Recent Developments That May Affect Your Tax Situation

The following is a summary of important tax developments that occurred in October, November, and December of 2018 that may affect you, your family, your investments, and your livelihood. Please call us for more information about any of these developments and what steps you should implement to take advantage of favorable developments and to minimize the impact of those that are unfavorable.

Business meals. One of the provisions of the Tax Cuts and Jobs Act (TCJA) disallows a deduction for any item with respect to an activity that is of a type generally considered to constitute entertainment, amusement, or recreation. However, the TCJA did not address the circumstances in which the provision of food and beverages might constitute entertainment. The new guidance clarifies that, as in the past, taxpayers generally may continue to deduct 50% of otherwise allowable business meal expenses if:

  1. The expense is an ordinary and necessary expense paid or incurred during the tax year in carrying on any trade or business;
  2. The expense is not lavish or extravagant under the circumstances;
  3. The taxpayer, or an employee of the taxpayer, is present at the furnishing of the food or beverages;
  4. The food and beverages are provided to a current or potential business customer, client, consultant, or similar business contact; and
  5. In the case of food and beverages provided during or at an entertainment activity, the food and beverages are purchased separately from the entertainment, or the cost of the food and beverages is stated separately from the cost of the entertainment on one or more bills, invoices, or receipts.

Convenience of the employer. IRS provided new guidance under the Code provision allowing for the exclusion of the value of any meals furnished by or on behalf of an individual’s employer if the meals are furnished on the employer’s business premises for the convenience of the employer. IRS determined that the “Kowalski test” — which provides that the exclusion applies to employer-provided meals only if the meals are necessary for the employee to properly perform his or her duties — still applies. Under this test, the carrying out of the employee’s duties in compliance with employer policies for that employee’s position must require that the employer provide the employee meals in order for the employee to properly discharge such duties in order to be “for the convenience of the employer”. While IRS is precluded from substituting its judgment for the business decisions of a taxpayer as to its business needs and concerns and what specific business policies or practices are best suited to addressing such, IRS can determine whether an employer actually follows and enforces its stated business policies and practices, and whether these policies and practices, and the needs and concerns they address, necessitate the provision of meals so that there is a substantial noncompensatory business reason for furnishing meals to employees.

Depreciation and expensing. IRS provided guidance on deducting expenses under Code Sec. 179(a) and depreciation under the alternate depreciation system (ADS) of Code Sec. 168(g), as amended by the TCJA. The guidance explains how taxpayers can elect to treat qualified real property, as defined under the TCJA, as property eligible for the expense election. The TCJA amended the definition of qualified real property to mean qualified improvement property and some improvements to nonresidential real property, such as: roofs; heating, ventilation and air-conditioning property; fire protection and alarm systems; and security systems. The guidance also explains how real property trades or businesses or farming businesses, electing out of the TCJA interest deduction limitations, can change to the ADS for property placed in service before 2018, and provides that such is not a change in accounting method. In addition, the guidance provides an optional depreciation table for residential rental property depreciated under the ADS with a 30-year recovery period.

Partnerships. IRS issued final regulations implementing the new centralized partnership audit regime, which is generally effective for tax years beginning after Dec. 31, 2017 (although partnerships could have elected to have its provisions apply earlier). Under the new rules, adjustments to partnership-related items are determined at the partnership level. The final regulations clarify that items or amounts relating to transactions of the partnership are partnership-related items only if those items or amounts are shown, or required to be shown, on the partnership return or are required to be maintained in the partnership’s books and records. A partner must, on his or her own return, treat a partnership item in a manner that’s consistent with the treatment of that item on the partnership’s return. The regulations clarify that so long as a partner notifies the IRS of an inconsistent treatment, in the form and manner prescribed by the IRS, by attaching a statement to the partner’s return (including an amended return) on which the partnership-related item is treated inconsistently, this consistency requirement is met, and the effect of inconsistent treatment does not apply to that partnership-related item. If IRS adjusts any partnership-related items, the partnership, rather than the partners, is subject to the liability for any imputed underpayment and will take any other adjustments into account in the adjustment year. As an alternative to the general rule that the partnership must pay the imputed underpayment, a partnership may elect to “push out” the adjustments, that is, elect to have its reviewed year partners take into account the adjustments made by the IRS and pay any tax due as a result of these adjustments.

