IRS INCREASES MILEAGE RATES TO HELP WITH GAS PRICES

The Internal Revenue Service today announced an increase in the optional standard mileage rates for the final six months of 2008. Taxpayers may use the optional standard rates to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

The rate will increase to 58.5 cents a mile for all business miles driven from July 1, 2008, through Dec. 31, 2008. This is an increase of eight (8) cents from the 50.5 cent rate in effect for the first six months of 2008, as set forth in Rev. Proc. 2007-70.

In recognition of recent gasoline price increases, the IRS made this special adjustment for the final months of 2008. The IRS normally updates the mileage rates once a year in the fall for the next calendar year.

"Rising gas prices are having a major impact on individual Americans. Given the increase in prices, the IRS is adjusting the standard mileage rates to better reflect the real cost of operating an automobile," said IRS Commissioner Doug Shulman. "We want the reimbursement rate to be fair to taxpayers."

While gasoline is a significant factor in the mileage figure, other items enter into the calculation of mileage rates, such as depreciation and insurance and other fixed and variable costs.

The optional business standard mileage rate is used to compute the deductible costs of operating an automobile for business use in lieu of tracking actual costs. This rate is also used as a benchmark by the federal government and many businesses to reimburse their employees for mileage.

The new six-month rate for computing deductible medical or moving expenses will also increase by eight (8) cents to 27 cents a mile, up from 19 cents for the first six months of 2008. The rate for providing services for charitable organizations is set by statute, not the IRS, and remains at 14 cents a mile.

The new rates are contained in Announcement 2008-63 on the optional standard mileage rates.
Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

Tax Help - "Sorry Jenny Craig, Those Meals Aren't Deductible!"

How many of you have seen and been lured into all those TV “lose weight quick with our meals” commercials?

With obesity being one of the top diseases facing Americans today, many folks are looking for ways to deduct the high costs of those meals on their tax returns. But the IRS has their own thoughts on the deductiblity of those costs.

IRS Information Letter 2007-0037 explains that meal replacements and dietary supplements to help people reduce their weight cannot be deducted as medical expenses because they are substitutes for the food individuals normally consume and the cost of food is a nondeductible personal expense.

So for all of you career dieters, your efforts are in vein to try and supplement what you’ve expended with a deduction.

Tax Help - There's More To Alimony Than You Think

Alimony is deductible by the payer and reportable as income to the recipient. But it can also provide more deductions for the payer.

For instance, under the terms of a divorce, a taxpayer is required to make the payments on his former spouse’s car, health insurance premiums, and the mortgage and property taxes on their jointly owned home. The former spouse resides in the home. Do you think any of these payments qualify as deductible alimony payments?

Most definitely, yes. The payments he makes for the care and the health insurance premiums qualify as deductible alimony, even if they are paid directly to the bank and the insurance company.

One-half of the interest on the mortgage payments he makes for the joinly owned home qualifies as alimony; the other half is deductible on his Schedule A.

None of the real estate taxes he pays is deductible as alimony; however the entire amount is deductible on his Schedule A.

Additional reading material:

Frequently Asked Questions - Alimony

Tax Topic - Topic 452 Alimony Paid

Tax Topic - Topic 406 Alimony Received

Self-Employment for the Shareholders

A basic principle of taxation is that anyone who earns income should pay tax on it. “The existence of a validly organized and operated corporation does not preclude taxation of income to the service provider instead of the corporation.”

A taxpayer and his wife, who is a realtor, each owned S corporations. The taxpayer ran his construction business through one corporation while his wife runs her business through another corporation. The S corporations recognized the income and operating expenses of their businesses. Neither the taxpayer nor his wife received a salary from the S corporations. No payroll taxes were paid on moneys distributed to them. They did report income flowing through (pass-through income) to themselves from the corporations and paid income tax on the amounts, but no FICA or self-employment tax.

In this case, the IRS and the Tax Court has determined:
· The person providing the service is an employee of a corporation that has the right to instruct or control the employee in some meaningful sense.
· There exists a contract or similar arrangement between the corporation and the service provider that recognizes the right to instruct or control.

Both of these factors were absent in this case. Therefore, it has been upheld by the Tax Court to subject the taxpayers’ income from their S corporations to self-employment tax.

