Go Audit Yourself

          Take any Shakespearean play of the tragedy variety and you already know the outcome. At the height of his treachery the villain is forced to confront his own humanity and to perish with friends and loved ones shedding a questionable tear. In 2016, the Internal Revenue Service started a program of on line self-audit. It was actually an online audit program where individual taxpayers were able to use an online portal to communicate with the IRS. The program allowed documents to be attached and answers to questions posed by examiners to be posted. Imagine the cost savings to the IRS in this kind of program. Add this to the service’s own data mining which will expose suspicious activity and identify cases for possible audit and you can almost see the future. This program was a mere test of the online audit concept. Surprisingly, many taxpayers said they were satisfied with the program. They have course could’ve been the taxpayers who gave the right online responses.

NJ Amnesty Program

         Everyone is in the data mining business these days. The state of New Jersey is no different. In the last several months its computers have been whirling to create a list of taxpayers that could possibly owe more tax or tax returns. Then unaided by human eyes the machines themselves sent out notices to taxpayers declaring that “our records show you owe taxes or need to file delinquent returns.” Without even a touch of a button, taxpayers across the state received these notices whether they were warranted or not. Just think about it, what a great way to raise revenue by making taxpayers think the state is on to them. Of course I’m talking about the New Jersey Amnesty Program. And if you haven’t read about it in the paper, seen it online or slapped on the sides of public buses you have probably been residing on the moon. Like the flyers you get from Kohl’s or Macy’s it was almost like a one day sale. Under the Jersey plan, which ran for 62 days from November 15 to January 15, the tax division was willing to waive penalties and 50% of the interest for eligible taxpayers who enroll in the amnesty program… and pay up. Naturally the suggestion is that if taxpayers don’t come forward themselves they soon will be found in the state audit grinder. That of course remains to be seen. If you are just getting wind of this program go to tax amnesty.nj.gov to find the elaborate application guidelines and FAQs. You know if you have been running from the tax authorities whether state or federal it may make sense to come forward anyway even if you are outside the amnesty program. These tax agencies are going to get a lot better in detecting tax violators of all kinds as data mining becomes a recognized national sport. As you are well aware, privacy is dead.

Forgotten Ocean Grove

My new book" Forgotten Ocean Grove " is for anyone curious about New Jersey's most interesting seaside resort. It will be available on Amazon.com and in local bookstores. It's not your grandma's history book with 147 mini-stories about " God's Square Mile at the Jersey Shore" from the past to the present.

The New 1040 Schedule A

        The IRS is preparing its revised Form 1040 Schedule A for taxpayers to file by next April. In that new form medical expenses will continue to be deductible which exceed 7.5% of adjusted gross income. The deduction for state and local taxes is limited to $10,000 for Schedule A itemizers ($5000 if filing separately). Charitable contributions continue to be deductible. Personal casualty losses have been eliminated except if in a presidential declared federal disaster area. All of the personal miscellaneous itemized deductions which were subject to 2% adjusted gross income have been eliminated. The result of all this is that fewer taxpayers will be itemizing deductions for tax year 2018. The IRS has also made clear that all attempts by the individual states to circumvent the SALT limitation through the use of charitable deductions and other contrivances will not be allowed. The many high tax states have not at this time given up on this issue.

Love Me Love My Dog

        The dog is man’s best friend. Our country is becoming increasingly dog friendly. Dogs are now finding their way onto airplanes, into restaurants and in some cases supermarkets. Many states have laws that prevent pet owners from bringing their furry little friends with them into many places. But then there is the very special service dog. In some cases these dogs exhibit more compassion than many human beings including at least half of the US congress. The Internal Revenue Service treats the service dog who assists a visually impaired person or others with physical disabilities and its required veterinarian care as an allowable medical deduction to the owner. The amounts paid to purchase such an animal plus food and grooming can be deducted on schedule A subject to the 7.5% of adjusted gross income limitation. An owner of a support animal who is not so impaired must show that it is primarily for medical care to relieve a mental disability or illness.

The IRS Can Drive You Crazy

         Let’s face it, the IRS can drive you crazy. I don’t mean just us tax professionals, after all we get paid for the aggravation. You know some of us actually enjoy it. But when a client gets notice from the Internal Revenue Service even the toughest of them begin quaking in their boots. When representing these taxpayers of course the first course of action is to set forth a plan hopefully to negotiate an amicable conclusion. As a tax court judge once told me a good settlement should make both parties unhappy. But sometimes the IRS just won’t do it your way and for those cases referral to a bankruptcy attorney makes the most sense. Bankruptcy stops the IRS in its tracks to enforce collection. It can no longer badger the taxpayer by mail or any other type of communication. In that sense it is the same as any other creditor. What redress exists if the IRS doesn’t play by this rule? In Hunsaker (9th circuit) the taxpayers admittedly owed taxes but were forced to file bankruptcy. Notwithstanding this filing the IRS continued to send nasty demand letters which threatened immediate enforcement action. The taxpayers sued the IRS for emotional distress and a bankruptcy court ruled the IRS would have to pay the taxpayers… $4000. The District Court in late 2016 reversed on the grounds of sovereign immunity. But this Court of Appeals determined the District Court erred in dismissing the couple’s claims and sent the case back for a decision on the merits. Certainly this case is an aberration, but it does represent creative thinking on the part of their attorney.

The New Man at IRS

1      Charles Rettig has become the new Commissioner of Internal Revenue. He may be the first from the other side of the fence. That is the side most of us are on. He spent 35 years representing clients before the Internal Revenue Service, the tax division of the Department of Justice and numerous state taxing authorities in federal and state court litigation and appeals. You name the board and he’s been on it. He’s worked with IRS in an advisory capacity. His credentials include a certified specialist both in taxation law, estate planning, trust and probate law. He is admitted in California, Hawaii and Arizona. He is no stranger to the bar association having given numerous presentations to private practitioners. He has also done his share of work representing taxpayers in foreign and domestic voluntary disclosures and sensitive civil tax examinations where substantial civil penalty issues or possible assertions or fraudulent conduct may arise. You can read more about his accomplishments at the website of his firm: Hochman, Salkin,Rettig,Toscher and Perez. There is no doubt in my mind that Mr. Rettig knows where the bodies are buried. He is one of us… for better or worse.