Under the Fresh Start program the limit of the tax lien is raised to $10,000 meaning the IRS will only impose a lien on your property once your tax debt exceeds $10,000. More significantly, the Fresh Start program allows for the withdrawal of the lien once your back taxes have been fully paid. This is a vast improvement from the previous system where your lien was merely released upon full payment of taxes. If your lien is withdrawn, it is expunged, meaning it will not show on your credit record at all, thereby making it easier for you to apply for credit and loans after paying off your taxes. However, if you are merely released from your lien, your credit record will show that you had a lien filed against you by the IRS and you were released upon satisfying the lien.

If you wish your lien to be withdrawn even earlier, the Fresh Start program enables this also. All you need to do is enter into a Direct Debit agreement with the IRS that allows the agency to deduct fixed amounts from your bank account to repay your taxes every month. Once you have made several installment payments, the IRS can lift the lien even before your back taxes have been fully settled.

If you are currently paying for taxes in installments you can convert to the direct debit program and have your lien lifted immediately by requesting the IRS to do so.

The Fresh Start program also benefits small business owners. Now such business owners can pay their back taxes in installments if their tax liability does not exceed $25,000. Previously the threshold was only $10,000 meaning if your tax debt exceeds this amount, you cannot pay by installments. But now with the Fresh Start program, you can owe up to $25,000 and still pay by installments over 2 years.

If you wish to file for an offer in compromise, you may now do so if you owe not more than $50,000 in back taxes (the previous limit was only $25,000). The offer in compromise allows you to have part of your tax liability forgiven under certain conditions. Also, the offer in compromise is now open to those who earn up to $100,000 per annum.

But there are caveats attached to the Fresh Start program. For instance, the lien withdrawals are only for individuals and not businesses or other entities, and the program is only meant for use with income taxes. The program is not open to those with delinquent gift, estate or employment taxes.

What the IRS Fresh Start Program does for You is a post from: IRS Tax Problem Solver Blog - IRS Help

Firstly, the statute of limitations is still 6 years under certain circumstances. If you under-declare your taxable income by 25% or more, the IRS has 6 years, not 3, to audit you. Furthermore, the civil statute of limitations on Report of Foreign Bank and Financial Accounts (FBAR) errors or misreports is 6 years plus all criminal cases carry a 6 year statute of limitations also.

In 2010, the tax code was amended so an omission of more than $5,000 in gross income from “specified foreign financial assets” extends the IRS time to 6 years. The law is clear that the 6 year statute applies even if you had filed and disclosed your foreign income sources under the Foreign Account Tax Compliance Act (FATCA). So to each case, the statute of limitations may still be 6 years instead of 3 depending on circumstances.

If you filed your 2006 taxes before the deadline of April 15 in 2007, for example, the IRS has 6 years to audit you because the 3 year statute of limitations had not expired on March 18, 2010 when FATCA was passed. This means the IRS has up to April 15, 2013 to audit you. But for your 2005 taxes that were filed before April 15, 2006 the IRS has 3 years (not 6) to audit you because it was longer than 3 years before March 18, 2010.

However, if you consent to extend the statute of limitations before the 3 years is up (i.e. before April 15, 2009) then the IRS gets 6 years since the extension was not expired yet when FATCA was passed on March 18, 2010.

Another circumstance is if you had submitted your taxes late. For example, if you submitted your 2005 taxes in 2007 instead of 2006 and let’s say the 3 year statute of limitation was still open on March 18, 2010 when FATCA was passed, then the IRS has 6 years to audit your taxes. But if you made a late submission and your submission date was longer than 3 years before March 18, 2010 then the 6 year time limit does not apply and the IRS only has 3 years to audit you unless some other exception to the 3 year statute applies.

Finally, let’s say you submitted your 2005 taxes on time but you under-declared your income by more than 25% and more than $5,000 of that came from a foreign source. This means the statute of limitation in this case is 6 years and the IRS has until April 15, 2012.