If you have an S corporation where the shareholder(s) are performing services for the S corporation, they should be drawing a reasonable salary and reporting it on IRS Form W-2.

Further reading:

Corporations

S Corporations

Tax Information for Corporations

Publication 542

Just Another Dumb Crook Story

How dumb do you have to be to bribe an IRS agent, well let’s ask Ming Liou, he went to prison for one year because he did.

Ming owned an electronics corporation. He conducted business out of his home. As luck would have it, the IRS came to conduct audits on his corporate and personal returns in 2003.

Liou first offered the auditor a designer handbag claiming it was worth $400. The Auditor did not accept the gift. In the same meeting, Liou mentioned that he was going to have to pay his accountant $5,000 to handle the audit and that he would rather just give the money to the auditor in exchange for her to wrap up the audit quickly and “not to be hard on him”. The IRS agent neither accepted nor rejecdted the offer.

Upon returning to the office, the IRS auditor notified her superiors of the bribe. They had the auditor call Liou back stating she would take the deal; the call was of course recorded. She also wore a wire when she went to Liou’s home to pickup the money. He gave her the purse and $5,000 in cash and asked her not to tell anyone about it and not to deposit the money in the bank.

Liou was arrested and sentenced to a year in prison. He appealed in an attempt to get a lesser sentence and was unsuccessful.

Now I ask you, how stupid are you to mess with the IRS. Guess Mr. Liou has realized the bribery really doesn’t pay!

The following are some IRS articles that will enlighten you on just what they can do.

Examples of Public Corruption Crimes Investigation

2007 Civil and Criminal Actions

FY2007 Examples of Money Laundering Investigations

Bribery Links

Tax Help - "Do Your Children Work For You?"

Taxpayers who own small businesses such as paper route carriers and vending machine businesses sometimes have their children work with them. In some instances the owner (father/mother) will use their children’s help as a deduction.

If you do use your child to do minial tasks in your business, beware, the IRS has very specific regulations for claiming wages paid to a child.

In Tax Court Summary Opinion 2005-11, the IRS disallowed the deduction for amounts paid to children after determining that the amounts were not ordinary and necessary expenses paid or incurred in a trade or business.

The Tax Court also determined that a taxpayer is liable for the accuracy-related penalty in regard to the underpayment attributable to the disallowed deductions. The Tax Court ruled for the IRS on both issues.

As an example, a taxpayer states that his children work about ten hours per week, but does not really keep good records on the exact time. For their services, the taxpayer writes checks to each child in the amount of $3,000 each year and deducted these amounts as labor expenses.
The parent does not set up separate accounts for his children to deposit their alleged wages. Without proper documentation, the IRS will assume that the parent kept the proceeds and either reinvested into busines or deposited the amounts into their own personal account. The parent also never establishes and hourly rate for the child’s services and pays the set amount.
Overall, the parent did not keep adequate books and records or otherwise substantiate the deductions reported on his Schedule C and the amount allegedly paid to the child remained in his control.

This particular case does not state that children cannot work for their parents. However, if children are hired, make it legitimate, substantiate the hours worked, and actually pay them a reasonable wage. But most of all, make the money earned theirs. Save for their education and financial future.

TAX TIP: Parents owning a sole proprietorship or a partnership with a spouse can hire their children and avoid withholding FICA as long as the children are under the age of 18. Your are not required to pay FUTA until your child reaches the age of 21. This exception from withholding does not apply if the parents own a corporation or if there are any partners in the partnership other than the child’s parents.

Tax Help - An Education For Mom & Dad

For divorced parents of full time college students, there are a number of tax related issues that you should familiar yourself with.

If the student lives with the mother she is claimed on the mother’s return as a dependent.

There are instances where the father is awarded the dependency claim.

Here’s another twist, under a final divorce decree, the father is requried to make tuition payments on behalf of his child directly to the University where they are enrolled. The question is now can the father deduct as an education credit the expenses paid for his child.

The answer is NO. The payments made to the University by the father are treated as if the father gave the child the money and the payment to the University was made by the child.

The mother is allowed to claim the education credit since she is eligible to claim the child as a dependent.

But on the other hand, if the father is given the right to claim the child on his return, then he may claim the education expenses on his return.

