kcjenkins

ONCE AGAIN, JUST NOW Sorry, you don't have permission for that! [#103128] The administrator has limited the number of new posts you can submit within a short time frame. Please wait 9 seconds before replying or posting a new topic. Need Help? Our help documentation Contact the community administrator

Estate Liable for Late-Filing Penalty Despite Timely Payment of Tax Washington, D.C. (July 9, 2014) By Roger Russell A federal appeals court has upheld a penalty assessed against the estate of a deceased man because the executor filed the return late, even though estimated taxes had been paid. The full assessed penalty is mandatory unless advice given by counsel establishes reasonable cause for not filing the return. While an estimated tax payment more than covered the taxes due, there were two uncertainties material to calculating the proper amount of tax due under Section 6651(a)(1) of the Tax Code. The principal one was whether and when the widow of Morton Liftin would become a United States citizen so that the marital deduction could apply. The second uncertainty involved litigation with the widow relating to her rights under a prenuptial agreement and the decedent’s will. Although the executor, the decedent’s son John Liftin, is an attorney, he retained his former law partner for assistance in administering the estate. The estate received an automatic six-month extension of time to file and pay, and the IRS granted the extension on Jan. 16, 2004. The new deadline to file the return and pay the estate tax was June 2, 2004. Neither of the two uncertainties had been resolved by that date. In a split decision, the U.S. Court of Appeals for the Federal Circuit affirmed the Court of Federal Claims determination that it was reasonable for the executor to rely on counsel’s advice as to waiting for the widow to obtain citizenship. However, it was unreasonable to further delay filing well beyond the time she obtained citizenship until the other “ancillary matters” were resolved. Therefore, the court upheld the late filing penalty. Judge Pauline Newman, dissenting, noted that the $877,300 estimated tax had been paid two years earlier before any late-filing penalty could accrue. “Nonetheless, the IRS levied the same 25 percent late-fling penalty as if no payment of estimated tax had been made. My colleagues on this panel agree with this outcome.” “With all respect to my colleagues, they are incorrect,” Judge Newman stated. “The role of the estimated tax payment is to avert the imposition of a penalty. No statute or regulation provides that the nonpayment penalty accrues for the period after full payment of the estimated tax. The statute explicitly bars such assessment. It is incongruous to levy a penalty for late payment of a tax that had been timely and fully paid two years earlier, before the penalty period accrued.”

No idea at all. Tonight I added a new thread in Politics, and it duplicated. I saw that and deleted the second one. But I have not changed anything, same laptop I've used over a year, no new software, etc.

Well, put it back any time you think it's needed. And thank you.

I don't think many clients would ever consider that.

I agree with Jack. While it is not really NECESSARY, since there is no change in the year being amended, and the IRS says no amendment is needed if no change is made, in this case I would. The reason is that this is the simplest way to avoid a CP2000 and a bunch of back and forth to explain it later. So it's the best thing for the client, making a clear paper trail for everyone. The charge for such a simple 1040X should be less than the cost of the time to deal with a confused IRS several years down the road.

