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Lower Tax Refunds?

ACA Credits Could Mean Lower Tax Refunds

The Affordable Care Act (ACA) is already proving to be confusing and costly for consumers, with widespread premium increases and plan cancellations. Now, the Centers for Medicare and Medicaid Services (CMS) is warning tax preparers that their clients could face lower refunds in the coming tax season due to excessive tax credits on their 2013 returns.

CMS initially accepted the consumer’s estimates of income and other data, but subsequently verified that data through independent sources. That process revealed some 1.2 million households with income-related data mismatches, and another 966,000 individuals with citizenship or immigration data matching issues, as of May 30th. [Read more...]

New Direct Deposit Limits Could Affect Preparers and Their Customers

In an effort to combat fraud and identity theft, new IRS procedures effective January 2015 will limit the number of refunds electronically deposited into a single financial account or pre-paid debit card to three.

The fourth and subsequent refunds automatically will convert to a paper refund check and be mailed to the taxpayer.

Taxpayers also will receive a notice informing them that the account has exceeded the direct deposit limits and that they will receive a paper refund check in approximately four weeks if there are no other issues with the return. Taxpayers can track their refunds at Where’s My Refund?

The vast majority of taxpayers will not be affected by this limitation, and the IRS still encourages taxpayers and tax preparers to continue to use direct deposit. It is the fastest, safest way for taxpayers to receive refunds.

The direct deposit limit will prevent criminals from easily obtaining multiple refunds. The limit applies to financial accounts, such as bank savings or checking accounts, and to prepaid, reloadable cards or debit cards.

However, the limitation may affect some taxpayers, such as families in which the parent’s and children’s refunds are deposited into a family-held bank account. Taxpayers in this situation should make other deposit arrangements or expect to receive paper refund checks.

The new limitation also will protect taxpayers from preparers who obtain payment for their tax preparation services by depositing part or all of their clients’ refunds into the preparers’ own bank accounts. The new direct deposit limits will help eliminate this type of abuse.

Direct deposit must only be made to accounts bearing the taxpayer’s name. Preparer fees cannot be recovered by using Form 8888 to split the refund or by preparers opening a joint bank account with taxpayers. These actions by preparers are subject to penalty under the Internal Revenue Code and to discipline under Treasury Circular 230.

Source: IRS at

Tax Extenders Bill Stalled In Senate

Await November Elections

One of the casualties of the coming election in Congress is a bill that would extend a package of 50 tax breaks worth $85 billion over the next 10 years to individuals and businesses. The bill has been stalled by Senate republicans angered by the refusal of Sen. Harry Reid to permit any amendments to the bill.

Work began on passage of the bill, which covers tax breaks for auto race tracks, wind energy, school teacher expenses, Puerto Rican rum producers, multinational corporations and others, in May of this year. They are collectively known as “tax extenders” because they expired at the end of 2013. New legislation would revive these credits until the end of 2015.

Republicans want to divide the bill and vote on individual projects, while Democrats are pushing for a single vote on a single bill. Since 36 seats in the Senate are up for re-election, Senator Reid is blocking action on the bill until after the elections.

A compromise bill was passed by voice vote of the Senate Finance Committee earlier this year, but failed to gain traction enough for a vote of the whole Senate.



Sources: Various, including Reuters, Forbes, and National Journal.

IRS Identifies Five Easy Ways to Spot Suspicious Calls

Consumer Alert

The Internal Revenue Service has re-issued a consumer alert providing taxpayers with additional tips to protect themselves from telephone scam artists calling and pretending to be with the IRS.

These callers may demand money or may say you have a refund due and try to trick you into sharing private information. These con artists can sound convincing when they call. They may know a lot about you, and they usually alter the caller ID to make it look like the IRS is calling. They use fake names and bogus IRS identification badge numbers. If you don’t answer, they often leave an “urgent” callback request. [Read more...]

IRS: Publication 1304 (Individual Tax Stats) For 2012 Now Available

Statistics of Income

The Internal Revenue Service today announced the availability of Statistics of Income—2012,

Individual Income Tax Returns Complete Report (Publication 1304). U.S. taxpayers filed 144.9 million individual income tax returns for tax year 2012, down 0.3 percent from 2011. The adjusted gross income less deficit reported on these returns totaled $9.1 trillion, which is an 8.7-percent increase from the prior year. [Read more...]

Part II: Representation- Before US Tax Court

Part II: Representation- Before US Tax Court

© Ben A. Tallman EA

This is the second part in a three part series on Representation.  If you missed the first part, please go back to the previous issue to catch-up.  We had discussed the IRS letters that trigger certain actions and responses on your part, as the client’s representative.  Below is the fifth paragraph dealing with our last level of response before going to US Tax Court.  The earlier paragraphs can be found in the previous article. [Read more...]

IRS Releases Draft Versions of New Affordable Care Act Forms

IRS Releases Draft Versions of New Affordable Care Act Forms

As a tax software company, we get excited when the IRS releases a new form for the upcoming season.  Forms drive our development cycle, and the earlier we can get our hands on them, the better.

The Affordable Care Act forms have created heightened anticipation this year, and when the draft versions were finally posted to late last week, our developers and analysts were buzzing. [Read more...]

Part I: Representation- Questions from the IRS

Part I: Representation- Questions from the IRS

© Ben A. Tallman EA

 If you think about the characteristics and skills that separate Circular 230 Practitioners from the rest of the tax industry; representation is near the top of the list.  Even if you are not credentialed, you still have the right to represent your client in the initial examination or audit of a tax return you prepared.  If you have not become a Circular 230 Practitioner, let’s see if we can get you started on the pathway to “fulfillment”. [Read more...]

IRS Budget Sliced 13% as U.S. House Constrains Tax Agency

IRS Budget Sliced 13% as U.S. House Constrains Tax Agency

 The US House of Representatives voted to cut the Internal Revenue Service’s budget by $1.14 billion in an effort to rein in unnecessary audits and enforcement actions the Congress deems inappropriate.

 The vote came Wednesday in a pair of amendments offered by Republicans Paul Gosar of Arizona and Bill Huizenga of Michigan. Both proposals were passed by voice vote.  The changes would leave the IRS with a budget of $9.8 billion for the fiscal year that starts Oct. 1 — 13 percent below the current year  funding level and 21 percent below the level the administration has requested. [Read more...]

National Taxpayer Advocate Identifies Priority Areas and Challenges in Mid-Year Report to Congress

National Taxpayer Advocate Identifies Priority Areas and Challenges in Mid-Year Report to Congress

 WASHINGTON — National Taxpayer Advocate Nina E. Olson has released her statutorily mandated mid-year report to Congress that identifies the priority issues the Taxpayer Advocate Service (TAS) will address during the upcoming fiscal year. The report emphasizes the importance of taking concrete steps to give meaning to the recently adopted Taxpayer Bill of Rights, issuing refunds to victims of return preparer fraud, continuing to make improvements in the Exempt Organizations area and expanding the recently announced voluntary return preparer certification program to include competency testing.  [Read more...]