IRS Turns to Private Collection Agencies to Capture Unpaid Tax Money

The Internal Revenue Service has always wanted your money.

Now we know they’re serious about getting it.

In a recent announcement, the IRS revealed that it is now going to be using private debt collection agencies to help retrieve what is, reportedly, an ever-increasing mountain of tax debt owed by John Q. Public.

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According to an item from NBC News on the IRS’s new effort at collecting unpaid taxes, the agency will start by making a more gradual move toward the use of debt collectors. Initially, “merely” hundreds of taxpayers will begin hearing from collection agencies, but, as the year wears on, it’s expected that thousands of people will receive communications from debt collection companies weekly in relation to their tax bills.

Although IRS Commissioner John Koskinen has said that “the IRS is taking steps throughout this effort to ensure that the private collection firms work responsibly and respect taxpayer rights,” it’s worth noting that this is the same John Koskinen who was overseeing the IRS during the period of time it was targeting conservative groups in an effort to either deny or delay the awarding of the tax-exempt statuses for which they had applied.

Koskinen also noted that “the IRS also urges taxpayers to be on the lookout for scammers who might use this program as a cover to trick people.” Some fear that the decision by the IRS to start using third-party private debt collectors will prove a boon to those fraudsters now be unburdened of having to pretend to be actual IRS employees.

In addition to a bevy of consumer groups worried about the IRS taking this path, some IRS employees are voicing their displeasure with it, as well. Tony Reardon, president of the National Treasury Employees Union, issued a statement in which he said, in part, that he believes this change will result in “collection agents getting paid to harass taxpayers, many of whom need assistance, not threats.”

The information contained here is for general information purposes only. The Financial Writer blog and Bob Yetman disclaim responsibility for any liability or loss incurred as a consequence of the use or application, either directly or indirectly, of any information presented herein. Nothing contained in this article, or any other article featured at this blog, should be construed as a solicitation or recommendation to engage in any financial transaction. You should seek the advice of a qualified professional before making any changes to your personal financial profile.

Report: Most IRS Employees Caught Cheating on Taxes Allowed to Keep Their Jobs

Have you ever wondered what happens to IRS employees who cheat on their taxes?

IRS employees who cheated on their taxes allowed to keep jobs   Washington Times

According to numbers released by the inspector general’s office, and reported on by The Washington Times, most simply get to keep their jobs.

While privacy rules prevent the agency from providing specifics, it is known that in the reporting period April 2016 – September 2016, nine employees who were caught cheating saw their penalties subject to “mitigation” by IRS Commissioner John Koskinen – “mitigation” means that the offenders received punishments in the range of suspension to reprimand. Additionally, during the same period, one to three employees were allowed to resign, and another one to three were overtly terminated. Based on these numbers, it can be concluded that anywhere from 60 to as many as 82 percent of IRS employees caught intentionally cheating were allowed to stay on.

The Washington Times disclosed in their piece that when the inspector general released a report in 2015 on the specific issue of tax cheating by IRS employees, the “leniency rate” at that time was 61 percent.

In a statement, the IRS said, “The vast majority of IRS employees, nearly 99 percent, file and pay their taxes timely — one of the highest tax compliance rates across government agencies and higher than general taxpayer population estimates.”

That doesn’t cut it with a lot of folks, including Rep. Mark Walker (R-N.C.).

“The privileged and well-connected should not get to live and work by another standard,” said Walker. “Just like with Commissioner John Koskinen, these IRS employees have failed in performing their duties and have neglected the laws they are supposed to uphold.”

Walker’s shot at Koskinen is a reference to the way he gave Congress the run-around during that body’s investigation into the harassment of Tea Party groups by the IRS. He and other congressional Republicans fired off a letter to President Trump last week that requested John Koskinen be removed from his position as IRS Commissioner.

The information contained here is for general information purposes only. The Financial Writer blog and Bob Yetman disclaim responsibility for any liability or loss incurred as a consequence of the use or application, either directly or indirectly, of any information presented herein. Nothing contained in this article, or any other article featured at this blog, should be construed as a solicitation or recommendation to engage in any financial transaction. You should seek the advice of a qualified professional before making any changes to your personal financial profile.