10 YEARS? Your original post said he skipped 3 years?

Washington, D.C. (July 7, 2014) By Michael Cohn Better management of correspondence audits by the Internal Revenue Service could improve tax compliance and reduce the burden on taxpayers, according to a new government report. The report, from the Government Accountability Office, found that the notices sent by the IRS during correspondence audits have misled many taxpayers by providing unrealistic time frames on when the IRS would respond to their correspondence. For example, the notices stated that the IRS would respond within 30 to 45 days when it has consistently taken several months to do so, according to the GAO. As of early 2014, IRS data showed that the agency had not responded in a timely manner to more than half of the correspondence that taxpayers sent to the IRS. In many cases, tax refunds are held up until an audit is finished. According to IRS tax examiners, notices caused taxpayer frustration and generated unnecessary taxpayer calls to IRS. “The taxpayers cannot understand why IRS would send a letter out with such unrealistic time frames and there is no acceptable way we can explain it to them,” said one tax examiner who was interviewed by the GAO in a focus group. “That is why they are so frustrated. It puts us in a very awkward and embarrassing situation…. I try to gain control of the situation and tell the taxpayer I understand the frustration so that he will calm down so we can make the phone call productive, but this takes time and wastes time for both the taxpayer and me.” Examiners who answer such calls told the GAO they do not know when the IRS will respond. The IRS uses correspondence audits, which are done by mail and constitute the majority of IRS audits, to resolve disputes over tax return reporting of relatively simple issues. Tax observers and the IRS itself have concerns that these audits impose unnecessary burden on taxpayers or costs on IRS. For audits closed in fiscal year 2012, correspondence audits accounted for 1.1 million of the 1.5 million audits that year, or about 76 percent, and approximately $9.2 billion of the $15.3 billion, or 60 percent, in recommended additional taxes due and refunds disallowed by the IRS. The IRS recently revised the notices, the report pointed out, but the revisions were not based on analysis of historical data nor did the IRS have a plan to analyze data to ensure it is responding timely per revised notices. The IRS said it does not have information to determine how the correspondence audit program affects its strategic goals for compliance, taxpayer burden, and cost. The IRS also said it has not documented objectives for the program. While the RS has many program measures such as how many audits are closed annually, they are not linked to the compliance, burden and cost goals. Thus, it is not possible to tell whether the program is performing better or worse from one year to the next, the GAO noted. Beyond those measures, the IRS also did not have guidance on how IRS managers were to use program data to make decisions. In some cases, the program data being used are incomplete, the GAO pointed out. For example, the IRS did not track data on the number of times a taxpayer called the IRS or sent documents. “Using incomplete information limits insights on the additional revenues identified from IRS's audit investments and on how much burden the audits impose on the taxpayers,” said the GAO. In 2012 IRS began its Correspondence Examination Assessment Project, or CEAP, to reduce taxpayer burden. With a contractor, the IRS identified five problem areas involving communications with taxpayers, the audit process, expedited audit resolution, resource alignment, and program metrics. CEAP has 19 improvement efforts finished or underway. However, the IRS has not defined the intended benefits and tracked the actual benefits. As a result, it will be difficult to determine whether the efforts successfully addressed the problems, according to the GAO. The CEAP contractor recommended that the IRS develop a tool for better balancing resource allocation between, for example, telephone calls and reviewing correspondence. IRS officials said they would consider the recommendations but did not have a specific plan or timeframe. Thus, it will be difficult to hold IRS managers accountable for ensuring that the recommendations are completed in a timely manner, the GAO noted. The GAO recommended that the IRS collect and analyze data on whether it is responding in a timely way in its revised audit notices, and establish program objectives as well as measures that reflect the objectives and strategic goals. The IRS should also document its guidance for making decisions with program data, as well as track previously unused program data to provide more performance insights, the report suggested. The GAO also recommended that the IRS document the intended and actual benefits of its audit improvement efforts, and develop a plan and timeline for implementing the contractor's recommendations. In response to the report, the IRS described the actions it plans to take on all the recommendations. However, the IRS pointed out that it is operating under budget constraints due to budget cuts in recent years that have affected its enforcement efforts. “It is important to note that reductions in the IRS budget have stretched enforcement resources across the agency,” IRS deputy commissioner for services and enforcement John M. Dalrymple wrote in response to the report. “In fiscal 2014, the IRS budget has been reduced by nearly $850 million compared to fiscal 2010. During the same period, the IRS has seen the number of key enforcement personnel drop by 3,000 positions.” Fred Slater, CPA, a partner with MS 1040 LLC in New York City and a tax practitioner for businesses and individuals for over 25 years, pointed out that budget cuts at the IRS are affecting service and audits. “The training budget of IRS personnel is down by 83 percent,” he said. “Over the past five years, there is no professionalism in how the IRS audits. If that is not enough, the IRS is closing a key office in midtown Manhattan. There are 10 months before the next tax season and I challenge the IRS to make positive changes toward better service.” Slater pointed to IRS audits done for deductions on Schedule C, in particular. “The majority of these audits result in more penalties and interest for the taxpayer only because the group the IRS is auditing is usually unrepresented during the audit,” he said. “Auditors follow a strict (no variation allowed) set of rules. As a result, reports are issued every 45 to 60 days disallowing everything for no reason other than that the agent must show they are working the case. It wastes paper, creates animosity and destroys morale.” Slater added that service from the New York State Tax Department is just as bad. “New York State wants their money and they do not care if they are not entitled to it or not,” he said.

There are bound to be SFRs so I'd want to see those first, as a starting point, before deciding how/whether to proceed. Also, if he can't "afford" a decent retainer up front, I'd send him down the road, because this mess THAT HE MADE is going to take a lot of time to clean up.

Odd, then, it's told me 14 seconds at least once. It just started this week.

How well I remember these days with my three boys......

