1 OATC Portland Chapter Fall Seminar Six Hours of Continuing Professional Education Peter Bunce CPA presents Partnership and S Corporation Fundamentals This instructor-led course focuses on Form 1065 and 1120S and the related schedule K-1s. The course will provide a line-by-line review of the five pages making up Forms 1065 and 120S, and will discuss the latest information and proposed legislative changes relating to entities taxed as partnerships and S corporations. In addition, participants will review Schedule K-1 and discuss the tax implications for the partners or shareholders by way of practical examples and group discussion. LOCATION St. Rita Church Hall, NE Prescott St., Portland Saturday November 23, 2013 from 9:00 AM to 4:00 PM Lunch is included For more information contact: Dale Marino or ALSO, SEE PAGE TWO OF REGISTRATION FORM OATC Portland Chapter Fall Seminar Registration Form FREE with New OATC Portland Chapter membership application and dues (see details) $50.00 OATC Portland Chapter Member $60.00 OATC Member of Chapter $ Non-OATC Member (same as membership fee) add $20.00 Late registration. Registration or payment postmarked after 11/16/2013 add additional $20.00 for registration form or payment at the door. PAID $ by check/cash, $ by OATC scrip, $ by Portland vouchers Please Print Clearly No Refunds after November 16, 2013 One attendee per form. Name PTIN Address /City/State/Zip Best Contact Telephone Number address Required Make check payable to OATC. Return check fee is $40. Must be postmarked by November 16, Mail to: Dale Marino, Fall Seminar, PO Box 66512, Portland, Oregon H
2 Page 2 OATC Portland Chapter Fall Seminar Partnership and S Corporation Fundamentals Oregon Association of Tax Consultants - Portland Chapter is an IRS Approved CE Provider (#CAVSS) The Lunch Menu - Chef s Surprise OATC Members Recycle Maybe you have attended many tax seminars over the years and have a whole bunch of 3-hole binders. So let s recycle one. Bring a 1 inch 3-hole binder with you to this seminar. We will have the handout material punched for your recycled binder. CE and PTINS It is responsibility of the attendee to legibly supply their correct name (as it appears on their PTIN registration), and their correct PTIN. PTIN s start with a P and include 8 numbers. (Example P ). If you do not have a PTIN, write NONE on the PTIN line. Failure to do so can disqualify your CE Hours reported to IRS-RPO. Portland Chapter Members Don t forget to send in our $10 Portland Chapter Education Vouchers with your Fall Seminar registration form. New Portland Chapter Members To qualify for the FREE registration fee, mail the completed registration form, the completed membership application (available at and check of $105 payable to OATC to address on first page, postmarked by November 16, Only for new members who have not been an OATC member since May 1, 2010.
3 Portland Chapter Newsletter November 2013 From the President Congratulations. All Portland Chapter members who attended our October meeting received a $50 education voucher to be used only for the IRS/Practitioners Forum on November 1 st. Also, our members can use any other Portland Chapter $10 education voucher. Just apply for reimbursement as detailed in this newsletter. Portland Tax Attorney Faces Federal Trial for Tax Fraud By ANDREA DAMEWOOD, Willamette Week A Portland tax attorney who taught classes at Portland Community College is under federal indictment for filing false tax returns for himself. At our October meeting, we heard about Schedule E issues from Susan Lauderdale EA, LTC. She owns Northwest Accounting and Tax Services in Vancouver. Congratulations, also, for all our attendees being on time for our October meeting. Our November meeting will feature Molly Lessard EA, LTC. Her topic will be on the Decedent s Tax Return. Molly works in the tax department at US Bank. Steven M. Cyr is charged with two felony counts of fraud and false statements for overstating his business expenses on his 2006 and 2007 tax returns. According to a federal indictment, Cyr who runs Legal Representation LLC on Southwest Scholls Ferry Road well knew and believed his expenses were substantially less than the business expenses he claimed. In April 2007, the indictment shows, Cyr filled out his personal income tax form claiming his business cost him $524,678. The next year, he filled out his 1040 to say his expenses were $408,767. The indictment, signed by Assistant U.S. Attorney Ryan Bounds, says those figures are false. Cyr s trial date is set for Oct. 22 and is assigned to U.S. District Court Judge Michael Mosman. Molly Lessard Reached by phone, Cyr says he's aware of the charges and trial, but declined to comment. (continued on next page) (continued on next page)
