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If You Owe Back Taxes, Try Making the I.R.S. an Offer By CHARLES DELAFUENTEFEB. 14, 2015 The Internal Revenue Service has made it easier — though by no means automatic — for delinquent taxpayers to cut the amount they owe on back taxes. The agency has a program it calls an “offer in compromise,” which develops payment plans for taxpayers who can demonstrate that they face problems involving ability to pay, fairness or liability. The burden of proof rests with the taxpayer, who needs to make a payment offer, which the agency is free to reject. While it is easier than it once was to have an offer accepted, filling out the forms is no picnic. Still, the acceptance rate for taxpayers’ offers, which was under 25 percent as recently as 2010, rose to 42 percent in 2013, according to the I.R.S. People who demonstrate that their tax bills cannot be collected must show that they are, to put it gently, financially challenged. To receive such an agreement, the taxpayer must acknowledge a tax liability and demonstrate an inability to pay all of it, saying, in proper bureaucratic form, “Look, you can’t get blood from a stone.” Sarah Knight, a tax accountant in Denver, says the hoops the I.R.S. sometimes makes applicants jump through can be “painful.” Credit Brad Torchia for The New York Times The I.R.S. does not break down offers by type, according to Anthony Young, a spokesman. Don’t count on having your offer accepted. But when the I.R.S. does agree to it, it may amount to “the deal of a lifetime,” says Todd S. Unger, a tax lawyer in Mount Laurel, N.J. In a similar vein, Sarah Knight, a tax accountant in the Denver office of CBIZ MHM, a business services company, says when clients’ offers are accepted, “we get the monkey off their backs.” But the hoops the I.R.S. sometimes makes applicants jump through can still be “painful,” she added, and the process can take time, because the agency has up to two years to decide whether to accept an offer. “When the process takes 12, 18, 24 months for a relatively straightforward offer, it’s challenging,” she said. If the agency does not meet that 24-month deadline, the offer is deemed accepted. Until then, the I.R.S. can look at whether a taxpayer’s ability to pay has improved since the offer was made, Ms. Knight added. The easing of agency criteria for such offers has come in the last few years. In 2012, the I.R.S. changed the way it calculated how much income has to go to repayment. Last year, the formula for figuring the worth of assets — which must also go toward a payment of back taxes — was liberalized. “There’s probably never been a better time” to make such an offer, Mr. Unger said. He said he saw reasonable offers, particularly ones in which the government was forgiving less than $50,000, being accepted “pretty consistently.” The I.R.S. does not offer a golden formula that pegs a successful offer to a percentage of assets or income, but says in its booklet, “Offer in Compromise,” that “the ultimate goal is a compromise that suits the best interest of both the taxpayer and the I.R.S.” The key seems to be offering what the taxpayer can pay, not how much is owed. Even then, employees at some I.R.S. offices may have different outlooks from those at others, and reject more offers, hoping the debt may be collected in the future, some practitioners said. The fairness plea, on the other hand, can be made even when there is no doubt that all of the past-due tax could be collected from assets or future income, but that doing so would be unfair. Taxpayers seeking that relief must explain why “requiring full payment would cause an economic hardship or would be unfair and inequitable,” the agency says. They generally must pay a $186 application fee. Along with the forms, taxpayers claiming a hardship or doubt that a debt can be collected must submit some money, as well as the fee, with the application. The I.R.S. requires payment of 20 percent of the amount offered, or, if an installment plan is being proposed, the agency will want the first payment immediately, with subsequent payment continuing while the offer is being reviewed. If the offer is rejected, the I.R.S. gets to apply the amounts paid toward the tax due. But all the payment-with-application requirements are waived if the taxpayer’s current income is no more than 2.5 times the current federal poverty level, which amounts to $29,172 for an individual and $59,628 for a family of four. An offer to the I.R.S. based on doubtful liability hinges on narrow grounds that the amount assessed is incorrect. But the I.R.S. makes clear that an offer in compromise based on doubt about liability is not a substitute for an interpretation or challenge to tax law that would, if decided in the taxpayer’s favor, wipe out the debt. “You must offer more than zero,” it warns, or else consider alternatives to the offer in compromise. The procedure for making such an offer is different from that of the other types of offers. The taxpayer doesn’t need to submit the $186 fee or send any payment. All three kinds of offers are restricted to people who actually filed returns. And offers can’t be made in cases that have been turned over to the Justice Department or to a judgment for unpaid taxes or a court-ordered payment. Tax Day in United States
