James W. Rahmlow, The Daily Record Newswire
Possibly as a casualty of the continued reduction in the IRS budget, examination rates decreased across the board, the IRS recently announced in summarizing their fiscal 2013 statistics. The amount of revenue collected from enforcement actions actually increased from $50.2 billion to $53.35 billion, even though the overall audit coverage rate decreased by .07 percentage points.
In the individual tax area, it appears that actual field examinations conducted actually increased for individuals with incomes of $200,000 or higher. It is contemplated that a possible reason for this is that these taxpayers may be more likely to have offshore previously undisclosed assets, a subject of great IRS enforcement effort.
For corporations, it appears that large corporations with assets of $250 million or more were the agency’s focus. The audit coverage rate increased to over 33 percent, an approximately 4.5 percent increase over fiscal 2012.
Combatting identity theft and refund fraud a major priority for IRS
In a recently issued Fact Sheet 2014-1, the Internal Revenue Service announced that it continues to grow its capabilities to detect and deter both identity theft and refund fraud. For the 2014 filing season, the IRS has assigned more than 3,000 IRS employees to work on identity theft-related issues.
These employees are working to prevent refund fraud, investigate identity theft-related crimes and help taxpayers who have been victimized by identity thieves. As a result of already in-place controls, the IRS feels that it has stopped 14.6 million suspicious returns and protected over $50 billion in fraudulent claims from 2011 through November 2013.
For 2014, the IRS is concentrating on increasing the number and efficiency of identity theft filters that are used to single out potentially fraudulent returns for further investigation.
In the same release, the IRS notes that victims of identity theft now have an Identity Protection PIN, a six digit number that is assigned annually to victims when filing their federal return that shows that a particular taxpayer is the rightful filer of the return. Additionally, an IRS Identity Protection Specialized Unit is available at 1 (800) 908-4490 for victims to obtain assistance and resource information for resolving tax issues.
Another country signs up for FATCA
The U.S. Treasury recently announced that an intergovernmental agreement has been signed between the U.S. and Italy to assist in the exchange of information under the Foreign Account Tax Compliance Act. The agreement is a Model 1 agreement and continues the worldwide push for financial transparency.
Applicable federal rates and adjusted AFR
In Revenue Ruling 2014-6, the IRS issued its short-term, mid-term and long-term applicable rates and adjusted applicable federal rates (adjusted AFR) for February 2014. Below is a summary of those rates.
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Short Mid Long
Term Term Term
Applicable
Federal
0.30% 1.95% 3.50%
Adjusted Applicable
Federal Rates
0.30% 1.55% 3.50%
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New IRS commissioner sworn in
On Jan. 6, John Koskinen was sworn in as IRS commissioner replacing the role previously served by Principal Deputy Commissioner Daniel Werfel. The term expires on Nov. 12, 2017.
The new commissioner promised transparency in all of the agency’s dealings with taxpayers and lawmakers. In his remarks, Koskinen specifically referenced applicants for Code Sec. 501(c)(4) organizations, the agency’s recent scandal over conservative groups seeking tax exempt status. He also acknowledged that a top priority for him will be a smooth 2014 filing season.
IRS posts videos on YouTube-type sites
In early January the IRS announced that it released a series of videos designed for individuals to help them prepare and file their 2013 personal tax returns. The videos cover a variety of topics including filing requirements, filing status, where to obtain tax forms and how to avoid tax scams. The videos are in English, Spanish and American Sign Language.
Required Employer Identification Number
In a recent advice memorandum issued by the IRS Chief Counsel, it was determined that a now disregarded entity (due to single ownership status) that previously had been a partnership, should use the originally assigned partnership Employer Identification Number to report and pay its employment tax obligations. It was determined that there was no need for a new EIN and that a Social Security number was also not acceptable in this case as an EIN.
IRS announces maximum upper compensation limit for qualified plan integration level
In Revenue Ruling 2014-3, the IRS announced that the maximum level of covered compensation that may be used in an offset defined benefit plan is $117,000 for 2014. This amount is adjusted annually.
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James W. Rahmlow, CPA, is a partner with Mengel, Metzger, Barr & Co. He can be contacted at jrahmlow@mmb-co.com.
