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Internal Revenue Service Archives

IRS contract workers delinquent on taxes

People who work for the Internal Revenue Service in Massachusetts and at its other locations around the country are required to pay income taxes like everyone else. Unlike other federal agencies, the IRS requires its all of its workers to be in full compliance by timely filing their returns and either paying in full all amounts owed or entering into approved installment arrangements. However, a report recently released by the agency's inspector general showed that nearly 700 contract workers owe a combined total of $5.4 million in taxes. Over half of those are supposedly ineligible to work for the IRS because they have not enrolled in an installment plan to get them caught up.

New IRS laws to impact restaurants

Restaurants in Massachusetts will be having to deal with new rules regarding the way that the Internal Revenue Service handles some tips for waiters. The IRS will now classify a number of waiters' tips as taxable income to the restaurant instead of considering them to be self-reported tips. Under this new policy, according to a recent article in the Wall Street Journal, tips that are automatically included by restaurants in the bill for large tables will now be considered taxable service charges.

Powerball winners share a $448M jackpot with the IRS

Three lottery players have hit the Powerball jackpot and will share a $448 million prize. All three of the winners purchased tickets and picked five numbers between 1 and 59, as well as a Powerball number from 1 to 35. The jackpot, which was expected to be $425 million during the final days, grew by $23 million in the final hours.

A proactive stance can help when short on money for taxes

Not having enough money to pay your taxes can be intimidating, but ignoring the matter should be even more so. Unfortunately, some Massachusetts residents have the mistaken notion that if they do not have the money to pay their taxes, they should not file a return. Nothing could be further from the truth. Failing to file a return along with failure to pay taxes when due can result in a myriad of consequences beyond the usual penalty fees and interest. Bank levies and asset seizure are a couple of examples of what can happen when taxes that are due and payable are not reported or paid in a timely fashion.

IRS subjected to criminal investigations

Massachusetts residents may be interested in a recent IRS criminal probe, which followed allegations that the agency unfairly targeted conservative groups seeking tax-exempt status. The IRS admitted that its employees used names containing phrases like "patriot" and "tea party" to decide whether or not to force specific organizations to undergo extra reviews. The White House and the Attorney General's office have since condemned these practices.

IRS orders information about foreign bank accounts

Massachusetts residents who possess offshore accounts would do well to follow an ongoing case in which a U.S. District Court judge most recently instructed five unidentified individuals to reveal confidential information about their finances. The judge ordered these taxpayers to divulge information about their foreign bank accounts to a grand jury to potentially use in a federal case against them.While some may argue that the judge had no authority to deprive individuals of their right to avoid self-incrimination, the judge said that individuals do not have the right to refuse disclosure of their bank records to the grand jury. The judge also argued that taxpayers cannot avoid being accountable because they used offshore accounts to try to hide assets. District courts in three other jurisdictions have also ruled that information related to a foreign bank account is not protected by the assertion of a Fifth Amendment right against self-discrimination. Furthermore, these courts have held that information pertaining to foreign bank accounts is governed by the federal government's "Required Records Doctrine."

Don't plan on getting to talk to the IRS this tax season

While the IRS is typically difficult to reach immediately after Presidents' Day because many Massachusetts residents have either filed their taxes by this time or they may be peppering the agency with questions regarding tax returns, the late start of the 2013 tax season may make this feat nearly impossible. Over the years, the IRS has become increasingly difficult to reach during tax season. According to the Taxpayer Advocate Service, more than 100 million people contacted the IRS in 2012. Out of this number of people, more than 30 percent of them were never able to reach a customer service representative. For those consumers who were able to reach an actual agent, the average wait time was 17 minutes in 2012, a nearly 50 percent increase over the average 12-minute wait in 2011. Further, the wait time in 2012 was more than three times the average wait time that consumers experienced in 2007.

Keep clean records to potentially avoid an IRS audit

Being audited may well top the list of taxpayers' worst nightmares. This process can easily consume a person's time, energy and money as it can be extremely frustrating to deal with the IRS for months on end. Fortunately, there are a few steps that one can take to potentially avoid an audit. For individuals who own a business, it is important that they keep all business and personal expenses separate. If an action was taken for both personal and business purposes, such as taking a trip or having lunch with a friend who is also a client, it is probably best to keep these expenses listed as personal ones. It is also important that one does not list a hobby as a business. Keeping well-organized records is also vital toward avoiding an audit. Before making any deduction, one should ensure that he or she has the receipt or other evidence to support it. Keep all of these documents together with each year's tax return.

IRS may gain greater access to tax documents

Recent court rulings may allow the IRS to have access to Massachusetts consumers' tax documents that were previously privileged. While the old rules allowed the IRS to access information from accountants regarding their clients, information given to attorneys was typically considered part of the attorney-client privilege. Accountants did have a loophole for keeping information confidential and out of the possession of the IRS when a tax lawyer hired an accountant, thus making this information part of the attorney-client umbrella. However, the IRS has filed several lawsuits that are changing the rules regarding these privileges. In a Ninth Circuit case, the court ruled that an appraisal could not be kept from the IRS by the taxpayer, lawyer and accountant. In another case, the court required a lawyer and accountant to disclose their discussions.

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