Filing Nightmares for Same-Sex Marriages

Most tax preparers have not had the experience of preparing same sex returns. Many of us are going to need special training to complete such returns.

I was recently doing some research and came across a blog article by William Perez, tax blog writer for About.com. He provides some very valuable information to both taxpayers and tax preparers. The following are some highlights from his blog article.

With same-sex marriages now legal in California as well as Massachusetts, couples will need to plan their financial future and taxes with great care.



Federal law does not recognize same-sex marriages, only certain States. This provides same-sex couples with some tax time problems.

Same-sex couples will need to file as unmarried persons for federal tax purposes, and as married for state tax purposes. This means that same-sex couples will need to file either three or four tax returns: two single federal returns plus a joint state return; or two single federal returns plus two separate state returns.

Filing Status Options

The biggest challenge, for tax planning and preparation, will be managing two different filing statuses. Same-sex married persons will be unmarried for federal taxes and married for state taxes.

Federal law does not recognize same-sex marriages under the Defense of Marriage Act. Even if a couple is legally married in CA or MA, or has entered into a registered domestic partnership or civil union, these couples cannot file as married persons on their federal tax returns. They will have to file individual tax returns. Their filing status can be either single, or possibly head of household if they support a qualifying person such as a child or parent. A domestic partner will not qualify for the head of household based solely on supporting his or her partner financially, however.

For state tax purposes, married couples will file as married in their state. Here the filing status options are to file jointly or separately. Because some tax breaks have different limitations, state tax liabilities will likely be different than if the couple filed single returns. For example, there's a $3,000 cap on net capital losses per year. If both spouses have capital losses, their state loss could be different than their federal losses. There's a wide range of dollar limits and phase out ranges that would need to be considered in optimizing a state tax return. As such, I recommend that married same-sex couples focus on managing their federal tax situation foremost.

Tax Planning Suggestions

Here's some things to watch out for when dealing with the federal side of the tax return:
Health insurance benefits will be tax-deductible for the employee, but not for a covered same-sex spouse. If both spouses work, it would make sense for each spouse to obtain coverage through their respective employers. If one spouse isn't covered by a group plan, consider purchasing an individual policy instead of getting coverage through a group plan. This will preserve the tax-deductible status of the health insurance premiums at the federal level.
Consider shifting income to the spouse with the lower income. Investment income such as dividends, interest, and capital gains might be taxed at a lower rate. Each spouse will report his or her own wages, however. So income shifting really means deciding who will do the saving and investing.

Consider shifting deductions to the spouse with the higher income. Mortgage interest, property taxes, and charity would yield greater tax savings for the spouse with the higher income. Some deductions cannot be shifted, such as IRA contributions, college tuition and medical expenses. Those deductions remain with the taxpayer and cannot be deducted by the other partner.
Maintain separate bank accounts. To get a tax deduction, a person will need to prove that he paid for the expense. Paying for tax-deductible expenses out of a joint account could result in lost deductions if a return were audited and the taxpayer couldn't prove that he actually paid for the expense. To eliminate this audit scenario, the person who gets the deduction should pay expenses out of his own bank account.


More information:
Tax Tips for Gays, Lesbians and Same-Sex Couples from About.com
Registered Domestic Partners and Tax Information for Registered Domestic Partners (pdf, 17 pages) from the CA Franchise Tax Board
Same-Sex Marriages from the MA Department of Revenue

Like Kind Exchanges

Whenever you sell business or investment property and you have a gain, you generally have to pay tax on the gain at the time of sale. IRC Section 1031 provides an exception and allows you to postpone paying tax on the gain if you reinvest the proceeds in similar property as part of a qualifying like-kind exchange. Gain deferred in a like-kind exchange under IRC Section 1031 is tax-deferred, but it is not tax-free.

The exchange can include like-kind property exclusively or it can include like-kind property along with cash, liabilities and property that are not like-kind. If you receive cash, relief from debt, or property that is not like-kind, however, you may trigger some taxable gain in the year of the exchange. There can be both deferred and recognized gain in the same transaction when a taxpayer exchanges for like-kind property of lesser value.

Who qualifies for the Section 1031 exchange?

Owners of investment and business property may qualify for a Section 1031 deferral. Individuals, C corporations, S corporations, partnerships (general or limited), limited liability companies, trusts and any other taxpaying entity may set up an exchange of business or investment properties for business or investment properties under Section 1031.