4 (continued from front page President) Our Fall Seminar registration form is attached. I already received several registration forms from Portland Chapter members paying only with our Portland Chapter $10 vouchers. Free is a very good price. It pays to be a Portland Chapter member. Oregon Department of Revenue held a liaison meeting on October 25 th. If you missed it, you missed a tour of the tax return processing center. ODR also handed out a flyer on changes to the Special Oregon Medical Subtraction to appear in the new Pub 17 ½. This is also on the ODR web under Taxpayer Tops. Have you logged-in to your PTIN account lately? You can see all your 2013 education that has been uploaded by your education provider. If you don t see all your 2013 Federal education, you should contact the education provider. (continued from front page Attorney) Portland Community College says Cyr last taught classes there in Cyr's license with the Oregon State Bar remains active, although a spokeswoman says Cyr is also under investigation by the bar discipline council. UPDATE On October 23 rd, Steven Cyr changed his plea, to guilty of one felony count of filing false tax returns for himself. UPDATE In the matter of US v. Steven M. Cyr, sentencing is scheduled for February 5, Only Portland Chapter regular members who are current with their membership dues will be issued a $10 education voucher with their monthly CPE certificate. Do you know that your Portland Chapter has our own web site? As soon as I have confirmation of our upcoming speaker and subject matter, I will post it on our web site. Just go to: Your Portland Chapter is an IRS approved CPE provider. Most of our tax education qualifies for IRS continuing education for Enrolled Agents. Currently, the IRS does not require continuing education for any other tax return preparer or PTIN holder. Participation in these programs are voluntary for other tax return preparers. Continuing education credits will be posted to your PTIN account for any participant who provides their PTIN, regardless of credentials. To ensure that your CE appears correctly in your PTIN account, please provide your PTIN and name as they appear in your PTIN account. Delay in Filing Season IRS dropped a bombshell, a one to two week delay in the 2014 filing season start. The filing season was originally slated to begin on January 21, 2014, but with the delay, IRS will "start accepting and processing 2013 individual tax returns no earlier than Jan. 28 and no later than Feb. 4." Why this state of affairs you may ask? IRS framed the delay as a result of the federal government shutdown (though, candidly, the agency did not address why those employees responsible for delivering a timely filing season were not deemed essential). OATC Portland Chapter President, Dale Marino or
5 Massive Tax Fraud Takedown During Government Shutdown Most of the government was shutdown mid-october but that didn t stop law enforcement from a massive take down in an ongoing effort to stamp out criminal tax fraud in South Florida. Federal charges were filed over a number of days against 45 defendants in 30 separate cases for tax fraud and identity theft. The arrests were the result of a team effort between federal and local members of the South Florida Identity Theft Tax Fraud Strike Force (Strike Force). latest take down, however, is the largest to date in the region. TIGTA estimates that the IRS could issue as much as $21 billion in fraudulent tax refunds over the next five years. In South Florida, however, U.S. Attorney Wifredo Ferrer and the rest of Strike Force has a message for potential criminals: We re on it. Through its partnership, the Strike Force was able to identify and charge 45 defendants said to be responsible for more than 20,000 stolen identities; 38 of those defendants have been arrested. Those stolen identities are valuable. It s alleged that the personally identifying information gleaned