Tag Archives | IRS

IRS security puts taxpayer info at risk

The IRS won’t contact taxpayers by email, because of security concerns. When I am representing a client, auditors generally will not send me emails, for the same reason. And the Service regularly puts out notices telling taxpayers how to maintain their privacy and not get taken in by scammers claiming to be with the government.

But none of this concern for security seems to apply when it comes to the IRS’s own hiring practices. The Washington Post jumped on a report this week that the IRS didn’t do background checks on contractors who were given information on 1.4 million taxpayers–including their Social Security numbers.

The Associated Press, in an article picked up by the Santa Fe New Mexican and dozens of others newspapers, noted that the IRS also had sensitive documents being transported by a courier who had spent 21 years in prison for arson and other charges. Yep.

You can read the whole sad and kinda scary report from the Treasury Inspector General For Tax Administration here.

IRS penalty on foreign account is more than total $$$ in the account!

Proof once again that the rule requiring U.S. taxpayers to report their foreign bank accounts is being used like a sledgehammer: The IRS has won a court case assessing a 150% penalty–that is not a typo–on the value of a Swiss bank account.

As Bloomberg reports, Coral Gables, Florida, resident Carl Zwerner, 87, was assessed a $2.24 million penalty on the approximately $1.5 million he held in an account with ABN Amro Group, NV.The penalty was for failing to file the Report of Foreign Bank and Financial Accounts. It’s worth noting that the penalty has nothing to do with Zwerner owing any tax on that money. Nope, the penalty is for the simple failure to file a form reporting the assets.

By the way, if you have foreign bank accounts subject to reporting, the deadline for electronically filing your 2013 FinCEN Form 114 (which replaces old friend Form TDF 90-22.1–isn’t this fun??) is June 30.

IRS abandons voters on campaign finance mess

Don’t look to the IRS for potential relief from a tsunami of political advertising during the 2014 off-year elections.

The Service announced in late May that it is pulling back proposed regulations on tax-exempt groups. That means that everyone from the billionaire Koch brothers to tree-hugging lefties will be able to fund ad campaigns through organizations that often aren’t required to disclose where their contributions come from. It also means the IRS probably will not be doing anything to challenge the tax-favored status of nonprofit “educational” groups until after the end of this year.

This is the one place where many people would like to see the IRS doing more, but nooooooo….

Bitcoin: IRS says, “It’s property, and it’s taxable!”

A lot of people are still trying to figure out just what Bitcoin is, but the IRS has seen enough to decide: It’s a type of property and not a form of currency.

So what, you say? Here’s what: Because, as The New York Times has reported, the IRS is going to treat Bitcoin as property, people who buy and sell it are going to have to calculate the change in value from when they acquired it, and pay tax (or claim losses) on the difference.

That means you could buy Bitcoin, use it to purchase something, and then have to report a “trade” on the change in Bitcoin value between when you bought it and when you used it.

Oh, and if you’re one of those smart guys or gals who can actually electronically “mine” a Bitcoin, you are going to have to report the market value of the Bitcoin as income.

For Michael Jackson estate, $1B disagreement with IRS is no thriller

There’s the average person’s disagreement with the IRS over a tax bill. And then there’s the estate of Michael Jackson.

The executors of Jackson’s estate pegged his net worth at $7 million. But papers filed with the U.S. Tax Court in Washington, DC, show that the IRS believes his estate is worth $1.125 billion, which is, as The Los Angeles Times so nicely put it, “a difference so vast it looks like a typo.” (10 free articles and then a paywall.)

At that level, the estate would owe more than $500 million in taxes, plus another $200 million in interest and penalties. Among the areas of dispute: The IRS says Jackson’s image & likeness are worth about $434 million; the estate filing put the value at…$2,105.

Inheritance tax disputes are often settled before trial, but I’d like to see this case go to court, if for no other reason than that the testimony, and eventual ruling, is bound to be fascinating.