IRS Statute of Limitations on Foreign Sources of Income is a post from: IRS Tax Problem Solver Blog - IRS Help

Since 2009, the IRS has intensified its efforts of tracking down American-owned taxable assets lodged overseas. This action has resulted in thousands of taxpayers being caught and prosecuted for tax evasion because they have not declared their offshore assets. The number of US citizens renouncing their citizenship started to spike in 2009 after the infamous case of UBS Bank of Switzerland that was fined $780 million in compensation for its role in helping its US customers hide their taxable assets in their bank accounts.

More significantly, the bank was forced to divulge the names of thousands of American clients with bank accounts suspected of tax evasion to the American government. This entire episode came about after an ex-private banker of UBS, Bradley Birkenfeld blew the cover off what UBS was doing and subsequently helped the IRS identify thousands of suspected tax dodgers. This inevitably spooked those having foreign assets.

The number of those relinquishing citizenship is expected to increase next year when more legislation is put in force. Among them is one that makes it mandatory for foreign banks to inform the US government of Americans opening bank accounts with them. Some foreign banks are already prohibiting Americans from opening accounts.

One of those in the list of people announced by the IRS who had renounced their citizenship is Eduardo Saverin, the 30-year old billionaire co-founder of Facebook, that is about to make its shares public. Facebook expects to raise as much as $11.8 billion through its coming IPO, the biggest for an Internet company. Saverin’s share in the company is about 4% which would stand to earn Saverin about $3.84 billion after the IPO. All this money will not be subject to tax now that Saverin has given up his citizenship.

But Saverin will still be subject to an exit tax on the capital gains from his stock holdings, even if he does not sell the shares. Saverin plans to become a resident of Singapore, where he intends to live indefinitely. Singapore does not have a capital gains tax but it does tax certain “foreign-sourced income”.

Many Renouncing Citizenship because of IRS Action on Foreign Assets is a post from: IRS Tax Problem Solver Blog - IRS Help

The National Organization for Marriage alleges that someone from the IRS divulged the list to the Human Rights Campaign. Senator Orrin Hatch (R – Utah) wrote a letter to IRS Commissioner Doug Shulman expressing his dissatisfaction on the issue, claiming that "evidence suggests that the IRS may have been the source of the unauthorized disclosure of donor information.” Senator Hatch describes this allegation as “disturbing” and says he views this matter “with the utmost seriousness”.

In his letter, Senator Hatch wrote, “Our political history shows the absolute necessity of maintaining the nonpartisan integrity of the IRS,” while calling for an investigation to be carried out.

The IRS has no comments about whether an investigation will be carried out but stressed they do not take this matter lightly. In a statement to FoxNews.com, IRS spokesman Dean Patterson said last month that the "IRS takes this confidentiality of return information very seriously" and that "any allegations of improper disclosures of taxpayer information are investigated by the Treasury Inspector General."

The Human Rights Campaign has used the information as fodder in allegations against Mitt Romney, claiming that Romney was "essentially funding NOM's strategy of using racial division and unfounded scare tactics to attack LGBT (lesbians, gays, bi-sexual and transgender) equality."

But the Human Rights Campaign has refuted the claim by the National Organization of Marriage that they obtained inside information from the IRS regarding the donor list. Describing the NOM allegation as “absolutely false”, the group said the information on the Romney donation was freely available from other sources – including in a filing for Romney PAC's Alabama chapter – before the Human Rights Campaign published it.

The donation was in connection with the National Organization of Marriage’s support of the Proposition 8 measure that bans gay marriages in California. In response to this issue, the President of the National Organization of Marriage, Brian Brown said while the NOM never tried to hide the information about Romney, the tax form listing donations of at least $5,000 is meant to be confidential because the other donors on the list could be subject to intimidation if the contents of the list was made used for wrong purposes.

IRS Queried on Tax Info Leak is a post from: IRS Tax Problem Solver Blog - IRS Help

However, the IRS refutes George’s assessment and claims it is “far too high”. The IRS counter commented on the issue with this statement – “The estimate was based on 2010 figures, which took place before the IRS instituted major changes with the way it handles identity theft cases. Our expanded screening on issues such as W-2 matching, Schedule C information, interest income and Social Security income have had a major impact on our ability to reduce identity theft fraud.”