from the identities stolen by these defendants resulted in more than $11.5 million in fraudulent tax refunds; nearly $40 million more in intended losses was stopped as a result of the investigation. Stolen identity/tax refund fraud is an increasing problem in the U.S. and one the IRS considers a top priority. The crime topped the IRS list of Dirty Dozen Tax Scams for 2012 and As a result, IRS has ramped up enforcement to identify and block fraud, including increased investigations, arrests and prosecutions. In 2012 alone, these efforts resulted in preventing $20 billion (yes, with a b) in fraudulent refunds (up 42% from 2011). Identity theft and tax-related fraud is particularly rampant in South Florida. According to a report from the U.S. Treasury Inspector General for Tax Administration (TIGTA), the state of Florida has the highest rate of stolen identity tax refund fraud in the country. Concentrations are particularly high at the southern tip: the number of false returns filed in Miami alone is 46 times the national average. The Strike Force a partnership between federal, state and local agencies was created in 2012 to make it easier to target and prosecute fraudsters. Since its creation, 269 defendants have been charged with stealing 76,700 identities (that s more than the population of Wilmington, Delaware). That includes a number of high profile cases like Rashia Wilson (the self-proclaimed Queen of IRS Tax Fraud ) and Maurice Larry. This Upcoming Education 2013 November 12, Portland Chapter Meeting November 23, 2013 Portland Chapter Fall Seminar December 7, 2013 OATC Update Mt. Hood C C December 10, Portland Chapter Meeting 2014 January 4, 2013 OATC Portland Metro Supplemental Update January 14, Portland Chapter Meeting June 19-21, 2014 OATC Convention, Pendleton, OR February No Portland Chapter Meeting March 11, 2013 Roundtable Meeting April - No Portland Chapter Meeting May 13, Portland Chapter Meeting
6 From Sophia Sakoff, Oregon Department of Revenue, Policy and Systems The Department of Revenue s website has been updated to include links for the new special Oregon medical subtraction and updated RDP information. The special Oregon medical subtraction link contains all the information from the handout I provided at the Friday LTC Liaison meeting. The RDP link doesn t have anything new yet, as we are still waiting to have our particular questions addressed by the Department of Justice. This link will be updated as we learn more. December s ODR Liaison meeting will be packed full of good information and I will have my preliminary agenda posted by next week. As always, let me know what the burning issues, questions, and topics are that you would like to have discussed during our meetings. The next meeting is December 6th. The new links can be found on the personal income tax page under Taxpayer Tips at x. Our meeting agenda and past meeting minutes can be found by clicking the Tax Preparer s link on the right side of the DOR homepage at x. This is where you will find contact information, where to ask questions, and tax updates. We are currently working on the 2013 personal income tax updates. IRS Increases Fees for Installment Agreement and OIC IRS has announced an increase in the user (processing) fees for Installment Plans and Offers in Compromise effective January 1, Under OMB rules, IRS is supposed to charge user fees and is supposed to recover full cost. Currently the fee for an Installment Agreement is $105, a reduction to $52 for a direct debt agreement, and $45 to restructure or reinstate a defaulted agreement. IRS has determined that the cost of an installment agreement is $282, $122 if it is a direct debit agreement, and $85 to restructure/reinstate a defaulted agreement, therefore an increase in the user fee appears to be appropriate. The new fees beginning January 1, 2014, are: $120 for an installment agreement and $50 to restructure/reinstate a defaulted agreement. The direct debit agreement fee does not change. The current fee for an Offer in Compromise is $150. IRS has determined that the full cost of processing an Offer in Compromise is $2,718. The new fee beginning January 1, 2014, for an Offer in Compromise is $186. The no fee for low-income taxpayers continues to apply. Thanks so much, and please feel free to me with any questions, comments, or suggestions.