What are the different structures of a Section 1031 Exchange?

To accomplish a Section 1031 exchange, there must be an exchange of properties. The simplest type of Section 1031 exchange is a simultaneous swap of one property for another.

Deferred exchanges are more complex but allow flexibility. They allow you to dispose of property and subsequently acquire one or more other like-kind replacement properties.
To qualify as a Section 1031 exchange, a deferred exchange must be distinguished from the case of a taxpayer simply selling one property and using the proceeds to purchase another property (which is a taxable transaction). Rather, in a deferred exchange, the disposition of the relinquished property and acquisition of the replacement property must be mutually dependent parts of an integrated transaction constituting an exchange of property. Taxpayers engaging in deferred exchanges generally use exchange facilitators under exchange agreements pursuant to rules provided in the Income Tax Regulations. .

A reverse exchange is somewhat more complex than a deferred exchange. It involves the acquisition of replacement property through an exchange accommodation titleholder, with whom it is parked for no more than 180 days. During this parking period the taxpayer disposes of its relinquished property to close the exchange.

What property qualifies for a Like-Kind Exchange?

Both the relinquished property you sell and the replacement property you buy must meet certain requirements.

Both properties must be held for use in a trade or business or for investment. Property used primarily for personal use, like a primary residence or a second home or vacation home, does not qualify for like-kind exchange treatment.

Both properties must be similar enough to qualify as "like-kind." Like-kind property is property of the same nature, character or class. Quality or grade does not matter. Most real estate will be like-kind to other real estate. For example, real property that is improved with a residential rental house is like-kind to vacant land. One exception for real estate is that property within the United States is not like-kind to property outside of the United States. Also, improvements that are conveyed without land are not of like kind to land.

Real property and personal property can both qualify as exchange properties under Section 1031; but real property can never be like-kind to personal property. In personal property exchanges, the rules pertaining to what qualifies as like-kind are more restrictive than the rules pertaining to real property. As an example, cars are not like-kind to trucks.

Finally, certain types of property are specifically excluded from Section 1031 treatment. Section 1031 does not apply to exchanges of:

Inventory or stock in trade
Stocks, bonds, or notes
Other securities or debt
Partnership interests
Certificates of trust

What are the time limits to complete a Section 1031 Deferred Like-Kind Exchange?

While a like-kind exchange does not have to be a simultaneous swap of properties, you must meet two time limits or the entire gain will be taxable. These limits cannot be extended for any circumstance or hardship except in the case of presidentially declared disasters.

The first limit is that you have 45 days from the date you sell the relinquished property to identify potential replacement properties. The identification must be in writing, signed by you and delivered to a person involved in the exchange like the seller of the replacement property or the qualified intermediary. However, notice to your attorney, real estate agent, accountant or similar persons acting as your agent is not sufficient.

Replacement properties must be clearly described in the written identification. In the case of real estate, this means a legal description, street address or distinguishable name. Follow the IRS guidelines for the maximum number and value of properties that can be identified.

The second limit is that the replacement property must be received and the exchange completed no later than 180 days after the sale of the exchanged property or the due date (with extensions) of the income tax return for the tax year in which the relinquished property was sold, whichever is earlier. The replacement property received must be substantially the same as property identified within the 45-day limit described above.

Additional Reading:

Hurricane Victims - Like Kind Exchanges

IRS Bulletin - March 10, 2008

Form 8824 Like-Kind Exchanges

Help for Victims of Mother Nature

Every year we see Mother Nature at her best and worst. And each year you will find some area of the country that has been hit with either severe drought, hurricanes, flooding and tornadoes.

With the recent flooding in Iowa and New Orleans (yet again), the following are some extremely valuable links the IRS and other government agencies have put together to help you deal with any type of disaster.