The Fake IRS Agent Scam Remains Popular

The U.S. federal tax filing deadline is around the corner, and many are scrambling to finish their returns, as well as digging deep to come up with the money necessary to pay their tax bills. A few may find themselves receiving any of a variety of follow-up communications and queries from the IRS about minor discrepancies or other issues related to their filings, but for the vast majority of us, tax season will prove to be uneventful, once again. This said, the fact that we are all just one minor error away from receiving a communication from the IRS means that if we do receive such a communication, we’re not inclined to react to it as though getting it was out of the realm of possibility all along. On that basis, then, a vicious scam targeting American taxpayers has proven to be all-too-successful: people pretending to be IRS agents, calling innocent taxpayers who have no legitimate payment obligation to the IRS, and demanding money, as well as threatening the taxpayers that they’ll face jail time if they do not cough up the dough. According to a recent disclosure by IRS Deputy Inspector General Timothy Camus made before Congress, the fake IRS agent scam has, since October 2013, targeted well over a third of a million Americans, and successfully fleeced over 3,000 of them out of nearly $16 million.     

As with all effective scammers, much of their success lies in their ability to come off as instantly credible. To make communications seem as though they’re official-looking emails (although the scam most at issue now is not email-based) and official-sounding phone calls does not require much more than an attention to detail and a little advance practice, and for the taxpayers receiving them, they are caught entirely unawares.

In the effort to keep yourself safe, perhaps the first, and most important, piece of information of which to be mindful is that the IRS will not make its first communication to you in the form of a phone call. While most people have not run afoul of the IRS in any serious fashion, many have been contacted over the years about minor issues, like discrepancies with Social Security numbers (something that happens a lot after changes in marital status, for example), small underpayments of taxes based on miscalculations made in filings, and the like. In no case, I’ll wager, has anyone in that position ever received his contact from the IRS by telephone. The IRS does not call out of the blue, and if you are genuinely communicating with the IRS by telephone about a particular issue, it’s only after several back-and-forth exchanges by mail have brought the matter to that point. As for email exchanges, the IRS simply does not communicate in that manner with taxpayers.

Accordingly, part of being aware, and benefitting from that awareness, is to train oneself to remember that if you do receive a phone call out of the blue from someone purporting to be an IRS representative, your first reaction should be to disbelieve the legitimacy of the call. Again, this will be a tough thing for many to do, so accustomed are we to accepting what others tell us, and more so when the person on the other end of the phone is overtly representing himself to be someone of the stature of an IRS representative. However, should you receive a communication…phone call or email…that is supposedly from the IRS, the single best way to handle it is to immediately disengage from it, and contact the IRS separately yourself. This is how I suggest handling all unusual communications from any business or organization; just hang up, get up from your computer, whatever…and separately contact whoever it is to find out if you have an outstanding issue. The fact remains that as ridiculous as we know the IRS to be in how it operates, at times, they simply do not call taxpayers unexpectedly, demanding payment and threatening jail time – they just don’t…so don’t you fall for any such scam; just hang up the phone quickly, and if you have any questions about your current status with the IRS, call them separately at 800-829-1040, Monday through Friday, anytime between 7 a.m. and 7 p.m. in your local time zone.

The information contained here is for general information purposes only. The Financial Writer blog and Bob Yetman disclaim responsibility for any liability or loss incurred as a consequence of the use or application, either directly or indirectly, of any information presented herein. Nothing contained in this article, or any other article featured at this blog, should be construed as a solicitation or recommendation to engage in any financial transaction. You should seek the advice of a qualified professional before making any changes to your personal financial profile.

The IRS Audit Rate Continues to Drop – What Does that Mean for You?

