You might have to wait longer for your tax refunds this year. This is because the IRS is beefing up its security measures to detect fraud and the downside of it is a delay in refunds to genuine filers. According to an enrolled agent in H&R Block, Diana Jacobsen, “(The IRS has) modernized e-file. So they are accepting the returns much quicker, but now once it gets there, they are putting these protections and screening for fraud.”

If you wish to obtain your refund in the shortest amount of time, the best way is to e-file your tax return. You may get your refund sometimes in just 10 days. According to the IRS website, 90% of tax filers obtain their refunds in 21 days or less, if their returns are filed correctly.

According to official figures, as at February 21 this year, the IRS has issued some 45.2 million tax refunds but at the same time, it has received about 1.8 million more returns via e-file. This indicates a slower rate of refunds which is making more taxpayers frustrated with the IRS. The Wall Street Journal has even reported that the delays have resulted in frustrated taxpayers making threats or damaging property. Some have also expressed their frustrations over the social media.

Most lower to middle income earners need their refunds to pay bills or buy necessities. Jacobsen reports, “We will have people who file on the same day, and one gets their refund, and the other one hasn’t gotten one yet. It’s just that something has triggered [the return] for fraud.” Jacobsen also advises taxpayers to visit the IRS website (www.irs.gov) to get an idea of when they can expect their refunds, so that even if they are delayed, they can expect it at a certain time.

The IRS says that many factors come into play that determine the speed of a refund but they do not specify what these factors are.

One factor that may complicate your tax refund is identity theft. If you believe somebody is trying to steal your identity, you should contact the IRS immediately. Jacobsen said, “The IRS will assign a four-digit PIN number so that you can use that on your tax return. It makes sure someone can’t steal your refund.”

Press Release – IRS out to Help You with “Fresh Start” Program

Tampa, Florida Thursday March 8, 2012: The IRS has turned a sympathetic ear to the cries of taxpayers who are struggling to pay their taxes. And the means by which the agency is doing so is its “Fresh Start” program. Tampa tax attorney Darrin Mish advises taxpayers to take advantage of the “Fresh Start” program that enables them to pay their taxes more easily. “The last thing you should do is avoid paying your taxes,” said Mr. Mish, who runs a legal firm based in Tampa, Florida that helps taxpayers with their tax problems. “It is better for you to pay your taxes than to be caught and punished by the IRS”.

However, if you are caught and charged penalties for not paying your taxes, the IRS’ “Fresh Start” program allows for a six month grace period to pay up. But interest on unpaid taxes continues to accrue during this grace period. This applies only to your 2011 taxes and limited to cases with balances not exceeding $50,000. The grace period ends on October 15, 2012.

In giving further clarification on this benefit, Mr. Mish said, “This grace period only applies to you if you have not been employed for at least 30 consecutive days during 2011 or through April 17, 2012 or you are self-employed and your business income has fallen by at least 25% due to the economy. Another caveat is that you must not be earning more than $200,000 per year for those who are married filing jointly or not exceeding $100,000 for taxpayers filing single or head of households.”

If you are eligible for this benefit, you should fill up a new federal form 1127A and submit it to the IRS.
Another way the IRS is helping you is through a more streamlined collection method. The IRS has raised the threshold for entering into an installment payment plan without having to supply a financial statement from $25,000 to $50,000. “This means if you owe the IRS up to $50,000 in taxes, penalties and interests, you can enter into a streamlined agreement with them to pay off your debts over time. The payment period has also been extended from 60 to 72 months,” said Mr. Mish. However, interest on unpaid taxes continues to accrue over this period.

To take advantage of this benefit, you should complete and submit a Collection Information Statement, federal form 433-A or federal form 433-F to the IRS.

If you are struggling with paying your taxes and are at a loss as to what to do, call Mr. Mish’s office at (813) 229 7100 for a free consultation.

PRESS RELEASE - Save Money on Your Taxes with Mortgage Debt Forgiveness

Tampa, Florida Wednesday, Mar 7, 2012: If you have any form of debt cancelled, you are liable for tax on the amount forgiven. “But with mortgage debt, it’s different,” says Darrin Mish, a tax attorney based in Tampa, Florida. If your mortgage debt was forgiven from the tax years 2007 to 2012, you will not be taxable. This applies to even partially forgiven mortgage debt.

The IRS is out to help you save money on your taxes (believe it or not) by revealing these facts about mortgage debt forgiveness:

Under the Mortgage Forgiveness Debt Relief Act 2007, you are eligible for up to $2 million in mortgage debt forgiveness on your principal residence for which you do not have to pay taxes. But if you are married and filing separately, the limit is only $1 million. However, the debt must be for the purpose of buying, building or substantially renovating your principal residence. Furthermore, the property concerned must be the security for the mortgage.

If you have refinanced your property and the proceeds have been used to make substantial renovations to your principal residence, this amount also may be excluded from tax if forgiven. On the other hand, if you have used your refinancing proceeds to pay off other debts such as credit card debts, then the amount no longer becomes eligible to be excluded and will therefore be taxed.

If you have reduced your mortgage through restructuring your loan or if your mortgage has been forgiven because your property has been foreclosed, you can also exclude it from taxes.

All these are applicable only to mortgages on your principal (primary) place of residence. If you have debt forgiven on your second home, business premise or other forms of debt such as car loans or credit card debt, these are not eligible to be excluded from being taxed. But in certain situations, other tax relief provisions like insolvency may be applicable here. Look up IRS Form 982 for more details about these provisions.

