In their efforts to combat tax evasion, the IRS is mulling over two proposals.  The first is to get US Banks to disclose the details of their foreign customers (non-US citizens) and the second is to get foreign banks in the US to disclose details of their US customers.  Senator Carl Levin (D-Michigan) is urging the IRS to impose such information sharing requirements on the banks.  At present, a similar proposal has been imposed on foreign institutions.
Elsie Bean, who is the chairman of the Senate Permanent Subcommittee on Investigations, spoke on behalf of Levin when she said the proposed requirement on foreign banks would prevent the US from becoming a tax haven.  Bean, staff director of the subcommittee, said it is fair to require all US banks to identify their foreign customers if overseas institutions might be required to disclose information about their US depositors.
Bean added, “The United States and the IRS are going to have to get cooperation from foreign tax authorities.  To get that cooperation, we need to give cooperation as well.”
However, the proposal that obligates foreign banks to disclose US citizens’ details was opposed by some foreign banks namely Canada’s Toronto-Dominion Bank (TD), Allianz SE (ALV) of Germany and Aegon NV (AGN) of the Netherlands.
When the IRS will implement either or both proposals is anyone’s guess.  The obviously easier one to implement would be the one requiring US banks to declare foreigners’ accounts.  Some analysts say this measure, which involves reporting details of non-US bank accounts that earn more than $10 in a calendar year, could be implemented as early as Jan 1, 2012.  The IRS and Treasury Department met with representatives from banks, non-profits and regulators recently to discuss this matter.  Banking representatives told the IRS it would cause their depositors to send their money to institutions in countries that won’t report their identities to the IRS.
Florida’s Office of Financial Regulation Commissioner Tom Cardwell said these proposals precipitate some security and soundness concerns for banks in Florida.  The President of the Florida Bankers Association, Alex Sanchez said often foreign depositors put their money into US banks to avoid political persecution in their home countries.  Some are concerned over possible kidnappings at home.
But Elsie Bean dismisses such fears as ‘misplaced’.  She said, “We have never heard of a case – ever – where a dissident has had their tax information turned over to a government that is oppressing them.  We have very careful procedures and policies to prevent that from happening.”

In a recent action, the IRS sent letters to donors who contributed to advocacy groups that have been supporting political causes.  As a result, a group of Republican Senators wrote to the IRS requesting to see internal correspondences and other information on the matter.  They sought for the names of any IRS staff members involved in that decision, along with internal documents and any correspondence with White House officials.  These Republican Senators are all members of the Senate Finance Committee that oversees the IRS.  According to them, their purpose was to investigate if political concerns have played a role in the IRS’ action in targeting the donors.
The IRS letters state that the contributions may have been subject to a federal gift tax that has been part of the law but not enforced for ages.  At least 5 such letters were sent out recently to donors but it is unclear which individuals received them.
Part of the letter stated, “This pattern of non-enforcement over a period of nearly three decades, coupled with the troubling issues regarding the adverse impact that enforcement might have on the exercise of constitutionally protected rights, raises important questions regarding the timing of the decision to enforce the gift tax on these contributions.  Retroactive enforcement of the gift tax in this highly politicized environment raises legitimate concerns and demands further explanation.”  The letter was signed by Senator Orrin G. Hatch of Utah, the ranking member of the Finance Committee, and five other members of the Finance Committee.
In view of the 2012 Presidential elections, large nonprofit organizations formed under section 501(c)(4) of the tax law are expected to play a major role in how the political parties fare.  Section 501(c)(4) allows such nonprofit organizations to raise vast amounts of money while their donors remain anonymous.  These organizations can also engage in some aspects of political advocacy even though their function is apolitical.  It is no secret that such organizations helped the Republicans gain control of the House in elections last year.
President Obama and the Democrats have been highly critical of such organizations but have themselves initiated the formation of their own version of such organizations to match the Republican ones.
Last September, Democrat Senator Max Baucus of Montana, as chairman of the Finance Committee, sent his own letter to the IRS requesting that they investigate these tax-exempt organizations involved in unlawful political activity.

In the aftermath of the April 23 storms, tornadoes and floods, another 10 counties in Arkansas were added to the list of counties where residents are eligible to receive federal tax relief.  With the inclusion of these 10 counties, the total number of counties now stands at 26 namely Benton, Boone, Clay, Crittenden, Cross, Faulkner, Garland, Greene, Independence, Jackson, Jefferson, Lawrence, Lincoln, Lonoke, Madison, Mississippi, Monroe, Montgomery, Phillips, Prairie, Pulaski, Randolph, Saline, Washington, White and Woodruff.
One of the reliefs given is the postponement to June 30 of the deadline for submitting federal taxes that fall between April 23 and June 30.  This includes filing deadlines for Form 720 (Quarterly Federal Excise Tax Return), Form 730 (Monthly Tax Return for Wagers), Form 941 (Employer's Quarterly Federal Tax Return), and Form 2290 (Heavy Highway Vehicle Use Tax Return) if the deadlines fall between those dates.
For taxpayers and corporations who make estimated tax payments, the second individual estimated tax payment for 2011, and the second deposit of corporation estimated tax that are both due June 15 have been postponed to June 30.  Also, the failure-to-deposit penalties for employment and excise tax deposits due on or after April 23 and on or before May 9 is waived provided you have made the deposits by May 9, 2011.
Finally, the IRS has given residents of these counties the option of claiming disaster-related casualty losses on their income tax returns for either this year or last year.  By claiming the disaster-related casualty loss on an original or amended return for last year (2010) you will obtain a refund quickly, once your tax return has been received and processed by the IRS.  This will be a much welcomed relief for those recovering from the natural disasters.   On the other hand, if you choose to claim the loss on this year’s (2011) return, it could result in greater tax savings for you, depending on other income factors.

