The IRS recently proposed several significant changes to the existing regulations under Section 6015 of the Internal Revenue Code. The regulations in Section 6015 provide guidance to married individuals who filed joint returns and later sought relief from joint and several liability.

There are several proposed regulation changes:

• Present additional guidance on the application of Section 6015(g)(2) res judicata, a doctrine that aims to prevent a spouse from requesting innocent spouse relief when Section 6015 relief was at issue in a prior court proceeding. The proposed rule entails defining precisely what “meaningful” participation entails.

• Give a better definition for “underpayment” and “unpaid tax” under Section 6015(f). Clarity is needed. Currently, the terms are too similar which is problematic; because if there is no unpaid tax due, no relief is available.

• Give detailed rules regarding credits and refunds. The rules explain, in detail, how a credit or refund available to a spouse is determined and allocated.

• Amend the rule for credit or refund in equitable relief cases to clarify that credits or refunds of tax are available in both underpayment and deficiency cases.

• Elaborate on the rule that penalties and interest are not separate items from which relief can be obtained in underpayment cases.

• Introduce an administrative rule. The attribution of an inaccurate item follows the attribution of the underlying item that caused the increase to adjusted gross income. The administrative rule includes a tax benefit rule, where the inaccurate item allocated to a requesting spouse may be increased or decreased. The adjustment depends on the tax benefit to each spouse.

• Revise rules governing the prohibition on collection and suspension of the collection statute. The proposed revisions are in response to the amendments of the law permitting the Tax Court to review innocent spouse cases where the IRS has not determined a deficiency.

The proposed rules are not applicable until they are published in the Federal Register. At that time, they will be considered final. If you would like more information about the proposed regulations, please contact one of our professionals today.

IRS Warns Taxpayers to Guard Against New Tricks by Scam Artists Losses Top $20 Million

WASHINGTON — Following the emergence of new variations of widespread tax scams, the Internal Revenue Service today issued another warning to taxpayers to remain on high alert and protect themselves against the ever-evolving array of deceitful tactics scammers use to trick people.

These schemes — which can occur over the phone, in e-mails or through letters with authentic looking letterhead — try to trick taxpayers into providing personal financial information or scare people into making a false tax payment that ends up with the criminal.

The Treasury Inspector General for Tax Administration (TIGTA) has received reports of roughly 600,000 contacts since October 2013. TIGTA is also aware of nearly 4,000 victims who have collectively reported over $20 million in financial losses as a result of tax scams.

“We continue to see these aggressive tax scams across the country,” IRS Commissioner John Koskinen said. “Scam artists specialize in being deceptive and fooling people. The IRS urges taxpayers to be extra cautious and think twice before answering suspicious phone calls, emails or letters.”

Scammers posing as IRS agents first targeted those they viewed as most vulnerable, such as older Americans, newly arrived immigrants and those whose first language is not English. These criminals have expanded their net and are now targeting virtually anyone.

In a new variation, scammers alter what appears on your telephone caller ID to make it seem like they are with the IRS or another agency such as the Department of Motor Vehicles. They use fake names, titles and badge numbers. They use online resources to get your name, address and other details about your life to make the call sound official. They even go as far as copying official IRS letterhead for use in email or regular mail.

Brazen scammers will even provide their victims with directions to the nearest bank or business where the victim can obtain a means of payment such as a debit card. And in another new variation of these scams, con artists may then provide an actual IRS address where the victim can mail a receipt for the payment — all in an attempt to make the scheme look official.

The most common theme with these tricks seems to be fear. Scammers try to scare people into reacting immediately without taking a moment to think through what is actually happening.

These scam artists often angrily threaten police arrest, deportation, license revocation or other similarly unpleasant things. They may also leave “urgent” callback requests, sometimes through “robo-calls,” via phone or email. The emails will often contain a fake IRS document with a telephone number or email address for your reply.

It is important to remember the official IRS website is IRS.gov. Taxpayers are urged not to be confused or misled by sites claiming to be the IRS but ending in .com, .net, .org or other designations instead of .gov. Taxpayers should never provide personal information, financial or otherwise, to suspicious websites or strangers calling out of the blue.

Below are five things scammers often do that the real IRS would never do.

