suspicious. Eventually, Forbes and Blakely were also interviewed, and, according to the complaint, Blakely admitted that she “felt sorry” for filers who ended up with a tax bill and that she sometimes exaggerated their deductibles, such as by placing a “1” in front of a $500 amount for expenses. According to IRS Special Agent Cas Mar, Blakely said she is aware of being held to a higher standard, but wanted to “help” her customers.

Anyone with concerns about a suspicious tax return, or who thinks their return may not have been completed accurately, should contact an accountant or a tax lawyer in Alameda County.

 

 

 

 

Proposal to Increase IRS Oversight of Tax Preparers

Proposal to Increase IRS Oversight of Tax Preparers

Many tax attorneys are keeping their eye on the Biden administration's proposal to increase the Internal Revenue Service budget, giving it more resources to catch tax cheats while reducing the number of audits completed on a regular basis. According to Biden’s...

Reality Star Jax Taylor at Odds With IRS and California Franchise Tax Board

Reality Star Jax Taylor at Odds With IRS and California Franchise Tax Board

Virtually any tax attorney in San Francisco would agree that reality stars appear to have frequent problems with taxes. It seems like every time we turn around, another high-profile reality star is facing a tax audit or even being charged with tax evasion. Obviously, filing taxes is a source of aggravation for so many, let alone the rich and famous who sometimes have to keep track of multiple businesses, expenses, and assets. They also stand to lose a lot to Big Brother if they don’t make sure they use a good accountant or tax attorney to take care of this task.

According to Daily Mail, former Vanderpump Rules star, Jax Taylor, owes over $1.2 million to both the IRS and his home state tax agency. The controversial television personality allegedly owes about $300,000 to the state of California and a whopping $800,000 in federal taxes. It is unclear whether or not he has hired a Franchise Tax Board attorney to help him with his troubles.

Jax Taxylor Tax Problems

Tax Lien Placed Against Former Reality Star

According to The Sun, the reality star–born Jason Cauchi–has had a tax lien placed against him by the state of California. The lien was filed on March 27 and totals more than $300,000. Taylor also allegedly owes over $316,000 to the California Franchise Tax Board from the 2018-2019 tax season. On March 10, 2021, a state tax lien was filed, with interest and fees continuing to accrue until the balance is paid in full. Last Thursday, The Sun confirmed with LA County clerk officials that Taylor’s state taxes have not yet been paid. It is not known if a federal tax lien is also in Taylor’s future.

Tax Troubles Date Back to 2014

According to documents obtained by The Sun, this is not the first time Taylor has found himself in tax trouble. The bartender- turned- reality star has allegedly been at odds with the IRS since 2014, a year for which he still has an outstanding tax bill of $23,000. In 2018, Taylor allegedly found himself in additional trouble with the Agency. That year, somewhere in the neighborhood of $200,000 was added to the balance he already owed the IRS.

Taylor Purchases New Home Despite Tax Debt

Although Taylor purchased a new home with Britney Cartwright for almost $2 million in 2019, an even higher amount was added to his unpaid tax bill that same year; a whopping $650,000. Most people would agree that the timing of their troubles is very bad, considering Jax and Britney have a baby on the way and Taylor is not working at the moment.

Jax Taylors House and Property Tax Lien

Photo Credit – Realtor.com

Taylor Once the Highest Paid Pump Rules Cast Member

According to Celebrity Worth, at one time, Jax Taylor was Pump Rules’ highest paid cast member. He earned up to $25,000 for each episode and his net worth mostly stemmed from his ties with Bravo and his time on the reality show. However, he was let go by Bravo, the latter of which cited “problematic behavior” as the reason for the termination. Although Taylor has hinted that another big project is coming, this has not been confirmed. Not surprisingly, the former reality star declined to comment on his IRS troubles. Anyone who owes money to Big Brother or who needs to stop IRS harassment should contact a tax attorney in San Francisco as soon as possible.

 

Proposal to Increase IRS Oversight of Tax Preparers

Proposal to Increase IRS Oversight of Tax Preparers

Many tax attorneys are keeping their eye on the Biden administration's proposal to increase the Internal Revenue Service budget, giving it more resources to catch tax cheats while reducing the number of audits completed on a regular basis. According to Biden’s...

Is the US Tax-Filing System Deliberately Complicated?

According to Chuck Rettig, Internal Revenue Service Commissioner, the IRS is trying to help taxpayers navigate the unusual circumstances related to this year’s tax-filing season. Most of the confusion is due to temporary tax-regulation changes related to the 2020 pandemic. If you visit a tax attorney in San Francisco, one of the things you will likely learn is that the IRS has postponed the normal tax-filing deadline from April 15 to May 17. You can also request an extension, if necessary, until October 15. In spite of these promises from the IRS to help filers with this year’s confusing tax season, many people wonder why no one seems to be making the case for a simple return anymore.

Tax Problems

Past Promises Never Fulfilled

In 1985, then President Ronald Reagan promised a “return-free” tax system speaking of a process that would allow approximately 50 percent of all filers to never have to fill out a tax return again. The framework of this plan included that taxpayers with no complicated issues receive a letter detailing taxes owed or an automatic refund. Filers with more complex returns would use a system similar to the one in place today.

Similarly, Austan Goolsbee, then President Barack Obama’s chief economist, rolled out a plan for a “simple return,” where filers would be given a previously-completed tax form that they could review and correct if necessary. It is estimated that Goolsbee’s system would save American taxpayers over $2 billion annually in tax-preparation fees. Although neither proposal was ever implemented, both illustrate what most tax lawyers and individuals already know: nobody is fond of filling out tax forms. Even though return-free filing is not a complex process, the U.S. appears to be sticking to the costly and time-consuming system currently in place.