7 Preparer says Fraud a 'spiritual calling' For a man who admitted to cheating the IRS out of millions of dollars for his destitute clients, Cleo Reed doesn t sound all that sorry. Facing four years in prison, Reed previously admitted to filing hundreds of fraudulent tax returns prepared for Americans without any income. The IRS paid out at least $4.3 million to Reed and his clients in refunds obtained through lies. While prosecutors describe him as an admitted fraud caught on tape saying he likes f---ing with the government, Reed would cast himself as a man who answered a spiritual calling to help the underemployed, disabled, and veterans of this great land by cheating tax collectors. As I see it, these are real people, doing real work and they should be entitled to the same rights and privileges as every other working American, the University Place tax preparer said in a letter to the court. Being the humanitarian that I am, I felt it was my constitutional responsibility to inform the poor and underemployed of their patriotic obligation to report all earned income to the U.S. government. Reed, operator of We B Tax Services and scheduled to be sentenced Friday in U.S. District Court at Tacoma, went on to give himself credit for helping others pay their child support and debts, and for stimulating the economy. Charged in June, Reed was caught in a sting in 2010 after the IRS noticed he was filing unusually large numbers of tax returns that included claims for payment under a tax credit targeted at low-wage workers with children. As it turned out, Reed was inflating the incomes of his clients generally unemployed women with children so that they could claim an earned income tax credit. The credit is available to low- and middle-income families and allows for cash payment if the amount of the credit exceeds the taxes due, as is often the case for recipients with very low incomes. In 2012, a married couple with one child earning less than $36,920 annually could claim a $3,169 tax credit. To do so, though, the recipient must have collected a paycheck or made money through self-employment; public benefits, child support and investment earnings don t qualify as earned income. Reed admitted to faking income claims for his clients, who would not otherwise be able to claim the tax credit because they earned no pay. Doing so, he ensured they received thousands of dollars in taxpayer money they weren t due. Writing the court, Assistant U.S. Attorney Arlen Storm noted Reed had many of his clients claim income for household help while claiming to be self-employed. Reed did so for two undercover IRS agents and three fake clients. During their encounter, Reed explained he pays his recruiters $500 for each young woman with a new child they bring to him, Storm told the court. Agents identified three recruiters who d brought Reed dozens of clients. Investigators later determined Reed filed at least 1,305 fraudulent returns in three years, and that the IRS paid out $4.3 million on those claims, Storm continued. The government has requested that Reed be ordered to repay that amount. Prosecutors have asked that Reed receive a four-year prison term when he is sentenced. Reed, through his attorney, has asked to be spared prison. Suffering from a severe lung condition, Reed has asked to be sentenced to two years on home detention and three on probation. Writing the court, Reed has denied paying others to recruit clients and claimed he operated in an ethical manner. He went on to claim he was only helping his clients achieve the American dream. I had a spiritual calling to give aid, support, and guidance to the underemployed, disabled, and veterans of this great land, Reed said in his letter to the court. My services were not about me exploiting others to gain financial compensation, he continued, but rather to give something back to the people who have contributed in some form or fashion to the economical rebounding of our country during our recession period. UPDATE: Cleo Reed's sentencing hearing was rescheduled for Wednesday, Oct. 30, 2013.
8 Tax Preparers Arrested after Filing Prison Inmates Fraudulent Tax Returns By Michael Cohn A pair of owners of a tax preparation business that claimed millions of dollars in fraudulent tax refunds on behalf of inmates at various New Jersey prisons have been arrested. Special agents of the IRS-Criminal Investigations unit arrested Kamal J. James, aka Bro Messiah Aziz El, and Crystal G. Hawkins, aka Sis. Crystal Gabri El, at Hawkins residence in Laurel, Del., on Wednesday morning on a criminal complaint charging them with one count of conspiracy to defraud the United States. The pair operated Release Refunds, a purported tax preparation business that was previously based in Brick, N.J., and is now in Seaford, Del. According to prosecutors, they solicited New Jersey prison inmates as clients and then filed thousands of fraudulent tax returns on their behalf. James and Hawkins conduct allegedly resulted in hundreds of thousands of dollars in illicit profits and an actual tax loss of approximately $1.7 million. James and Hawkins appeared in Trenton federal court Wednesday afternoon before U.S. Magistrate Judge Douglas E. Arpert. During the proceedings, the government alleged that marijuana plants and a firearm were found in the Laurel home during the arrests. James was detained following the proceeding and Hawkins is expected to be released on a $250,000 bond. According to the criminal complaint, between October 2011 and October 2013, James and Hawkins conspired to defraud the federal government out of millions of dollars