According to data recently revealed by USA Today, the rate at which the IRS conducts audits of individual taxpayers sunk to a ten-year low as of 2014. Now at a measly .86%, the relatively few number of audits conducted presently is welcome news to taxpayers, but does it mean that there’s no reason for anyone to be concerned about finding themselves on the receiving end of an audit notice? Not at all. For one thing, the audit rate may be low, but it is certainly not zero, and never will be. For another, despite the lower audit rate, the behaviors of those taxpayers which make them likelier candidates for audit selection remain the principal determinants for the IRS in who ultimately comes to be under its thumb, so it’s worth a closer look at some of those so that you remain aware of the red flags that can prompt Uncle Sam to come calling.

High Income. Although the overall audit rate is under 1 percent, it is higher for those folks who make at least $200,000 per year, and higher still for those who earn at least $1 million annually – just over 10 percent. Admittedly, there isn’t much you can do (or would likely want to do) about the increased audit risk that comes with making a lot of money, but if you do find yourself making a fair sum, it is a good idea to arrange your tax-related affairs in such a way that you expect to be audited at some point. Hopefully, if you have a good tax preparer, he or she is taking good care of you and doing the things on your behalf necessary to ensure you will be bulletproof at tax time; if you are not sure that such is the case, don’t be shy to mention that you are aware that higher incomes receive more audit attention, and ask if there is anything more you should be doing to ensure you will emerge unscathed should a dreaded audit notice appear.

Large Charitable Deductions. One of the ways in which people seek to lower their anticipated tax bills is by making sizable charitable deductions. You have to be careful about this, however, because if the dollar amount of the total deductions you claim in a given year is high in comparison to the amount of money you earned, that apparent disparity can stick out like a sore thumb to the IRS. While there can be a number of good explanations as to why you happened to have a high value in donations one year, just remember that the mere fact you had them may pique the curiosity of the government, so you should maintain excellent records to back up the giving that you did. If the total amount of the deductions you’re claiming for noncash donations is more than $500 for the year, you have to complete Form 8283, so while you want to be sure you’re doing that, be especially mindful of the value you’re declaring on behalf of the donated goods; remember that despite whatever personal value you see them as having, or whatever you originally paid for them, the value of those goods as donated items has to do only with their worth in their current condition, in the present-day market. If you paid $500 for a suit several years ago, but that suit will sell at the local thrift store for around $75, the value you should be claiming should much closer to the $75.

Self-employed. The self-employed remain juicy targets for the IRS because of the substantial number of deductions normally claimed by a small businessperson. If you are self-employed, while it is nice to hear of declining audit rates, you cannot let your guard down, because whatever resources the IRS does have to apply to audits will be used to audit your professional demographic at a higher-than-average rate. The IRS established long ago that the self-employed are especially guilty of underreporting their income, while being far too generous with the deductions claimed, so they will always have the self-employed in their crosshairs. Again, you will always be better off, from the standpoint of remaining as audit-proof as possible, if your deductions look “income-appropriate;” high deductions for meals and travel come with enhanced risk, to be sure. Whatever you claim, make sure to keep excellent records – don’t allow yourself to get lazy about that. Other deductions that tend to register prominently on the IRS’s radar include the business use of a vehicle, as well as that claimed for a home office. As a matter of fact, some tax preparers will actually discourage clients from claiming the home office deduction, because it’s considered such a bright red flag by the IRS. That doesn’t mean you should not claim it if it legitimately applies…but understand, up front, how it raises your profile.

In the end, the news that the IRS is struggling to maintain the staff and resources necessary to perform audits is surely welcome to just about all of us. However, it would be a mistake to see yourself as having no chance of being audited, particularly if your personal profile reflects one or more of the higher-risk characteristics noted here. My advice is that you change nothing in the way of what has (hopefully) been a long, solid history of diligent recordkeeping and sound tax preparation, and simply treat the present reality of fewer audits as a bonus to all of your hard work at keeping your financial ducks in a row. 

The information contained here is for general information purposes only. The Financial Writer blog and Bob Yetman disclaim responsibility for any liability or loss incurred as a consequence of the use or application, either directly or indirectly, of any information presented herein. Nothing contained in this article, or any other article featured at this blog, should be construed as a solicitation or recommendation to engage in any financial transaction. You should seek the advice of a qualified professional before making any changes to your personal financial profile.

 

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