More Than 30 Countries Offer Return-Free Filing

As of now, a minimum of 30 countries worldwide allow return-free filing, including the U.K., Spain, Sweden, and Denmark. Interestingly, it appears as if the U.S. could follow suit if it wanted to, since 95 percent of American taxpayers receive multiple information returns giving the government access to their exact income. This data technically offers everything government officials need in order to complete returns for most taxpayers if they would simply embrace this idea.

A Costly Filing System

The tax-filing system used in the U.S. is 10 times more costly than tax systems in over 35 other countries with vigorous economies. In a return-free system, these expenses would disappear, along with the 2.5 billion hours U.S. filers spend annually on tax preparation. Some experts see the time-consuming and expensive tax reporting system in the U.S. as a consequence of the government’s connection with the commercial tax preparation industry. The latter consistently lobbies federal lawmakers to maintain the status quo.

Affiliation Between Congress and the Tax preparation Industry

Several decades ago, Congress told the IRS to offer free tax preparation to low-income filers. “Free File” was the IRS’s response in 2002. Free File was a public-private affiliation between the tax preparation industry and the government. Part of the agreement included the IRS’s refusal to compete with the private sector.

Free File’s public part consists of the IRS herding filers to commercial tax preparation sites. The private part consists of those same sites sending taxpayers to expensive alternatives.

The Treasury Inspector General for Tax Administration stated that partners in private industry use computer codes to obscure free websites and divert unsuspecting taxpayers to sites that charge money.

In 2007, legislation to provide free government tax preparation was rejected by the House of Representatives, and, in 2019, Congress attempted to legally bar the IRS from ever offering free online tax-preparation services.

Federal Lawmakers Lobbied by Tax Prep Companies

Obviously, tax preparation companies lobby federal legislators to keep tax preparation complicated and expensive. In fact, the maker of TurboTax, Intuit, refers to free government tax services as a threat to their business model. A quick example of this is the Earned-Income Tax Credit, which is so complex that 20 percent of eligible individuals never file for it. If those individuals’ tax returns were prepared by the government, that 20 percent would automatically get the tax credit. Many experts believe that the system has been kept complicated because the tax preparation industry predicts vast lost revenue if the government steps in.

Only an IRS tax attorney can offer expert advice on filing taxes and claiming tax credits. If you are confused about your return or need help to file, contact a tax attorney in San Francisco at your earliest convenience.

 

Proposal to Increase IRS Oversight of Tax Preparers

Proposal to Increase IRS Oversight of Tax Preparers

Many tax attorneys are keeping their eye on the Biden administration's proposal to increase the Internal Revenue Service budget, giving it more resources to catch tax cheats while reducing the number of audits completed on a regular basis. According to Biden’s...

Tax Deadline Extended by IRS Until May 17th for Individuals and Families

Tax Deadline Extended by IRS Until May 17th for Individuals and Families

After increasing pressure from organizations and legislators, the Internal Revenue Service has announced an extended deadline for filing returns and making payments on taxes owed. This will give taxpayers approximately another month to file, since the deadline was extended from April 15 to May 17.

Chuck Rettig, IRS Commissioner, said that many people are still experiencing challenges in 2021, which, of course, are primarily the result of the pandemic and last year’s subsequent economic crisis. Commissioner Rettig went on to say that the IRS’s goal is to continue doing everything it can to assist taxpayers to fight their way through this maze of unusual circumstances, while still working on their usual tax administration duties. He cautioned that even with the new deadline, however, taxpayers should try to file as early as possible, particularly if they are anticipating a refund.

Tax Deadline

Late Start for Filing Season

In 2021, February 12 marked the opening of the filing season, which was a delayed start when compared with prior years. Additionally, the IRS is operating behind schedule and now has the added task of implementing changes from the American Rescue Plan Act of 2021. This disruption in the normal schedule has left filers with less time to prepare their returns. Moreover, the government has created numerous stimulus provisions to give additional relief for those who were hit hard by pandemic-related financial problems. These provisions have added to the complexity of this year’s tax season. Some people have sought the advice of IRS tax lawyers because of the many confusing changes with deadlines and tax credits.

Extension Does Not Cover Estimated Tax Owed

The Treasury Department and the IRS stated that the extended deadline is for individuals and families, including self-employed persons. Filers who postpone paying their federal taxes will not be hit with interest or penalties on the amounts owed, provided they make their payments by May 17.

Estimated tax payments due by April 15 are not covered under this extension, so it is important for filers to understand they must still meet that deadline to avoid penalties and interest. Therefore, tax attorneys in San Francisco should be consulted by those who are concerned they may not be able to make timely payments.

Pressure from Numerous Sources Was Catalyst in Decision to Offer Extension

Representative Richard E. Neal (D-MA), the Chairman for the House Ways and Means Committee, stated that it is absolutely necessary to give taxpayers an extension and some much- needed flexibility during this time of crisis.

Democrat and Republican lawmakers alike have requested that the IRS extend the tax deadline. Representative Jamie Raskin (D-MD) stated that many are still grappling with health, logistical, and economic challenges on a massive scale brought on by the devastating pandemic, and that an extension to file 2020 tax returns is imperative. Senator Mike Crapo (R-ID) joined Raskin and other lawmakers in this request for an extension.

Throughout the coming days, the IRS plans to publish more formal details about the extension and other pertinent information on this issue. Speaking to qualified tax lawyers is the best option for those who are unclear about the tax extension or have other questions about their return or monies owed.

 

 

Proposal to Increase IRS Oversight of Tax Preparers

Proposal to Increase IRS Oversight of Tax Preparers

Many tax attorneys are keeping their eye on the Biden administration's proposal to increase the Internal Revenue Service budget, giving it more resources to catch tax cheats while reducing the number of audits completed on a regular basis. According to Biden’s...