For Individuals
FAQs for Disaster VictimsThis section provides current information on disaster relief and frequently asked questions. The Hurricane Katrina FAQs are now listed separately from the general FAQs, which are applicable to any disaster.
Reconstructing Your RecordsReconstructing records after a disaster may be essential for tax purposes, getting federal assistance or insurance reimbursement. Records that you need to prove your loss may have been damaged or destroyed in a casualty. While it may not be easy, reconstructing your records may be essential.
Publication 2194, Disaster Losses Kit for Individuals (PDF)Publication 2194 is a Disaster Losses Kit to help individuals claim casualty losses on property that was destroyed by a natural disaster. The kit contains tax forms needed to claim a casualty loss. It also answers common questions like how to extend the time you need to file, how you can receive free tax services and how to identify which disaster losses to claim.
Help for Hurricane Victims: Information on Tax Relief, Charitable IssuesThe Internal Revenue Service is working to provide appropriate relief and assistance to victims of Hurricanes Katrina, Rita and Wilma.

For Businesses
Publication 2194B, Disaster Losses Kit for Business (PDF)Publication 2194B is a Disaster Losses Kit to help businesses claim casualty losses on property that has been destroyed by a natural disaster. The kit contains tax forms needed to claim a casualty loss.
Crop Insurance and Crop Disaster Payments - Agriculture Tax TipsThis section offers helpful tax tips including whether crop insurance and crop disaster payments are taxable.
For Tax Professionals
Disaster Relief Resource Center for Tax ProfessionalsThrough this resource center we address many of the questions received from tax professionals. We've included information published by the IRS, along with links to IRS partners who may offer additional assistance. Many of our partners have developed Web pages that highlight the efforts they've made to help their fellow practitioners to recover and get re-established.
Disaster Assistance Self-StudyThe Disaster Assistance Self-Study provides the basic information needed to assist taxpayers in a disaster. It provides the volunteer practitioner disaster representative member with information on distributing Disaster Kits, computing gains/losses as the result of a disaster, information about administrative tax relief and information about the psychological effects of a disaster on its victims.

Household Employee Reporting

A household employee is someone a taxpayer hires to perform household work. A taxpayer falls under the household employee reporting requirements if a worker is hired to perform household work and is considered an employee.

Household work includes services performed in or around the house such as child care, health care, chauffeuring, housekeeping, and lawn care. A determination needs to be made whether the worker is an employee or an independent contractor. An employee would not control how the work is done, provide his or her own tools, and offer his or her services to the general public. A person who does those things would be an independent contractor. Hiring such a worker does not fall under the household employee reporting requirements. If there is doubt, simply file Form SS-8, Determination of Worker Status for the Purposes of Federal Employment Taxes and Income Tax Withholding, to request a determination from the IRS.

Because the taxpayer hiring a household employee is an employer, there is the potential for payroll taxes and wage reporting. Federal payroll taxes are reported on Schedule H, Household Employment Taxes. Wages are reported on a W-2, Wage and Tax Statement. If the household employer meets any or all of the filing requirements, the employer will need to file Form SS-4, Application for Employer Identification Number, to obtain an EIN.

Additional Resources:

2007 Instructions for Schedule H

Does Your Retirement Fund Look Shaky?

Feeling shaky about your retirement future? Count yourself part of a large, jumpy crowd. Only a quarter (27 percent) of people age 40 and older are very confident that they and their spouse will have enough money to live comfortably throughout retirement. A whopping three-quarters of us are struggling on a day-to-day basis to scare up enough resources to fund even a modest level of comfort.

A solid retirement is based on four parts: Social Security, pension benefits and personal savings, earnings from work past the traditional retirement age and health care benefits.

Credited with keeping nearly on-half of older Americans out of poverty, Social Security remain our most valuable and reliable source of retirement income. Those benefits alone, however, cannot provide years free of financial worries.

The other two sources of retirement income - pension and savings - have deteriorated, while spiraling costs threaten the stability of retiree health plans and the solvency of Medicare and Medicaid.

Traditional employer-based pension plans are down sharply, with only one in five American workers looking forward to a regular retirement check. Folks on the job are more likely to be offered the opportunity to save in an employee-sponsored 401(k) plan or a similar vehicle based on voluntary participation. But half of all private-sector employees either don't have access to that solution or aren't using it.

Personal savings are headed the same way. More than half of workers who have saved for retirement have put away less than $25,000. With national personal savings hovering around half of a percent of income, we are not saving enough.

Why don't we save more? Because it's too hard and because we have too much debt.

THE IRS DOES NOT SEND EMAILS...BEWARE!