This is not one of mine, but just so cute I had to share it.

Did it again! Actually, the new thread WAS created each time. Weird

I'll try it in a bit, Eric. Note that it has nothing to do with the number of new posts, because it happened with my very first post.

Eric? This is what I get, although the number of seconds mentioned varies. The thread is still created, btw. To be clear, I get this when starting a new thread, every time, even if it's my first activity on the board that day.

Well, while you're at it, can you tell me why, for the last several days, ANY time I try to start a new thread, even the first one, it tells me I've got to wait xx seconds, as I'm not allowed to start too many too soon?

Can you get any info from ADP?

The IRS issued Notice 2013-54 on September 13, 2013, eliminating the opportunity for employers to reimburse most medical costs in all but limited circumstances. The change is effective for plan years beginning on or after January 1, 2014. The notice eliminates an employer’s ability to use a stand-alone medical reimbursement plan, health reimbursement arrangement (HRA), or other tax-favored arrangements, such as a cafeteria plan, to help employees pay for individual health insurance policies or other out-of-pocket medical costs. The notice does this by pointing out that these arrangements would fail to satisfy the Affordable Care Act’s (ACA) market reform provisions requiring no dollar limits on essential health benefits and no-cost preventive health services. For example, the market reforms prohibit any limit on certain essential health benefits. But stand-alone Section 105 plans limit the amount for which an employee may seek reimbursement. The sanction for violating these rules is a punitive $100-per-day, per-employee penalty, or $36,500 per participant per year — effectively a total prohibition. Section 105 plans are still permitted for ancillary benefits such as dental and vision coverage, long-term care, and disability coverage, because these are not part of essential health benefits. An employer may still provide pre-tax dollars to the employees in a manner that is exempt to the employee for these reimbursements. The requirement for unlimited covered benefits does not apply to one-employee medical reimbursement plans. Businesses that have only one employee may continue to offer this benefit. In a very small business in which a family member is the owner’s spouse, the medical reimbursement plan may cover the spouse and dependents of the employee, and thus include the business owner. In this manner, medical expenses, in addition to medical insurance, can be provided on a tax-deductible basis. But Section 105 plans must meet nondiscrimination rules, so these one-employee plans are only practical where there are no other regular employees in the family business. A Section 105 plan that is coordinated with insurance coverage, so that the combined arrangement provides an ACA-approved group health plan, is permitted if the benefits provide coverage that meets the ACA market reform requirements of unlimited benefits and no-cost preventive services. But a key condition must be met: Each participant in the medical reimbursement plan must be enrolled in the health insurance plan. These restrictions regarding Section 105 plans are summarized in IRS Notice 2013-54. Warning, reading this notice may cause illness and/or suicidal thoughts! [my warning] We do not know enough details to know whether this individual's W-2 is correct or not. Jack is assuming that it's not, which is reasonable, but since it is still possible I'm basing my 'could be' on the fact that ADP usually errs on the cautious side, and we don't know any real details. Hope this helps, Rich.

Then most likely they have set up a proper 105 Plan.

It's good that it did that. In fairness, tho, if ATX cost as much as ProSeries, they could add those extra diagnostic steps too. I have to question whether the extra cost is worth it, for most experienced preparers, tho.

The 105 plan is still allowed, but it has to be done right. You must have an actual 105 Plan set up, you can't just reimburse the workers and call it non-taxable. Although Treasury Regulations do not specifically require that accident or health plans be in writing, a number of court decisions have made it clear that it is imperative that a corporation, by a resolution adopted by its Board of Directors, formally establish certain rules and regulations governing payment of benefits and that these rules be communicated to the employees involved as a definite policy of the corporation. Without such a written plan, deductions can be lost, premiums may become taxable income, and benefits can lose their tax shelter. Presumably, all medical reimbursement plans will need to be in writing in order to satisfy the IRS that nondiscrimination requirements have been met. Also, Title I of the Employee Retirement Income Security Act (ERISA) requires that a written instrument establish Employee Welfare Plans. And any plan providing medical, surgical or hospital care, sickness or accident benefits, or disability benefits is an Employee Welfare Plan and is subject to ERISA requirements. Most commonly used by self-employed, they can be used for employee reimbursement. There are rules as to non-discrimination and to the percentage covered, etc. http://www.law.cornell.edu/cfr/text/26/1.105-11 http://www.benefitplans.com/Employee_Benefits/Sec_105/Sec_105_intructions.asp