Archive for the ‘Tax Tips’ Category

Scammers Posing as IRS

Tuesday, August 12th, 2014

Authored by: Kirk Eck, Shareholder at CMP.

We get many calls from clients who have been contacted via telephone, email or mail, by someone purporting to be the IRS. Most recently, there has been an uptick in scam calls where individuals are claiming to be IRS employees. By March of this year, the IRS had received over 20,000 reports about the scam and estimated that over $1 million dollars had been stolen.

The crooks are using a couple different techniques when they call. They will present themselves as an IRS or CID agent and may ask for payments for unpaid tax and/or penalties related to the taxpayer’s tax returns. The caller often knows the last 4 digits of the victims Social Security Number and will tell them they must pay immediately with a prepaid credit card or direct wire transfer. Another approach is when they tell the victim that they are due a large refund and request personal information in order to process the refund for them. The crooks then use this information to commit identity theft in many different ways. Some of these scammers become very threatening and abusive, threatening victims with arrest or deportation if they don’t comply at once. They’ve also claimed that they will shut down the victim’s business or revoke their driver’s license if they don’t receive the owed money right away.

If you receive one of these calls, you should refuse to provide any information while on the phone. The scammers often make the caller ID information appear as though it is the IRS calling, so don’t rely on who your phone tells you is calling. You can ask the caller for a number to return their call later, and then confirm with the IRS if the phone number is valid by calling them at 800-829-1040. You should also alert the IRS to the call and provide them with all the details from the conversation with the scammer. We always encourage our clients to forward to us any correspondence from the IRS before responding, allowing us to review the notice and the validity of its claims.

The IRS will never initiate contact with a taxpayer via email, so any such email should be treated as a phishing scam and deleted immediately, regardless of how official it may appear.

The IRS’s process is to first try contacting a taxpayers via mail, and will often ask the taxpayer to then initiate contact with the IRS to resolve the problem via return mail or phone call. They will usually only contact a taxpayer via telephone after repeated efforts to contact the taxpayer via mail has failed. And they will never demand immediate payment via debit card, credit card or wire transfer on the telephone.

Taxpayer Bill of Rights – What you Need to Know When Dealing With the IRS

Friday, June 20th, 2014

Authored By: Jared Ripplinger, CPA, MBA, CFP®, CVA. Jared is currently a manager over tax, business valuations, and estate planning work in the Logan office. He works primarily with individuals and small business owners in a variety of industries.

Since 2007, the IRS has had a priority to adopt a Taxpayer Bill of Rights. This has also been a top priority for the Taxpayer Advocate Service in recent years. The wait is finally over. On June 10, 2014 the IRS released the Taxpayer Bill of Rights (Publication 1), which lists ten fundamental rights that each taxpayer has, and which each taxpayer should be aware of when dealing with the IRS. The better a taxpayer understands his/her rights, the better that taxpayer can prepare for and effectively deal with the IRS.

In the IRS’ own wording, the taxpayer rights are as follows:

1. The Right to Be Informed – Taxpayers have the right to know what they need to do to comply with the tax laws. They are entitled to clear explanations of the laws and IRS procedures in all tax forms, instructions, publications, notices, and correspondence. They have the right to be informed of IRS decisions about their tax accounts and to receive clear explanations of the outcomes.

2. The Right to Quality Service – Taxpayers have the right to receive prompt, courteous, and professional assistance in their dealings with the IRS, to be spoken to in a way they can easily understand, to receive clear and easily understandable communications from the IRS, and to speak to a supervisor about inadequate service.
3. The Right to Pay No More than the Correct Amount of Tax – Taxpayers have the right to pay only the amount of tax legally due, including interest and penalties, and to have the IRS apply all tax payments properly.

4. The Right to Challenge the IRS’s Position and Be Heard – Taxpayers have the right to raise objections and provide additional documentation in response to formal IRS actions or proposed actions, to expect that the IRS will consider their timely objections and documentation promptly and fairly, and to receive a response if the IRS does not agree with their position.

5. The Right to Appeal an IRS Decision in an Independent Forum – Taxpayers are entitled to a fair and impartial administrative appeal of most IRS decisions, including many penalties, and have the right to receive a written response regarding the Office of Appeals’ decision. Taxpayers generally have the right to take their cases to court.

6. The Right to Finality – Taxpayers have the right to know the maximum amount of time they have to challenge the IRS’s position as well as the maximum amount of time the IRS has to audit a particular tax year or collect a tax debt. Taxpayers have the right to know when the IRS has finished an audit.

7. The Right to Privacy – Taxpayers have the right to expect that any IRS inquiry, examination, or enforcement action will comply with the law and be no more intrusive than necessary, and will respect all due process rights, including search and seizure protections and will provide, where applicable, a collection due process hearing.

8. The Right to Confidentiality – Taxpayers have the right to expect that any information they provide to the IRS will not be disclosed unless authorized by the taxpayer or by law. Taxpayers have the right to expect appropriate action will be taken against employees, return preparers, and others who wrongfully use or disclose taxpayer return information.