Blytheville Owes IRS $2 Million

The City of Blytheville is in debt to the IRS by at least $2 million due to unpaid payroll taxes in 2009 and 2010.  This figure is set to balloon even more when penalties and interests are included.  City Mayor James Sanders, who took over the post from Barrett Harrison in 2011, said he was contacted by the IRS over ‘possible discrepancies’ with its payroll taxes in March.  When investigations were conducted by the city, it was discovered that they owed at least $2 million but they haven’t received a bill from the IRS.
Strangely, Shirley Overman, the city’s Finance and Purchasing Committee chairman admits she does not know how this could have happened.  She said, “We don't feel it was just an oversight.  It could be that it was not having the money to make payroll and payroll taxes at the same time, and then it just kind of ballooned,” adding that, “We'll just keep investigating this.”
According to Overman, when the IRS initially contacted the city, it told city officials that the city owed for payroll taxes from 2007-2010.  But Overman adds that the ‘proper paperwork’ was not submitted for the years 2007 to 2008 and when it was finally filed, the city only owed taxes for 2009 and 2010.  The city is current on its payroll taxes in 2011.
Currently an audit is being conducted on the city and it is unclear when the issue with the IRS would be resolved.  The city has hired a law firm to represent it in negotiations with the IRS.  “The only thing I can tell you is that we place safeguards in this administration to oversee and make sure all withholdings are done,” Sanders said.

Roof Repair Expert in Tax Trouble for Underreporting Taxes

Philip Hines, 38, who runs Hines Roofing in Lebanon pleaded guilty before Senior US District Judge Herman J. Weber in District Court in Cincinnati of underreporting his taxes.  Lying about how much he really earned, Hines claimed to have made just $663,000 between 2003 and 2006 when in actual fact, he made in excess of $1.2 million in that period, underreporting by more than $546,000.
Hines instructed some of his customers to pay him in cash or in checks made out to his personal name rather than his business.  If paid by check, he would cash them at his customers’ banks and not his own to circumvent paper trails of how much he earned.  Certain invoices were tagged ‘Cash No Taxes’ to indicate which income was to be concealed from the IRS.
Hines faces up to 3 years in prison and a fine of up to $250,000.

Spring and summer are wedding seasons for most couples.  And for newlyweds, it’s important to make those small but crucial changes to your tax status in order to avoid problems later on.  Here are some of them:
1. Update your married name (if there is any change).  This obviously refers to the wife.  If you have taken your husband’s last name, then you should inform the Social Security Administration.  If you do not, and you and your husband file a joint tax submission, the computers at the IRS would not be able to match your married name with your Social Security number.  The thing to do would be to update the Social Security card so your new married name matches your Social Security number.  Go to the SSA website at www.ssa.gov and download Form SS-5, ‘Application for a Social Security Card’ or call toll-free 1-800-772-1213.
2. Report your change in address.  If one or both of you change your addresses, you should report it to the IRS and US Postal Service.  To report to the IRS, you can download and send in Form 8822, ‘Change of Address Form’ from the website, www.irs.gov.  Alternatively, you can also obtain the form by calling the IRS at 1-800-TAX-FORM (1-800-829-3676).  This would ensure you do not miss any refund checks from the IRS.  What’s more, you should also inform your employer of your change of address (and your married name) so that you continue receiving your paychecks and W-2s.
3. Determine your filing status.  Married couples have the option to choose to file taxes jointly or separately.  You should determine your filing status depending on which status would allow you a lower tax rate.  Filing jointly means you and your spouse are allowed to deduct combined deductions and expenses on a single tax return whereas filing separately means each spouse can take only his or her individual deductions and credits.  If one of you itemizes deductions, the other must also.
4. Check your withholding.  Your change in filing status may alter your taxes due at the end of the year.  You can change the amount withheld from your salary by submitting to your employer a new Form W-4.  You can get information on this by referring to IRS Publication 919, ‘How Do I Adjust My Tax Withholding?’
5. Use the correct form to submit your tax returns.  Especially if you file jointly, you may have sufficient deductions to itemize those like donations to charity, medical care payments, mortgage interest, various taxes like real estate, general sales tax etc, casualty losses and so on.  Use Form 1040 when itemizing, not Form 1040EZ or Form 1040A that do not permit itemizing.  Get your Form 1040 from the IRS website or call 1-800-TAX-FORM (1-800-829-3676).