State & local taxes. IRS has provided safe harbors allowing a deduction for certain payments made by a C corporation or a “specified pass-through entity” to or for the use of a charitable organization if, in return for such payment, they receive or expect to receive a state or local tax credit that reduces a state or local tax imposed on the entity. Such payment is treated as meeting the requirements of an ordinary and necessary business expense. For tax years beginning after Dec. 31, 2017, the TCJA limits an individual’s deduction to $10,000 ($5,000 in the case of a married individual filing a separate return) for the aggregate amount of the following state and local taxes paid during the calendar year:

  1. Real property taxes;
  2. Personal property taxes;
  3. Income, war profits, and excess profits taxes, and
  4. General sales taxes.

This limitation does not apply to certain taxes that are paid and incurred in carrying on a trade or business or a for-profit activity. An entity will be considered a specified pass-through entity only if:

  1. The entity is a business entity other than a C corporation that is regarded for all federal income tax purposes as separate from its owners;
  2. The entity operates a trade or business;
  3. The entity is subject to a state or local tax incurred in carrying on its trade or business that is imposed directly on the entity; and
  4. In return for a payment to a charitable organization, the entity receives or expects to receive a state or local tax credit that the entity applies or expects to apply to offset a state or local tax described in (3), above, other than a state or local income tax.

Personal exemption suspension. IRS provided guidance clarifying how the suspension of the personal exemption deduction from 2018 through 2025 under the TCJA applies to certain rules that referenced that provision and were not also suspended. These include rules dealing with the premium tax credit and, for 2018, the individual shared responsibility provision (also known as the individual mandate). Under the TCJA, for purposes of any other provision, the suspension of the personal exemption (by reducing the exemption amount to zero) is not be taken into account in determining whether a deduction is allowed or allowable, or whether a taxpayer is entitled to a deduction.

Obamacare hardship exemptions. IRS guidance identified additional hardship exemptions from the individual shared responsibility payment (also known as the individual mandate) which a taxpayer may claim on a Federal income tax return without obtaining a hardship exemption certification from the Health Insurance Marketplace (Marketplace). Under the Affordable Care Act (ACA, or Obamacare), if a taxpayer or an individual for whom the taxpayer is liable isn’t covered under minimum essential coverage for one or more months before 2019, then, unless an exemption applies, the taxpayer is liable for the individual shared responsibility payment. Under the guidance, a person is eligible for a hardship exemption if the Marketplace determines that:

  1. He or she experienced financial or domestic circumstances, including an unexpected natural or human-caused event, such that he or she had a significant, unexpected increase in essential expenses that prevented him or her from obtaining coverage under a qualified health plan;
  2. The expense of purchasing a qualified health plan would have caused him or her to experience serious deprivation of food, shelter, clothing, or other necessities; or
  3. He or she has experienced other circumstances that prevented him or her from obtaining coverage under a qualified health plan.

Certain Obamacare due dates extended. IRS has extended one of the due dates for the 2018 information reporting requirements under the ACA for insurers, self-insuring employers, and certain other providers of minimum essential coverage, and the information reporting requirements for applicable large employers (ALEs). Specifically, the due date for furnishing to individuals the 2018 Form 1095-B (Health Coverage) and the 2018 Form 1095-C (Employer-Provided Health Insurance Offer and Coverage) is extended to Mar. 4, 2019. Good-faith transition relief from certain penalties for 2018 information reporting requirements is also extended.

Limitation on deducting business interest expense. IRS has provided a safe harbor that allows taxpayers to treat certain infrastructure trades or businesses (such as airports, ports, mass commuting facilities, and sewage and waste disposal facilities) as real property trades or businesses solely for purposes of qualifying as an electing real property trade or business. For tax years beginning after Dec. 31, 2017, the TCJA provides that a deduction allowed for business interest for any tax year can’t exceed the sum of:

  1. The taxpayer’s business interest income for the tax year;
  2. 30% of the taxpayer’s adjusted taxable income for the tax year; plus
  3. The taxpayer’s floor plan financing interest (certain interest paid by vehicle dealers) for the tax year.

The term “business interest” generally means any interest properly allocable to a trade or business, but for purposes of the limitation on the deduction for business interest, it doesn’t include interest properly allocable to an “electing real property trade or business”. Thus, interest expense that is properly allocable to an electing real property trade or business is not properly allocable to a trade or business, and is not business interest expense that is subject to the interest limitation.