The IRS said that their recent efforts in combating tax scams have stopped more refund fraud than ever before.
George revealed the modus operandi of the tax refund scammers. “The primary characteristic of these cases is that the identity thief reports false income and withholding to generate a fraudulent tax return," George said. “Without the falsely reported income, many of the deductions and/or credits used to inflate the fraudulent tax refund could not be claimed on the tax return.”

George stated the IRS budget cuts, a moratorium on new hiring and staff reductions as contributing factors that bring about a significant increase in tax refund fraud. “Without the necessary resources, it is unlikely that the IRS will be able to work the entire inventory of potentially fraudulent returns it identifies. The IRS will only select those tax returns that it can verify based on its resources," George said.

In the tax year of 2010, the Tax Inspector General’s auditors found that 48,357 Social Security numbers were used multiple times as a primary taxpayer identification numbers. Last year, the TIGTA’s office reported that of the 2.2 million tax returns the IRS found to be fraudulent, about 940,000 returns totaling $6.5 billion were related to identity theft. But this may be only the tip of the iceberg. The TIGTA’S auditors found another 1.5 million undetected tax returns with more than $5.2 billion in fraud.

The IRS reported that as of last month, it had stopped about $1.3 billion in potentially fraudulent tax returns. While this is lauded, the TIGTA believes that more should be done. For example, tax refunds should not be deposited into bank or debit card accounts.

The other problem highlighted by the TIGTA is that the IRS does not do enough to help victims of identity theft.

Tax Refund Scammers may get away with $26 billion is a post from: IRS Tax Problem Solver Blog - IRS Help

Senator Grassley expressed his disappointment in a press release recently. As a result of the slow progress of rewarding whistleblowers, these informants may stop feeding the IRS with valuable information that could lead to further discovery of tax fraud.

Whistleblowers can file IRS Form 3949-A Information Referral with details like who, what, when, how and how much pertaining to suspected tax fraud cases. Alternatively, you could submit these details in a letter to the IRS. Your personal details such as your name will be kept confidential. Another form that can be used is IRS Form 211 Application for Award for Original Information and follow the procedures in Notice 2008-4.

A whistleblower can receive a full reward, even if he is convicted of stealing from the company he blows the cover on. The whistleblower who "planned and initiated" a tax scheme is still eligible for a reduced award unless he or she convicted for that planning role.

A recent example of a successful case of whistleblowing was the tip-off by an informant named Bradley Birkenfeld on the dealings of Swiss bank, UBS that led to the bank’s admission of abetting wealthy American customers in evading taxes on their assets. The bank had to pay the US government a fine of $780 million back in 2009 as a result of its actions. Birkenfeld, a previous UBS bank employee, who blew the whistle that led to the discovery of what UBS was doing is yet to be rewarded.

Birkenfeld did not orchestrating the UBS scheme that began before he started work as a UBS private banker and continued after he complained about it internally and subsequently quit.

Birkenfeld himself has been charged and indicted for his role in an associated case helping a wealthy California billionaire, Igor Olenicoff hide taxable income offshore and is serving 40 months in prison but could leave prison with millions of dollars if he receives his reward by the time he ends his jail term. Senator Grassley also says that what happened to Birkenfeld may discourage more whistleblowers from coming forward with information for fear of being charged and subsequently imprisoned.

There are likely to be many more sizeable tax collections traceable to the actions of whistleblowers.

IRS Whistleblower Office Taken to Task is a post from: IRS Tax Problem Solver Blog - IRS Help

Tax refund thieves obtain Social Security numbers from places like death records from hospitals, then insert a name and false income details. According to Tampa police, detailed instructions are passed around among street criminals. It is called "cocaine on a card," as the refunds come on a debit card.