by creating and filing income tax returns based on bogus income and withholding information, using their purported tax preparation business to carry out the scheme. They sent promotional flyers for the business to inmates at various New Jersey prisons offering tax return preparation services. The pair asked inmates who expressed interest in Release Refunds services to provide basic identification information and to sign income tax returns and other IRS documents, but not to include any information about their income or withholdings. James and Hawkins then filled in the missing income information on the tax forms, fabricating the inmates earnings to trigger fraudulent and inflated refunds. During the course of the investigation, an undercover IRS-CI agent posing as an inmate in a New Jersey prison submitted a completed Release Refunds form and sent it to James and Hawkins. They then sent the inmate blank income tax forms and other IRS documents and instructions to sign the documents. James and Hawkins did not request any financial information from the undercover agent before preparing three fraudulent tax returns including false income information that James and Hawkins provided to be filed on behalf of the agent for tax years 2010 through The fraudulent tax returns resulted in several thousand dollars in refunds and a $1,485 fee for the defendants. In total, James and Hawkins caused approximately 2,432 fraudulent tax returns to be filed during the relevant time period, claiming approximately $4,402,288 in improper refunds, of which the United States paid approximately $1,779, If convicted, the defendants face up to 10 years in prison and a $250,000 fine, or twice the amount of the gain or loss from the offense. U.S. Attorney Paul J. Fishman credited special agents of the IRS s Criminal Investigation unit, under the direction of special agent in charge Shantelle P. Kitchen, with the investigation. The government was represented by Assistant U.S. Attorneys Nicholas P. Grippo and Jennifer Davenport of the U.S. Attorney s Office Criminal Division in Trenton and Trial Attorney Tino Lisella of the Justice Department s Tax Division. Assistant U.S. Attorney Sarah Wolfe represented the government at today s proceeding. Fishman s office noted that the charges and allegations contained in the complaint are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
9 Report: The IRS Must Do More to Reduce Improper Payments WASHINGTON The Internal Revenue Service (IRS) has made no significant improvement in reducing improper Earned Income Tax Credit (EITC) payments, according to a report publicly released on October 22 nd, by the Treasury Inspector General for Tax Administration (TIGTA). Executive Order 13520, Reducing Improper Payments and Eliminating Waste in Federal Programs, requires TIGTA to assess the IRS s compliance with the Order on an annual basis. The objective of this review was to assess the IRS s efforts to implement Executive Order The IRS estimates that 21 to 25 percent ($11.6 billion to $13.6 billion) of EITC payments were issued improperly during Fiscal Year However, TIGTA found that the IRS s Fiscal Year 2012 estimate for EITC claims and improper payments are understated because the laws extending increases in the EITC were not factored into the estimates. TIGTA also found that the IRS has not established annual improper payment reduction targets as required by law. The IRS is also not in compliance with the quarterly reporting requirement for high-dollar improper EITC payments (payments totaling more than $5,000) to TIGTA and the Council of the Inspectors General for Integrity and Efficiency. IRS management stated that they recently met with the Office of Management and Budget and agreed to develop supplemental measures and indicators in lieu of reduction targets. However, the IRS did not indicate when these measures would be in place. The IRS should be commended for implementing numerous processes to educate Americans and identify and prevent improper EITC payments, said J. Russell George, Treasury Inspector General for Tax Administration. Unfortunately, it is still distributing more than $11 billion in improper EITC payments each year and that is disturbing. The IRS must do a better job of reining in improper payments in this and in other programs, George added. TIGTA recommended that the IRS develop processes to identify high-dollar improper EITC payments and report the information to TIGTA and the Council as required by Executive Order IRS management agreed with TIGTA s recommendation and plans to take appropriate corrective actions. Kay Del Marshall, IRS This is an invitation to attend a series of virtual Practitioner events being delivered by Stakeholder Liaison in Utah. These events are two hour sessions, being offered on two different dates. Below is a list of topics and dates for each event. Each session qualifies for two CE credits with the exception of Part 3, which is only one CE credit. You can register for all parts or register for only the parts you are interested in. CE credits will be awarded accordingly. For Example, you could take Parts 1 on and Part 2 on You would then receive 4 CE credits. You could take Part 4 only on either of the dates offered and receive 2 CE credits. All sessions will start at 9:00 a.m. PST and run until 11:00 a.m. PST. There will be an Audiocast option to listen to the event, or if your internet connection does not allow that, you can attend the audio portion by phone. More information on links and phone numbers will be provided directly prior to each event. To register, reply to Jody Stamback at Use Virtual Seminars in the subject line for quick identification of your responses. Please provide your PTIN and your name as it appears on your PTIN card. Also, please specify which sessions you would like to attend. Part 1 Taxpayer Advocate Service & Tax Law Updates and Part 2 Campus and Field Appeals & FBAR and Part 3 Utah State Tax Commission & Automated Underreporter & Correspondence Exam and (Only 1 CE credit available for this session.) Part 4 ACA and Employment Tax and