Avoiding penalties. IRS has identified the circumstances under which the disclosure on a taxpayer’s income tax return with respect to an item or position is adequate for the purpose of reducing the understatement of income tax under the substantial understatement accuracy-related penalty for 2018 income tax returns. The guidance provides specific descriptions of the information that must be provided for itemized deductions on Form 1040 (Schedule A); certain trade or business expenses; differences in book and income tax reporting; and certain foreign tax and other items. The guidance notes that money amounts entered on a form must be verifiable, and the information on the return must be disclosed in the manner set out in the guidance. An amount is verifiable if, on audit, the taxpayer can prove the origin of the amount (even if that number is not ultimately accepted by the IRS) and the taxpayer can show good faith in entering that number on the applicable form. If the amount of an item is shown on a line of a return that does not have a preprinted description identifying that item (such as on an unnamed line under an “Other Expense” category), the taxpayer must clearly identify the item by including the description on that line. If an item is not covered by this guidance, disclosure is adequate with respect to that item only if made on a properly completed Form 8275 (Disclosure Statement) or 8275-R (Regulation Disclosure Statement), as appropriate, attached to the return for the year or to a qualified amended return.

IRS issues standard mileage rates for 2019

WASHINGTON — The Internal Revenue Service today issued the 2019 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on Jan. 1, 2019, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

  • 58 cents per mile driven for business use, up 3.5 cents from the rate for 2018,
  • 20 cents per mile driven for medical or moving purposes, up 2 cents from the rate for 2018, and
  • 14 cents per mile driven in service of charitable organizations.

The business mileage rate increased 3.5 cents for business travel driven and 2 cents for medical and certain moving expense from the rates for 2018. The charitable rate is set by statute and remains unchanged.

It is important to note that under the Tax Cuts and Jobs Act, taxpayers cannot claim a miscellaneous itemized deduction for unreimbursed employee travel expenses. Taxpayers also cannot claim a deduction for moving expenses, except members of the Armed Forces on active duty moving under orders to a permanent change of station. For more details see Notice-2019-02.

The standard mileage rate for business use is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously. These and other limitations are described in section 4.05 of Rev. Proc. 2010-51.

Notice 2018-02, posted today on IRS.gov, contains the standard mileage rates, the amount a taxpayer must use in calculating reductions to basis for depreciation taken under the business standard mileage rate, and the maximum standard automobile cost that a taxpayer may use in computing the allowance under a fixed and variable rate plan.

Tax reform expands availability of cash accounting

Under the Tax Cuts and Jobs Act (TCJA), many more businesses are now eligible to use the cash method of accounting for federal tax purposes. The cash method offers greater tax-planning flexibility, allowing some businesses to defer taxable income. Newly eligible businesses should determine whether the cash method would be advantageous and, if so, consider switching methods.

Read more

Close-up on the new QBI deduction’s wage limit

The Tax Cuts and Jobs Act (TCJA) provides a valuable new tax break to noncorporate owners of pass-through entities: a deduction for a portion of qualified business income (QBI). The deduction generally applies to income from sole proprietorships, partnerships, S corporations and, typically, limited liability companies (LLCs). It can equal as much as 20% of QBI. But once taxable income exceeds $315,000 for married couples filing jointly or $157,500 for other filers, a wage limit begins to phase in.

Full vs. partial phase-in

When the wage limit is fully phased in, at $415,000 for joint filers and $207,500 for other filers, the QBI deduction generally can’t exceed the greater of the owner’s share of:

  • 50% of the amount of W-2 wages paid to employees during the tax year, or
  • The sum of 25% of W-2 wages plus 2.5% of the cost of qualified business property (QBP).

When the wage limit applies but isn’t yet fully phased in, the amount of the limit is reduced and the final deduction is calculated as follows:

  1. The difference between taxable income and the applicable threshold is divided by $100,000 for joint filers or $50,000 for other filers.
  2. The resulting percentage is multiplied by the difference between the gross deduction and the fully wage-limited deduction.
  3. The result is subtracted from the gross deduction to determine the final deduction.

Some examples

Let’s say Chris and Leslie have taxable income of $600,000. This includes $300,000 of QBI from Chris’s pass-through business, which pays $100,000 in wages and has $200,000 of QBP. The gross deduction would be $60,000 (20% of $300,000), but the wage limit applies in full because the married couple’s taxable income exceeds the $415,000 top of the phase-in range for joint filers. Computing the deduction is fairly straightforward in this situation.