The Internal Revenue Service never contacts taxpayers via e-mail. So if you have received an email claiming to come from the IRS, chances are the email is a scam. Here's how you can protect yourself.

"The IRS does not send out unsolicited e-mails or ask for detailed personal and financial information. Additionally, the IRS never asks people for the PIN numbers, passwords or similar secret access information for their credit card, bank or other financial accounts." (Source: IR-2007-109)

Common Themes in Email ScamsEmail scams often trick you into thinking you have a missing refund, are under criminal investigation, refers to a non-existent tax form, or asks for your credit card number.

Recent email scams have shown some similarities, such as spelling mistakes and showing tax refunds for an amount that includes dollars and cents. (Usually, tax refunds are for amounts in whole dollars.)

Don't Click on Links or Open Attachments. The email probably contains links to Web sites or attachments. Do not click on those links or open any attachments. Those Web pages or attachments could contain malicious software or code designed to hijack your computer.
Forward the Email to the IRS for InvestigationYou can forward to the email to the IRS. Investigators at the tax agency will use the information contained in the emails to track down the criminals.

To forward the email, make sure your email software is displaying all the headers in the message. Many email programs show only the most important headers by default. Once you are displaying all the headers, forward the fake email to phishing@irs.gov.

"The IRS can use the information, URLs and links in the bogus e-mails to trace the hosting Web sites and alert authorities to help shut down these fraudulent sites." (Source: IR-2006-49)
The IRS will probably not acknowledge the receipt of your email.

Delete the Email. After forwarding the email to the IRS, delete the email. You might also want to run a scan of your computer using your antivirus or internet security program.

If you have any concerns or questions about your taxes, you should contact the IRS directly. Here's some phone numbers:

Tax Refunds: 1-800-829-4477, or visit Where's My Refund on the IRS Web site.Questions about Your Taxes: 1-800-829-1040, or visit a local IRS office.

Did You Know the IRS Rewards Whistleblowers?

The IRS Whistleblower Office pays money to people who blow the whistle on persons who fail to pay the tax that they owe. If the IRS uses information provided by the whistleblower, it can award the whistleblower up to 30 percent of the additional tax, penalty and other amounts it collects.

The IRS may pay awards to people who provide specific and credible information to the IRS if the information results in the collection of taxes, penalties, interest or other amounts from the noncompliant taxpayer.

The IRS is looking for solid information, not an “educated guess” or unsupported speculation.

We are also looking for a significant Federal tax issue - this is not a program for resolving personal problems or disputes about a business relationship.

The law provides for two types of awards. If the taxes, penalties, interest and other amounts in dispute exceed $2 million, and a few other qualifications are met, the IRS will pay 15 percent to 30 percent of the amount collected. If the case deals with an individual, his or her annual gross income must be more than $200,000. If the whistleblower disagrees with the outcome of the claim, he or she can appeal to the Tax Court. These rules are found at Internal Revenue Code IRC Section 7623(b) - Whistleblower Rules.

The IRS also has an award program for other whistleblowers - generally those who do not meet the dollar thresholds of $2 million in dispute or cases involving individual taxpayers with gross income of less that $200,000. The awards through this program are less, with a maximum award of 15 percent up to $10 million. In addition, the awards are discretionary and the informant cannot dispute the outcome of the claim in Tax Court. The rules for these cases are found at Internal Revenue Code IRC Section 7623(a) - Informant Claims Program, and some of the rules are different from those that apply to cases involving more than $2 million.

If you decide to submit information and seek an award for doing so, use IRS Form 211. The same form is used for both award programs.

What Happens to a Claim for an Informant Award (Whistleblower)Procedures used and the criteria followed to identify and process informant cases

History of the Whistleblower/Informant ProgramHistorical information on the evolution of the concept of paying for leads from its inception up to the current law followed today

Whistleblower LawA brief synopsis of what the new whistleblower law entails. This is the most significant change to the Services’ approach to informant awards in 140 years

How Do You File a Whistleblower Award ClaimStep by step procedures to follow to file an informant claim for award

Confidentiality and Disclosure for WhistleblowersThe rules governing confidentiality of informant information

IRC Section 7623(b) - Whistleblower RulesThe requirements of the new rules enacted in IRC Section 7623(b), the Whistleblower Program

IRC Section 7623(a) - Informant Claims ProgramThe requirement of the rules governing claims that do not meet the requirements of the provisions in the whistleblower program under IRC Section 7623(b). These claims are part of the Informant Claims Program

IRS Form 211Application for Award for Original Information

News Release IR-2007-201Procedure Unveiled for Reporting Violations of the Tax Law, Making Reward Claims

Notice 2008-4 Guidance to the public on how to file claimsClaims Submitted to the IRS Whistleblower Office under Section 7623

Whistleblower Office At-a-Glance

IRS Snooping on Celebs

John Snyder, a 17-year IRS employee, has been accused of peeking at the tax records of 197 celebrities and sports figures.