Strangely, it is easy to get away with identity theft and tax return fraud because the IRS does not verify income records through third party channels like employers or financial institutions. Usually by the time the police are alerted to the scam, the culprits are long gone. The Tampa Police Department has been trying to combat the crime, arresting 49 for tax fraud last year and identifying $130 million in fraudulent refunds. But the problem the police face is proving identity theft.

At least half a million people have been the victims of tax fraud since 2008. Even the late Tampa Police Officer David Curtis, who was killed on the job in 2009, had his identity stolen after he died. Although Curtis’ widow contacted the IRS, it took years to finally receive the refund she was owed. Clearly, it is futile to hope on the police alone to succeed in eradicating this crime. The IRS has a pivotal role to play in this.

The IRS has to do the basic thing – verify income claims with third party sources. Granted, this may slow the process for filers, but it would hamstring identity thieves who do not have access to W-2 forms and other income information.

Right now, the IRS is in the process of coding the accounts of deceased taxpayers to ensure no refunds are issued in their names. Personal identification numbers have provided 250,000 victims of identity theft with a way to verify that their returns are valid. This PIN system should be expanded to cover all e-tax filers.

Florida Senator Bill Nelson, who chairs the Senate subcommittee on this issue, recently sponsored the Identity Theft and Tax Fraud Prevention Act. Senator Nelson also announced that the IRS will test a new program in Florida to make it easier for local law enforcement to prosecute income tax fraud.

IRS Losing Fight against Tax Return Fraud? is a post from: IRS Tax Problem Solver Blog - IRS Help

1. Keep your tax return forms safely
You may need to refer to your tax returns if the IRS sends you a notice and for next year’s filing, so make sure your papers are in order and kept safely.

2. Organize yourself
A year can be a long time when it comes to record-keeping. So be organized in how your keep your records and documents. Receipts, invoices, bank and credit card statements etc should be kept in a proper place to avoid the mad scramble come tax deadline next year.

3. Review your withholding
Take a close look at your paycheck to see if your employer is withholding the correct amount and reporting retirement account contributions, health insurance payments, charitable payroll deductions and other items. If you find any errors, fix them now so that these errors will not accumulate.

4. Adjust your withholding (if necessary)
Having the correct withholding is important as you do not want to lose out on interest payments unnecessarily if your withholding is too low and you do not want to get slapped with tax bill to be humongous. The IRS has an online Withholding Calculator at its website, www.irs.gov that you can use to check your correct withholding amount. Alternatively you can use Publication 919 How Do I Adjust My Withholding?

5. List your deductions well
If you make the payments that entitle you to deductions on your taxes, you should itemize them clearly so that you do not lose out on any rightful deductions. So make sure you keep track of all expenses that can qualify for tax deductions such as prepayments, donations to charity, extra mortgage payments, certain medical expenses etc. Keep a record of all these throughout the year so that you can itemize them clearly when you submit your tax returns next year.

6. Pay tuition early
If you have any higher education fees to pay for, you may want to consider paying 2013 fees early (i.e. in 2012) because the American Opportunity Tax Credit that gives you a tax credit for higher education fees of up to $2,500 is due to expire after this year. So by pre-paying, you get this tax credit for next year’s taxes. Read Publication 970 Tax Benefits for Education for more information.

7. Appoint a tax professional early
If you hire a tax professional such as an enrolled agent or CPA you would do well to look around for one early so that you can make the best choice. Hiring a good tax professional can be very worth it as he or she saves you substantial amounts of money in taxes. Ultimately you are responsible for the truth and accuracy of your tax submission but engaging a good tax professional will go a long way in getting your taxes in order and maximizing your savings.

8. Keep abreast with tax law changes
The tax code and its regulations tend to change from time to time so make sure you keep abreast with all that is happening. One easy way of keeping up-to-date with development is by signing up for IRS tax tips through www.irs.gov or IRS2Go, the IRS mobile app for smartphones. The IRS will send out periodic tax tips and Special Edition tips are sent periodically with other timely updates for those who have registered.
If you need any forms or publications, you may obtain them at www.irs.gov or by calling 800-TAX FORM.