The first option for the wage limit calculation is $50,000 (50% of $100,000). The second option is $30,000 (25% of $100,000 + 2.5% of $200,000). So the wage limit — and the deduction — is $50,000.

What if Chris and Leslie’s taxable income falls within the phase-in range? The calculation is a bit more complicated. Let’s say their taxable income is $400,000. The full wage limit is still $50,000, but only 85% of the full limit applies:

($400,000 taxable income – $315,000 threshold)/$100,000 = 85%

To calculate the amount of their deduction, the couple must first calculate 85% of the difference between the gross deduction of $60,000 and the fully wage-limited deduction of $50,000:

($60,000 – $50,000) × 85% = $8,500

That amount is subtracted from the $60,000 gross deduction for a final deduction of $51,500.

That’s not all

Be aware that another restriction may apply: For income from “specified service businesses,” the QBI deduction is reduced if an owner’s taxable income falls within the applicable income range and eliminated if income exceeds it. Please contact us to learn whether your business is a specified service business or if you have other questions about the QBI deduction.

2017 Tax Reform Update

Below is a brief summary of the current differences between the House & Senate Tax Bills. Source: Thomson Reuters

2017 Tax Reform: Key differences between the Senate and House tax bills

The Senate and the House have each passed their own version of the “Tax Cuts and Jobs Act”. The two versions of the bill have many similar provisions, but they also have a number of key differences that will have to be reconciled by the Conference Committee as the two bills are merged into a single piece of legislation.

It is unclear at this point how these differences will be resolved. However, there is generally an inclination that the Senate’s provisions carry somewhat more weight because, since the Senate is subject to budgetary restraints as part of the reconciliation process, there is less flexibility to make changes to their bill.

The House voted on December 4 to go to conference with the Senate to reconcile the two bills, and the Senate is expected to name conferees later in the week. There has also been some speculation that the House might take up the Senate version and forego a conference, but this possibility is generally considered slight, especially considering the corporate alternative minimum tax (AMT) provision in the Senate bill (see below) which Conference Committee Chair Kevin Brady (R-TX) has identified as an issue that needs to be resolved.

Individual Provisions

Sunset provision. The Senate bill, in order to comply with certain budgetary constraints, provided an expiration date of Jan. 1, 2026 for many of the tax breaks in its bill, especially those for individuals. The House, on the other hand, largely made the changes in its bill permanent.

Individual rates and brackets. The Senate bill has seven tax brackets for individuals with rates ranging from 10% to 38.5%. The House bill has four tax brackets ranging from 12% to 39.6%, retaining the top rate under current law.

Individual alternative minimum tax (AMT). The House bill would repeal AMT for individuals. The Senate bill would retain the individual AMT, with increases to the exemption amounts.

Estate tax. Both bills would significantly increase the estate and gift tax exemption, but the House would also repeal the estate tax after Dec. 31, 2024.

Individual mandate. The Senate bill would effectively repeal the individual mandate (i.e., by reducing the penalty amount to zero). The House version has no such provision.

Mortgage interest deduction. The Senate bill would leave the deduction for interest on acquisition indebtedness intact but would suspend the deduction for interest on home equity indebtedness. The House bill would allow the deduction for interest on acquisition indebtedness, but would, for newly purchased homes, reduce the current $1 million limitation to $500,000 ($250,000 for married individuals filing separately), and would allow the deduction only for interest on a taxpayer’s principal residence. Interest on home equity indebtedness incurred after the effective date of the House bill would not be deductible.

Medical expense deduction. The House bill would repeal deductions for medical expenses under Code Sec. 213 outright, but the Senate bill would take a step in the opposite direction and temporarily (and retroactively) reduce the floor from 10% under current law to 7.5% for all taxpayers for tax years beginning after Dec. 31, 2016 and ending before Jan. 1, 2019, after which time the 10% floor would be scheduled to return.

Child tax credit. The Senate bill would increase the child tax credit from $1,000 under current law to $2,000, increase the age limit for a qualifying child by one year (for tax years beginning after Dec. 31, 2017 and before Jan. 1, 2025), increase the income level at which the credit phases out ($75,000 for single filers and $110,000 for joint filers under current law) to $500,000, and reduce the earned income threshold for the refundable portion of the credit from $3,000 to $2,500. The House bill would increase the amount of the credit to $1,600 and increase the income levels at which the credit phases out to $115,000 for single filers and $230,000 for joint filers.