The IRS will never:

• Angrily demand immediate payment over the phone, nor will the agency call about taxes owed without first having mailed you a bill.
• Threaten to bring in local police or other law-enforcement groups to have you arrested for not paying.
• Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe.
• Require you to use a specific payment method for your taxes, such as a prepaid debit card.
• Ask for credit or debit card numbers over the phone.

Here’s what you should do if you think you’re the target of an IRS impersonation scam:

• If you actually do owe taxes, call the IRS at 1-800-829-1040. IRS workers can help you with a payment issue.
• If you know you don’t owe taxes or do not immediately believe that you do, you can report the incident to the Treasury Inspector General for Tax Administration (TIGTA) at 1-800-366-4484.
• If you’ve been targeted by any scam, be sure to contact the Federal Trade Commission and use their “FTC Complaint Assistant” at FTC.gov. Please add “IRS Telephone Scam” to the comments of your complaint.

If you have a financial interest in or signature authority over a foreign financial account exceeding certain thresholds, the Bank Secrecy Act may require you to report the account yearly to the IRS by filing a Financial Crimes Enforcement Network (FinCEN) Form 114, Report of Foreign Bank and Financial Accounts (FBAR).  Specifically,  Form 114 is required to be filed if during the year—

1. You had a financial interest in or signature authority over at least one foreign financial account (which can be anything from a securities, brokerage, mutual fund, savings, demand, checking, deposit, or time deposit account to a commodity futures or options, and a whole life insurance or a cash value annuity policy) and;
2. The aggregate value of all such foreign financial accounts exceeded $10,000 at any time during 2014.

The 2014 Form 114 must be filed by JUNE 30, 2015  and cannot be extended.  Furthermore, it must be filed electronically. The penalty for failing to file Form 114 is substantial—up to $10,000 per violation (or the greater of $100,000 or 50% of the balance in an account if the failure is willful).

To File the Form 114 Yourself, go to:

http://bsaefiling.fincen.treas.gov/main.html

* Click on “Become a BSA E-Filer”

* Click on “File an Individual FBAR (FinCEN Form 114)“

* Complete the form and submit

If we have not already contacted you about filing this form for you, please give us a call. As always, please contact us if you have any questions or concerns regarding this form.

Hamilton Tharp, LLP

1099-MISC Reporting Requirement –IMPORTANT

1099-Misc forms are due to the recipients by Monday, February 2, 2015 for the 2014 calendar year. 

The Form 1099-MISC reporting rules apply to any business (whether a sole proprietorship, partnership, or corporation) that makes a payment for services or rents to non-employees when:

• Payments total more than $600 for the year

AND

• The recipient is an individual or unincorporated entity including LLC’s and partnerships.

3.)  Payments to corporations are excluded from 1099 reporting except for payments to corporations for legal services.

When the tax identification number is not provided by the service-provider, the payment is subject to Federal backup withholding at 28% and California backup withholding at 7%.

Payments by CREDIT CARD are NOT TO BE INCLUDED in 1099 reporting.   These amounts are being reported directly to the companies/individuals by their Credit Card Servicing Company on form 1099-K.

The best way to get accurate information from vendors is to obtain a completed form W-9 and have it completed prior to making any payments.    Attached is a current version of Form W-9 for your convenience or you can download at www.irs.gov (under Forms and Pubs tab).

In addition to 1099-MISC filing, the state of CALIFORNIA still requires notification, on an annual basis, of all independent contractor arrangements.  To meet this requirement you MUST file Form DE 542 within 20 days of entering into a contract with an independent contractor or making a payment of $600 or more. This form has to be filled out EVERY YEAR and should include any individuals for whom you will be providing a 1099-MISC.

For a faster, easier, and more convenient method of reporting your DE 542 information, you are encouraged to report online using the EDD’s e-Services for Business. Visit the website at

https://eddservices.edd.ca.gov  to choose the option that is best for you.

Attached is a blank Form 542 or you can download at http://edd.ca.gov/pdf_pub_ctr/de542.pdf .

Failure to file Form 1099 can result in the disallowance of deductions, assessment against the payer of the 28% and 7% backup withholding and penalties for failure to file.

Should you have any questions, please contact our office at 858.481.7702