If you have any such debt forgiven, you would Form 1099-C, Cancellation of Debt, from your lender at the end of the year. This form will show how much loan debt you have been forgiven and the fair market value of any property foreclosed. Once you receive your Form 1099-C, you should check that all figures therein are accurate, especially the amount forgiven and the current market value of your property.

To claim this special exclusion you need to fill out Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness and submit it with your federal income tax return for the tax year in which the debt was forgiven.

“Taxpayers who feel they qualify for this tax exclusion and wish to take advantage of their rights to Mortgage Debt Forgiveness under the Mortgage Forgiveness Debt Relief Act of 2007 should contact us,” said Darrin Mish.

Mr. Mish can be contacted at (813) 229 7100.

Press Release – Forgiven Credit Card Debts and Taxes

Tampa, Florida, Tuesday, March 6, 2012:  Did you know that all forgiven debt is considered taxable income? “Any debt forgiven is taxable, unless you can prove that the debt was discharged in bankruptcy or that you were insolvent when the debt was forgiven,” says Darrin Mish, a tax attorney based in Tampa, Florida. “The other way a forgiven debt may not be taxable would be when it is a cancelled mortgage debt on your primary residence,” added Mr. Mish.

Many taxpayers have been surprised to discover debts they held a long time ago only recently being forgiven. Some even received notification of debts from as far back as decades past only now being cancelled. You would know you have a debt forgiven when you receive a Form 1099-C Cancellation of Debt from your creditor. A copy of this form is also sent to the IRS.

This year, the IRS anticipates that creditors will send taxpayers 6.4 million 1099-Cs, an increase from 3.9 million in 2010. The rise is likely due to credit card defaults during the economic recession. It is estimated that the country’s six largest credit card companies wrote off more than $75 billion in bad debts in 2009 and 2010.
Furthermore, Treasury regulations encourage financial institutions to issue 1099-Cs for debts that have gone at least 36 months without collection efforts, even if the debts have not been forgiven.

Due to the age of the debts it is common to find many Forms 1099-Cs riddled with inaccuracies, according to the IRS Taxpayer Advocate, Nina Olson. Ms. Olson also says that some taxpayers have received more than one 1099-Cs for the same debt.

Another development that is likely to affect the number of 1099-Cs is the imminent expiry of the provisions of tax exemption for cancellation of mortgage debt on primary residences under the Mortgage Forgiveness Debt Relief Act at the end of 2012. The Act gives exemption from tax for debt forgiven on mortgages of principal residences as a result of a loan modification, short sale or foreclosure. But when the provisions of this Act expire, thousands of homeowners who owe more than their homes are worth could be liable for taxes on their forgiven debts. According to Ms. Olson, “When the law was enacted, no one conceived it would take longer than 2012 to dig out of the mortgage crisis.”

If you want to know what to do with taxes charged on forgiven debts, call Mr. Mish’s office at (813) 229 7100 for a free consultation.

In the recent IRS Oversight Board public forum, some suggestions on improving the IRS correspondence audit was brought up. In order to appreciate these suggestions, you need to know some pertinent facts about the IRS audit process as it is conducted today.

Generally, audits are conducted when the IRS requires further information or clarification on some aspect of a taxpayer’s tax submission. This would involve reviewing the taxpayer’s tax return or resolving questionable details within the return. The audits can either be conducted via the mail, over the phone or face-to-face at the taxpayer’s business premise. When the information sought by the IRS is not very extensive or the issue is not complex, the agency usually conducts a correspondence audit via the mail.

According to Margaret Begg, Compliance and Enforcement Operations Unit in the Treasury Inspector General for Tax Administration’s (TIGTA) office, the correspondence audit is “less intrusive, more automated, and conducted by examiners who are trained to deal with and focus on less complex tax issues”.

Between 2004 and 2008, the statistics show that on average, each correspondence audit resulted in an additional $6,800 in recommended tax revenue per audit. This came from more than 5.1 million correspondence audits that recommended about $35 billion in additional taxes. This figure makes up about 60% of the approximately $58 billion in total recommended additional taxes from all individual audits between 2004 and 2008. Correspondence audits are the cheapest to conduct and have been proven to be effective, thus its use is increasing.

But the main drawback of the correspondence audit has to do with the amount of time it consumes. Although approximately 48% of taxpayers were satisfied with the service they received during the correspondence audit, the source of greatest dissatisfaction could largely be attributable to how much time it takes to get through the process.

Begg disclosed that “the top three areas of dissatisfaction involved the time spent on the audit, the ease of getting through to the IRS on the phone for help, and the overall length of the audit from start to finish. The (public forum) results suggest that the IRS needs to streamline the process so it becomes less time consuming for taxpayers.”

Patricia Thompson, chair of the tax executive committee in the American Institute of Certified Public Accountants (AICPA) has urged the IRS to resolve issues pertaining to correspondence audits namely the time the IRS takes to resolve issues, the difficulty faced by taxpayers in contacting the IRS about the status of their case and the large number of unreturned phone calls by the taxpayers to the IRS.

Thompson also suggested that the IRS reviews the criteria it uses to determine which types of returns are being selected for review under the correspondence audit program. For example, it appears the IRS makes lots of requests for tax deductions like miscellaneous itemized deductions, state and local income taxes and real estate taxes. But the majority of taxpayers selected for audits on these matters are in the alternative minimum tax position, where these deductions do not change the amount of their tax liability. This results in the audit being closed with a “no charge” conclusion, thus wasting the resources of the IRS and the taxpayer’s time.