10 Tax Provisions only to 12/31/2013 What you need to know is what provisions are expiring at the end of Dozens of them, but we'll list what we see as the most important ones for enrolled agents. For individuals: Above-the-line deduction for certain expenses of elementary and secondary school teachers Deduction for state and local sales taxes Above-the-line deduction for qualified tuition and related expenses Deduction for mortgage insurance as qualified interest Direct IRA distribution to a charity PTIN Renewals Delayed The IRS also announced that the government shutdown is to blame for delay in PTIN renewals. The PTIN renewal season, which normally runs from October 16 to December 31, did not open on time this year because the IRS was closed. As a result, the start-up of the 2014 renewal season was delayed, the IRS said in an announcement posted on its website. All current PTIN holders will receive letters notifying them when the 2014 season will open, according to the IRS. A copy of the announcement is at For businesses: Research and experimentation tax credit Work opportunity tax credit Increase in expensing to $500k/$2M and expansion of definition of 179 property 15-year straight-line cost recovery for qualified leasehold, restaurant, and retail improvements A dependency exemption reminder for folks who help care for a parent : You must document that you pay over half of the support to be allowed to take the exemption. A couple who took in the wife s ailing mother for a few months didn t meet this test. Although the mother s taxable income was below the threshold needed to file a return, she was getting Social Security and other tax free benefits. On audit, the couple could not prove that they spent more than the mother did on her support, so the exemption was denied (Haskett, TC Summ. Op ). Looking for a higher interest rate on an IRA s CD cost a taxpayer dearly The owner of three IRAs was unhappy with the rates her bank was offering, so she withdrew all of the funds and began shopping for a better rate. Unfortunately, she took more than 60 days to deposit the funds in another IRA, so she asked IRS to grant her more time because her prior bank didn t tell her about the 60-day rule. The Service said her old bank had no duty to inform her about the rollover period and refused to OK her late rollover. As a result, she owes tax on the entire withdrawal.
11 Home Office Deductions Simplified Option In Revenue Procedure IRS announced a simplified option for claiming office in home (OIH) expenses to be effective for tax years beginning on or after January 1, This option basically permits the taxpayer to claim a standard deduction of $5 per square foot for the portion of the home that meets the normal OIH limitations. Of course there are some rules and of course advantages and disadvantages. Here is a comparison of the regular method and the Simplified Option: REGULAR METHOD * Calculate the square footage of the home used for business. * Actual expenses are determined and records need to be maintained. * The home office percentage of expenses are claimed on the Schedule C/F (through use of the Form 8829). * The rest of the real estate tax and mortgage interest is deductible on Schedule A. * Depreciation is calculated on the business portion of the home AND reduces the taxpayer s adjusted basis in the property. * Depreciation allowed/allowable is taxed (up to the amount of the gain) upon sale of home. * The total OIH deduction cannot exceed gross income from business use of home less business expenses with the exception of real estate taxes and mortgage interest. These two items can create a loss on the Schedule C/F. * OIH expenses in excess of the allowed deductions are carried over and allowed in the next year if the income test is met in that year. SIMPLIFIED OPTION * Calculate the square footage of the home use for business. There is no limit on the amount of square feet that can be used for business when using either the regular method or the Simplified Method, but the deduction under the Simplified Method is limited to 300 square foot. * Deduction is $5 per square foot but not more than $1,500 total deduction. * 100% of the real estate taxes and mortgage interest are claimed on Schedule A. * The depreciation deduction for this year deemed to be $0. No depreciation is considered to be allowed/allowable for this year. * No recapture of depreciation exists upon sale of the home for any period in which the Simplified Option was used. (Depreciation allowed/allowable for the years the regular method was used is still taxed in the year of the sale as normal.) * Deduction cannot exceed gross income from business use of home less business expenses. * The total OIH deduction cannot exceed gross income from business use of home less business expenses. Therefore the OIH expense will never create a loss on the Schedule C/F. * OIH expense in excess of the allowed deductions may NOT be carried over. * Loss carryovers from a year in which the regular method was used may NOT be claimed in years in which the Simplified Method is being used. However these