Both bills would also provide a non-child dependent credit, which would be $500 under the Senate bill and $300 under the House bill. The House bill would also provide a “family flexibility credit”; the Senate bill has no equivalent.

Business provisions

Effective date of corporate tax reduction. Both bills would reduce the corporate tax rate to 20%, but the House’s version would go into effect for tax years beginning after Dec. 31, 2017, whereas the Senate’s version would go into effect for tax years beginning after Dec. 31, 2018.

Corporate AMT. The House bill would repeal the corporate AMT. The Senate bill, however, would retain the corporate AMT at its current 20% rate.

RIA observation: The 20% corporate AMT rate is equal to the 20% corporate rate that would go into effect under the Senate bill in tax years beginning after Dec. 31, 2018—which would effectively render many corporate tax breaks worthless.

Section 179 expensing. Both bills would increase the expensing cap and phase-out under Code Sec. 179, but the Senate would increase the cap to $1 million and begin the phase-out at $2.5 million (up from $520,000 and $2,070,000 for 2018 under current law), whereas the House would increase the cap to $5 million and start the phase-out at $20 million.

Pass-through provision. The Senate bill would generally allow a non-corporate taxpayer who has qualified business income (QBI) from a partnership, S corporation, or sole proprietorship to claim a deduction equal to 23% of pass-through income. The House bill would provide a new maximum rate of 25% on the “business income” of individuals, with a series of complex anti-abuse rules to prevent the recharacterization of wages as business income.

 

Year-End Planning: Tax Strategies for Employee Stock Options

Stock options can be complex and costly if you don’t properly plan for taxes. Two common forms of non-cash employee incentives are Incentive Stock Options (ISOs) and Non-qualified Stock Options (NSOs). With tax reform on the horizon, hopefully this post will help you make a more informed decision about the opportunities that exist before the end of the year.

Incentive stock options: ISO’s are qualified stock options granted to an employee that allow the employee to buy stock or ownership in the employer at a specified price. Many ISO grants have vesting schedules that need to be met as a condition of receiving the options. With ISOs, there are no regular income tax consequences when granted or exercised. A taxable event does, however, occur if/when the employee sells the stock at a gain.

An ISO has certain requirements that must be met. For example, the option price cannot be less than the market value of the stock at the time of the grant, it must be exercised within ten years from the time of grant, and the market value of the stock for any ISOs exercisable in any year is limited to $100,000.

To avoid disqualified dispositions and lock in favorable capital gain treatment, ISO’s generally can’t be disposed of within two years after the option is granted or one year after the stock is transferred to the employee.

If there is a disqualifying disposition of a share of stock, you would recognize ordinary compensation income equal to the “bargain element”. This bargain element is the fair market value (FMV) of the stock on the date of sale less the exercise price.

For Alternative Minimum Tax (AMT) purposes, when an ISO is exercised, assuming the stock is fully vested on the exercise date, the amount of the bargain element is included as an adjustment for alternative minimum taxable income. If the stock is not substantially vested in the year of exercise (still subject to forfeiture), income is includible under the Code Sec. 83 rules for AMT purposes. In future years, a tax credit may be allowed against regular tax for AMT paid on account of the adjustment for ISO exercises.

Launch Consulting Insight: Since the Republican plan for tax reform has called for the AMT to be repealed, it may be worth holding off on exercising ISOs until 2018, if the current tax bill is passed.

Nonqualified stock options: NSOs, are taxable similar to an employee receiving compensation income equal to the FMV of the option. If a NSO isn’t tradeable and has no “ascertainable market value”, a taxable event would occur when stock is received upon exercise of the options rather than at the time of option receipt. The taxable amount would be the “bargain element”, the difference between the stock’s market price on the date of option exercise, less the exercise price under the option.

Launch Consulting Insight: NSOs pose a more difficult dilemma with year-end planning. If you have NSOs, you may want to consider waiting to exercise until 2018 if you believe tax reform will be enacted and lower tax rates will apply in 2018. I would recommend factoring in market conditions, since an increase in the stock value over the waiting period could increase the amount of income subject to taxation. Alternatively, if the bargain element now is small, and you think it could increase by next year, you may want to consider exercising in 2017 to minimize the amount of ordinary income recognized on your bargain element.