If convicted of the misdemeanor charge, the 56-year-old Snyder could go to jail for up to a year, be assessed a $250,000 fine and face a year of supervised release once he gets out of the slammer.

According to news reports (WebCPA, Kentucky.com and NBC affiliate WLWT in Cincinnati), the stars whose tax records were compromised include Eddie Albert, Kevin Bacon, Alec Baldwin, Timothy Bottoms, Chevy Chase, John Cleese, Portia De Rossi, Sally Field, Steffi Graf, NFL coach Marvin Lewis, Penny Marshall, Randy Quaid, Tara Reid, Maura Tierney and Vanna White.
Snyder also allegedly checked tax information on Cincinnati Reds and Chicago Cubs baseball players.

Snyder's job (former job?) at the IRS office in Covington, Ky., mainly involved business accounts. The federal complaint says that he allegedly accessed the individual accounts out of curiosity.

And apparently Snyder also wanted to gather some more relatable tax information. In addition to the snooping in stars' tax accounts, Snyder also is charged with browsing the files of five non-celebrities, including his next-door neighbor.

Wouldn't you like to be a fly on the wall at their next block party!

Just the latest privacy invasion: The Snyder case comes just weeks after five workers at the Fresno, Calif., IRS return processing center allegedly peeked at taxpayer files.

Corina Yepez, Melissa Moisa, Brenda Jurado, Irene Fierro and David Baker were charged with computer fraud and unauthorized access to tax return information. From 2005 through 2007, each allegedly peeked at one to four tax returns.

Wired magazine's Threat Level blog reports that only 13 taxpayers were compromised. But one authorized peek is one too many.

"The IRS has a method for looking for unauthorized access, and it keeps audit trails, and occasionally it will pump out information about who's done what," said assistant U.S. attorney Mark McKoen, who is prosecuting the California cases. "In general terms, IRS employees are only authorized to access the accounts of taxpayers who write in. They're not allowed to access friends, relatives, neighbors, celebrities."

These snooping instances underscore recent Congressional testimony. Last month, a Treasury Department investigator told lawmakers that IRS employee prying was on the rise, with 430 known cases in 1998, and 521 last year.

Tax Help - Home Office Proposal

Simplifying the deduction for small businesses with an office in the home is one of SBA’s Office of Advocacy 2008 Top 10 Rules for Review and Reform. The Top 10 are drawn from over 80 rules nominated by small business owners and representatives as part of the SBA’s Regulatory Review and Reform initiative.

Submitted by the National Association for the Self-Employed (NASE) and Eric Blackledge, Blackledge Furniture, this is a "must read" proposal for those of you who use the deduction each year:

Internal Revenue Code section 280A(c)(1) permits a deduction for a home office if it is the principal place of business of the taxpayer, used exclusively for business, or used to meet with patients, clients, or customers.

However, current IRS regulations do not provide a concise definition of the elements of this section. In the absence of final regulations describing how to qualify for and calculate the deduction, IRS policies and case law have made it more complicated for a home-based business owner to learn how to obtain the exemption.

Home-based businesses constitute 53 percent of all small businesses.

The requirements to qualify for and calculate the deduction are confusing for taxpayers and do not account for changes in technology that affect the way business is conducted. Consequently, many at-home workers do not take advantage of the home office business deduction.

The IRS should revise the rules to permit a standard deduction for home-based businesses. Similar to the Form 1040 standard deduction, the home office business deduction should be optional. Taxpayers who wish to claim the home office deduction could choose to continue to follow the current home office deduction rules or they could choose the new standard deduction.

Home-based business owners would have a simplified, less burdensome way of taking advantage of the home office business deduction.