8 Things to do to Prepare for Next Year's Taxes is a post from: IRS Tax Problem Solver Blog - IRS Help

1. Notice 2012-31 regarding minimum value of an employer-sponsored health plan

Starting from 2014, under the Affordable Care Act, you will be granted a tax credit for any qualified health insurance plan you may have purchased. But if you are also eligible for a health plan granted by your employer that provides a "minimum value" benefit, your tax credit may be eliminated. According to Section 36B(c)(2)(C)(ii) of the IRS code a "minimum value" is defined as at least 60% of the total cost of benefit provided. If the "minimum value" criteria is not met, then you may be able to claim the tax credit.

The IRS and Treasury also invites you to comment on their proposed methods to determine "minimum value". The proposed methods are:

- using an actuarial value calculator
- a range of safe harbors
- certification by a certified actuary

2. Notice 2012-32 regarding reporting requirements of providers of minimum coverage health insurance

The Affordable Care Act requires health insurers, government agencies, employers who self-insure, and any other entity that provides minimum coverage to submit annual information returns on each person being insured. You can comment on ways to minimize the reporting requirement and how to determine the point of time the individual's coverage begins and ends for reporting purposes.

3. Notice 2012-33 regarding how to make reporting more efficient in employer-sponsored health insurance for large employers

Undrer the Affordable Care Act, the IRS Code mandates reporting of certain information on employer-provided healthcare coverage provided on or after January 1, 2014. The report must be sent to both the IRS and a plan's employees. The IRS will use the information to verify the employer-sponsored coverage, among other things.

The IRS seeks your comments on how to coordinate and reduce duplication in reporting on employer-sponsored coverage under various IRS provisions.

If you would like to comment on these matters, you may do so by June 11, 2012. You can email your comments to Notice.Comments@irscounsel.treas.gov. The email subject line should include the number of the Notice(s) you are commenting on. If you do not wish to email your comments, you can find instructions for other ways to submit them in the Notices.

IRS Seeks Public Comment on Tax Law is a post from: IRS Tax Problem Solver Blog - IRS Help

Under the law, any forgiven debt including student loans is considered as income and taxes are due on it. The only exceptions are government-backed loans. These are not subject to taxes once forgiven. But this is not the case for privately-funded loans. However in the case of a veteran killed in combat as in the case of Lance Corporal Carpenter, there is a growing opinion that such persons should be exempted from this regulation.

Rep. Scott DesJarlais (R – Tenn) is representing the Carpenters in seeking for such waiver. He is proposing a new bill, the Andrew P. Carpenter Tax Act that says forgiven loans should not be considered taxable income for anyone who dies while on active duty as a result of a service-connected injury or illness. This proposed law (currently referred to as H.R. 5044) would be retroactive to October 7, 2001, the date the US started active military operations in Afghanistan, so that other families similarly affected would benefit. “It is simply not right to require the families of deceased veterans, having already sacrificed so greatly for our country, to pay more in taxes for loans that have already been forgiven,” DesJarlais said.

The number of people who would be helped if this law is passed is unknown at this point. It is also not clear how much tax revenue would be lost so it will be up to the nonpartisan Congressional Budget Office, which prepares cost estimates for pending legislation, at the request of the House Ways and Means Committee to calculate these figures.

DesJarlais' spokesman Robert Jameson said other forms of revenue to cover the loss of tax revenue from the proposed Act would have to be found before the Act could be passed.

Lance Corporal Carpenter's widow was pregnant when he was killed. But the tax bill, which amounted to about $1,000, was sent to his parents instead because they signed the loan agreement as co-borrowers of the loan. When the bill arrived, the parents paid for it without knowing what it was for. Only after paying the taxes did they realize what it was for and started looking for help and turned to Rep DesJarlais, the lawmaker who represents the Carpenters' hometown of Columbia, Tennessee.

Family Fights to Waive Tax Bill for Dead Serviceman is a post from: IRS Tax Problem Solver Blog - IRS Help