Proposed Increases to the Social Security wage base

The Social Security Administration’s Office of the Chief Actuary (OCA) has projected an increase in the current Social Security wage base from $118,500 (2015 & 2016) to $126,000 for 2017.

This is bad news for those who are self-employed, operating as either a sole-proprietorship or a single-member LLC (SMLLC). Based on this estimate, each self-employed person with at least $126,000 in net self-employment earnings will pay $15,624 in Social Security taxes alone for 2017. This tax will be in addition to medicare taxes and income taxes at the taxpayer’s ordinary marginal rate.

Below are the social security wage base projections for 2017 on:

  • 2017 — $126,000
  • 2018 — $129,900
  • 2019 — $135,900
  • 2020 — $142,500
  • 2021 — $148,800
  • 2022 — $155,100
  • 2023 — $161,700
  • 2024 — $168,300
  • 2025 — $175,200

The OCA is projecting that the Social Security trust fund will become insolvent in 2034. As an entrepreneur, what steps are you taking towards minimizing your exposure to the Social Security Tax?

 

 

Controversial Charitable Contribution Regulation Withdrawn

This past September, the IRS proposed a regulation that would require charitable organizations to collect personal information from its donors and file information returns with the IRS with this personal information for donations over $250. The IRS would, in turn, would use informational returns received from the donee to match the amounts with the social security numbers of the donors.

A few days ago, we received notice that the IRS has scrapped these regulations. (whew!) This could have only led to more paperwork for non-profit organizations and greater risks for individuals to become victims of identity theft.

As a reminder, the IRS still requires contemporaneous written acknowledgement of a contribution from a charitable organization if the donation exceeds $250.  The acknowledgement must state the amount of cash or a description (but not the value) of property other than cash contributed. The letter must also state whether the donee provided any “goods or services” in consideration for the contribution. Lastly, if the goods or services received were entirely intangible religious benefits, the letter must provide a statement to that effect.

For more information on charitable contributions, please contact Paul Glantz, CPA at paul@launchconsultinginc.com

 

Highway Bill Gives IRS Power over Passports

Last week President Obama signed into law the Highway Bill, a five-year $305 billion law that will focus on improving highway and transit projects. Included in that law were two controversial provisions that didn’t receive as much press.Both these provisions were included as offsets that are expected to cover the infrastructure spending.

Aside from the IRS bringing back private debt collectors, the new law gives the State Department the power to deny or revoke the passport of individuals with unpaid disputed tax bills. The passport revocation would only occur after the IRS has issued a lien or levy. If you have a payment agreement set up with the IRS, don’t worry, you’re in the clear. As far as privatizing debt collectors, expect to see an increase in criminals posing as IRS agents or collection companies.

More information on the Highway Bill here .

If you have questions about safeguarding your personal information, be sure to check out these tips.

For additional questions on how this law may impact you, contact Paul Glantz, CPA at paul@launchconsultinginc.com

IRS Audit Rates Drop, Again

A recent report shows IRS individual audit rates at the lowest level since 2004. In addition to cuts in IRS funding and staffing, the 8 million phone calls the IRS dropped, and the cyber theft of $39mm from fraudulently filed returns, audit rates have dropped to 0.84%. To put this in perspective, just over 8 returns for every 1,000 filed are examined by the IRS in person or via mail correspondence.

Tax Return, Tax Preparation, CPA, Certified Public Accountant, Austin, Texas, 78701, 78703, 78745, 78746, Tax Refund, 1040, 1065, 1120S

USA Today compiled audit rates from 2000-2015

The drop in audit rates marked the third consecutive year with audit coverage below 1%. Things have not been looking good for the IRS post the Tea-Party Scandal. Revenue from audit collections have been a measly $7.32 billion so far this year, compared with the $14.7 billion average between 2005-2010.

Less head count in the office, fewer audits, and longer phone wait times put the voluntary compliance system at risk for tax cheats and fed up taxpayers.

The IRS is working diligently to correct the problems. We have already seen new processes for ramping up security and battling fraudulent returns.

 

For questions or more information on how this may impact you, or if you are in need of assistance with an IRS audit, contact Paul Glantz, CPA at paul@launchconsultinginc.com