suspended regular method loss carryovers are carried over to the next year in which the regular method is used. The taxpayer can choose either method for any year. The choice to use the Simplified Method is made by claiming the OIH deduction using the Simplified Method on a timely filed (due date plus extension), original federal income tax return for the chosen year. Once a method has been chosen for a year, it cannot be changed to the other method FOR THAT YEAR. Once the simplified method is used for a year, the depreciation for any LATER years that use the regular method must be calculated by using the appropriate optional depreciation table (39-year life), regardless of whether the optional depreciation table was used in the first year or not. The depreciation allowed is the amount that would be deductible in that year AS IF depreciation had been used in the Simplified Method years. Example Dolly used the regular method to claim OIH expenses for 2011 & Her depreciation deduction is $1,000 each year. In 2013 she used the Simplified Method. In 2014 she used the regular method. The depreciation is calculated for 2014 is based on the amount allowed in the IRS tables for the FOURTH year. The 2013 has no depreciation allowed/allowable but 2013 still counts as a year for purposes of calculating depreciation in Going further with this example Dolly s depreciation allowed/allowable for purposes of a future sale is $3,000 computed as follows: $1,000, $1,000, $0, $1,000. NOW A FEW OTHER RULES When a taxpayer starts using an OIH or changes the size of the office during the year, the average square footage (continued on next page)
12 (continued from last page) More on Home Options is used for the calculation of the OIH expenses. This average is calculated by averaging the monthly square footage amounts AND no month is considered to have more than 300 square feet. Also the taxpayer must have a qualified OIH for at least 15 days during the month. Example: Tom starts using 400 square feet of his home for a business on July 20 and continues through the end of the year. Tom s average square feet is 125 square feet (calculated by using 300 square feet for 5 months divided 12 months in the year). The month of July has zero square feet since it did not include at least 15 days of OIH use. A taxpayer who has more than one qualified business use of the same home for a year and elects to use the Simplified Method MUST use the Simplified Method for each qualified business use. The maximum square footage used for ALL of the businesses cannot exceed 300 square feet. This taxpayer may allocate the deduction among the businesses in any reasonable manner, but never more to a business than that business applicable OIH square footage. An employee cannot use the Simplified Method if the employee receives advances, allowances, or reimbursements for expenses related to the OIH. Some IRS Contractor Employees Owe Millions of Dollars in Federal Tax Debts WASHINGTON Although the Internal Revenue Service (IRS) requires its employees to file their Federal tax returns on time and pay any Federal tax debt, hundreds of the employees of IRS contractors are not held to that same standard, according to a report published today by the Treasury Inspector General for Tax Administration (TIGTA). Because many contractor employees have access to sensitive IRS systems and facilities, the IRS should address tax noncompliance for these employees in a similar manner as it would for its own employees, said J. Russell George, Treasury Inspector General for Tax Administration. TIGTA s review identified weaknesses in the IRS s existing practices that allowed contractor employees with Federal tax debts and instances of nonfiling to go undetected after the IRS initially granted staff-like access because the IRS does not continuously monitor contractor employee tax compliance in the same way it monitors IRS employee tax compliance. Instead, the IRS reviews contractor tax compliance only once every five years or if the contract employee has longer than a two-year break in service. TIGTA conducted its review to determinate the effectiveness of the IRS background investigation process to identify contractor employees who do not file required Federal tax returns or who owe Federal taxes but are not currently on a payment plan. The Internal Revenue Manual requires all IRS employees, and contract employees, to file their Federal tax returns on time and pay any Federal tax debt. TIGTA found that as of June 14, 2012, 691 (5 percent) of the 13,591 IRS contractor employees reviewed by TIGTA had $5.4 million in Federal tax debt. These debts were either agreed to by the taxpayers or affirmed by the court. Of the 691 contractor employees, 352 were not currently on a payment plan to resolve their tax debt. Most of the contractor employees appeared to have been compliant when their initial staff-like access was granted. However, at least 319 contractor employees had tax debt assessed after they were granted staff-like access, and these employees were not currently on a payment plan. Under IRS policy, these 319 contractor employees were not eligible for staff-like access and should not have had access to IRS facilities, systems and data. TIGTA made three recommendations including further evaluating contractor employees TIGTA identified as potentially noncompliant and promptly bringing those individuals into compliance or removing them from IRS contracts. The IRS agreed with our recommendations and stated that they plan to establish and implement policies to ensure that contractor employees are tax compliant.