9. The Right to Retain Representation – Taxpayers have the right to retain an authorized representative of their choice to represent them in their dealings with the IRS. Taxpayers have the right to seek assistance from a Low Income Taxpayer Clinic if they cannot afford representation.

10. The Right to a Fair and Just Tax System – Taxpayers have the right to expect the tax system to consider facts and circumstances that might affect their underlying liabilities, ability to pay, or ability to provide information timely. Taxpayers have the right to receive assistance from the Taxpayer Advocate Service if they are experiencing financial difficulty or if the IRS has not resolved their tax issues properly and timely through its normal channels.

Are Cash Tips Reportable Income?

Friday, June 13th, 2014

Authored By: Connie Ward in our Logan Bookkeeping Department

Tip reporting isn’t limited to restaurant employees. Anyone who receives a wage and collects tips must report tips as income.

If you earn more than $20 a month in tips, the law requires you to report the amount received to your employer. The employer is then required to add the tip amount to your base pay to figure the correct amount of income, Social Security, and Medicare tax to be withheld from your paycheck. Tips can include cash left at a table, an amount added to credit card charges, money you receive from a co-worker if you share serving work, and tips you get from your boss as part of a tip pooling arrangement.

If you earn less than $20 a month in tips, you don’t have to report them to your employer but you still are expected to report them to the Internal Revenue Service when you file your individual tax return.

You must do three things to correctly report your tip income:
1. Keep a daily tip record.
2. Report tips to your employer.
3. Report all tips on your income tax return.

Tip income is also used to figure out how much should be paid into the employee’s Social Security and Medicare accounts and will be used to calculate benefits due upon retirement or disability.

What is the Tax Treatment for Bitcoin and Other Virtual Currencies?

Thursday, May 29th, 2014

Authored By: Michelle Butler, Staff Accountant in the Salt Lake City office.

As virtual currencies have become more popular, there has been more uncertainty as to whether they should be treated as currency or as property. The Journal of Accountancy recently highlighted the newly issued IRS Notice 2014-21 that provides guidance on applying general tax principles to transactions using virtual currencies. In the Notice, the IRS acknowledges that virtual currency can be used and accepted as a medium of exchange, but does not have the status of legal tender.

Virtual currency that acts as a substitute for tangible currency is referred to as “convertible virtual currency”. Bitcoins are an example of this; they can be traded, purchased, or exchanged for either real currency or digital currency. The notice instructs that there shouldn’t be any inference into virtual currencies not described therein.

To summarize, the sale or exchange of convertible virtual currency, or using virtual currency to pay for goods or services has tax consequences that could result in tax liability, the same as any other transaction.

Here are the basics:

• Virtual currency is treated as property.
• Virtual currency is not treated as currency that could generate foreign currency gain/loss for US federal tax purposes.
• A taxpayer who receives virtual currency as payment for goods or services must include the fair market value of the virtual currency in computing gross income.
• The fair market value is measured by converting virtual currency into US dollars on the date of the transaction.
• The basis of virtual currency is the fair market value in US dollars on the date of receipt.
• Gains and losses are recognized in accordance with the Internal Revenue Code (reference Publication 544).
o The character of gain or loss depends on whether it is a capital asset in the hands of the taxpayer. A capital asset is generally an asset held for investment. Otherwise, the asset will generate an ordinary gain or loss.
• If a taxpayer “mines” virtual currency as a trade or business, and is not an employee, then the taxpayer is required to pay self-employment taxes on their net earnings.
• If a taxpayer is paid wages as an independent contractor using virtual currency, then the fair market value of the virtual currency is subject to federal income tax withholding.
• Payments made to an independent contractor using virtual currency in the course of a trade or business that have a value of $600 or more are required to be reported to the payee and the IRS using the fair market value on the date of payment.
• Payments made using virtual currency are subject to backup withholding just as other payments made in property. Payors must receive a Taxpayer Identification Number (TIN) from the payee.

Failing to comply with tax laws may result in a fine or penalty, though relief is available upon proving reasonable cause.
The Treasury Department and IRS are requesting comments from the public with respect to other aspects of virtual currency transactions or types of virtual currency transactions that should be addressed in the future. If you have a question or comment, please email: notice.comments@irscounsel.treas.gov

To read the full article published in the Journal of Accountancy, click: http://www.journalofaccountancy.com/News/20149850

To view the IRS notice in its entirety, click: http://www.irs.gov/pub/irs-drop/n-14-21.pdf

Recent Accounting Standards Updates Affecting Private Companies

Tuesday, May 13th, 2014

Authored By: Dustin Wood, CPA. Dustin has been with the firm 9 years and is the audit manager in the Logan office of Cook Martin Poulson, PC. He specializes in financial statement services.

The current source of authoritative accounting standards is the Financial Accounting Standards Board (FASB) Codification. The FASB Codification is organized by topic. When changes or updates are made to the standards they are issued in the form of Accounting Standards Updates (ASU), which are identified by the year of the update and the sequential number of the update for that year. Two recent Accounting Standards Updates have been issued that affect accounting and financial statement presentation for private companies. Those updates are as follows: (more…)

 

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Rob Corcoran
Influence Real Estate

Utah Accountant and CPA

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