13 The federal income tax just turned 100 President Wilson signed it into law on Oct. 3, 1913, a little more than four years after the 16th Amendment was proposed by Congress and eight months after official ratification by the states. Some facts about the 1913 tax: The basic income tax rate was only 1%, with a surtax that ranged from 1% on net income over $20,000 and up to $50,000 to 6% on net income in excess of $500,000. All filers were allowed to deduct interest on personal debts plus state and local taxes paid. The standard deduction was $3,000 for single filers and $4,000 for married couples. About 1% of households paid tax. The 1040 form was three pages long, with separate pages for income, deductions and the calculation of the tax and surtax. The 20 instructions for completing the form fit on one page. The full set of instructions for filling out 2012 s 1040 was 214 pages. But don t pine too hard for the good old days. Five years later, as World War I was coming to an end, the top rate had soared to 77% on net income over $1 million. Welcome New Portland Chapter Members Congratulation to: Anne Burgess LTC Kay DeLay CPA Evelyn Davis LTC Ted Sams EA, LTC Let s all congratulate them at our next meeting.
14 PAID ADVERTISEMENT Kevin R. Minkoff, CPA is looking for tax preparation help, from an EA, LTC or LTP with an existing small tax practice, familiar with Drake Software, who has additional time to spend at my office assisting me with client contact, tax preparation, return assembly and handling correspondence from taxing authorities. For consideration by the successful candidate, I have private office space available to use to meet with their own clients. On a long-term basis, I would entertain the idea of office sub-lease, office sharing or practice merging, as a way to grow both of our practices. Please contact Kevin Minkoff directly, at ext. 2 to schedule an interview. Please bring a list of at least two personal and three business references. The successful candidate will also be subject to a background check. Our offices are located at NE Halsey St., Suite 201, Portland, OR We are upstairs (no elevator) above Smitty s Golf.
17 Portland Chapter, Oregon Association of Tax Consultants Educational meetings are held on the second Tuesday of most months at St. Rita Roman Catholic Church, NE Prescott St., Portland, Oregon, from 6:30 PM to 8:30 PM. We meet in the wheel chair accessible Religious Education Building at the back of the parking lot behind the large main parish building housing the church, rectory, and parish offices. Access this lot by entering the main parking lot and going down the driveway just to the right of the main building. $10 Education Voucher Redemption Each Portland Chapter member who attends the full monthly meeting will receive a $10 Education Reimbursement Voucher. When you register for a Portland Chapter sponsored seminar, send in your Voucher(s) in lieu of the portion of the payment they cover along with your registration form and the rest of the payment. Upon completion of an OATC State sponsored education event, you can receive a reimbursement by mailing within 30 days the voucher(s) and a copy of the education CPE certificate to Portland Chapter OATC, c/o Dale Marino, PO Box 66512, Portland, OR Any number of vouchers can be used for one education event. We appreciate the efforts of our volunteers and wish to reimburse them for pre-approved expenses incurred while helping us. As we have a fiscal responsibility to keep our books current, receipts are to be mailed within 30 days to Portland Chapter OATC, c/o Dale Marino, PO Box 66512, Portland, OR The Executive Board for the Portland Chapter normally meets after our educational meetings. All members are welcome to attend and encouraged to bring their ideas and concerns. Chapter Officers and Committee Chairs: President: Dale Marino Vice President: John Bell Secretary: Joy Veloni Treasurer: JoAnn Barberis Newsletter Committee Chair: Valerie Vann Membership Chair John Burke Education Chair Brent Hamilton Disclaimer We endeavor to provide accurate and reliable material in this newsletter. However, the possibility of error exists. The editor, the Oregon Association of Tax Consultants, and/or OATC Portland Chapter will not be held responsible for any misinformation. All persons using any information contained herein are encouraged to use all sources of information to arrive at a tax law decision. Neither OATC nor the Portland Chapter of OATC specifically endorses any services or products mentioned in this newsletter. Oregon Association of Tax Consultants FAX State Officers: President: Vickie Baker 1 st Vice President: Beverly Diercks 2 nd Vice President: Kirkwood Donavin 3 rd Vice President: Patricia Logan Secretary: Cathy Johnson Treasurer: David Kiser Past President: Vickie Hull
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