Many United States residents mark Tax Day as the deadline to file their income tax details to the Internal Revenue Service (IRS). The date is usually on or around April 15. However, this deadline may be extended to accommodate holidays or extreme weather conditions. Tax Day is an important date to remember.©iStockphoto.com/joel-tWhat do people do?A large proportion of residents of the USA have to inform the IRS of all income that they received in the previous fiscal year. Some groups, particularly veterans, pensioners and some low-income families, do not have to file a tax return unless they wish to qualify for certain types of income subsidy. Others may wait until the last moment to file their tax return and pay any money they owe. Some people may find that filing a tax return is complicated, while others may feel that they should not have to pay income tax. In the United States, income tax returns may be filed on paper or electronically. Now, people are encouraged to file a return via Internet as this is efficient and reduces the risk of mistakes being made or documents being lost in the post. Public lifeTax Day is not a federal public holiday in the United States. Schools, post offices, stores and other businesses and organizations are open as usual. Public transport services run to their usual schedules and no extra congestion on highways is to be expected. BackgroundIncome tax was first introduced in the United States of America in 1861. A rate of three percent was levied on incomes above $800 per year and the resulting revenue was used to help fund the American Civil War effort. However, income tax was seen as unconstitutional and the law was repealed in 1872. The idea of a tax on personal income, at a rate of two percent, was reintroduced in the Revenue Act of 1894, but the legal status of this kind of tax was still unclear. In 1913, the "Sixteenth Amendment" to the Constitution of the United States was ratified. This cleared the way for the modern income tax system in the USA. The details of the income tax system have changed greatly since 1913. The top rates of tax have varied enormously and were particularly high during the First and Second World Wars and the Great Depression. Individuals and families with very low levels of income do not have to pay income tax and may receive some subsidy via the tax system. In 1913 Tax Day, or the filing deadline, was fixed on March 1. However, it was moved to March 15 in 1918 and April 15 in 1955, where it has remained since then. If April 15 falls on a Saturday, Sunday or a civil holiday, such as Patriot's Day, the deadline is extended to the next working day. An extension due to a holiday may only affect certain states. In 2007, the residents of some states were granted an extension due to the disruption to public life in many areas caused by a huge Nor'easter storm. In some years in Washington DC, Emancipation Day may be the reason to extend the deadline for filing an income tax return (Tax Day). In 2007, the observance Emancipation Day in Washington DC had the effect of nationally extending the 2006 income tax filing deadline from April 16 to April 17. This 2007 date change was not discovered until after many forms went to print. Name in other languages Name Language Tax Day English Día de la Fiscalía Spanish יום מס Hebrew يوم الضرائب Arabic 조세의 날 Korean Tag der Steuer (Tax Day)German |
Taxpayer Guide to Identity Theft We know identity theft is a frustrating process for victims. We are committed to working with you to resolve your case as quickly as possible. What is taxrelated identity theft? Taxrelated identity theft occurs when someone uses your stolen Social Security number to file a tax return claiming a fraudulent refund. Generally, an identity thief will use your SSN to file a false return early in the year. You may be unaware you are a victim until you try to file your taxes and learn one already has been filed using your SSN. Know the warning signs Be alert to possible identity theft if you receive an IRS notice or letter that states that: More than one tax return was filed using your SSN; You owe additional tax, refund offset or have had collection actions taken against you for a year you did not file a tax return; IRS records indicate you received wages from an employer unknown to you. Steps to take if you become a victim File a report with the local police. File a complaint with the Federal Trade Commission at www.identitytheft.gov or the FTC Identity Theft Hotline at 18774384338 or TTY 18666534261. Contact one of the three major credit bureaus to place a ‘fraud alert’ on your credit records: Equifax, www.Equifax.com, 18005256285 Experian, www.Experian.com, 18883973742 TransUnion, www.TransUnion.com, 18006807289 Close any accounts opened without your permission or tampered with. If your SSN is compromised and you know or suspect you are a victim of taxrelated identity theft, take these additional steps: Respond immediately to any IRS notice; call the number provided Complete IRS Form 14039, Identity Theft Affidavit. Use a fillable form at IRS.gov, print, then mail or fax according to instructions. Continue to pay your taxes and file your tax return, even if you must do so by paper. If you previously contacted the IRS and did not have a resolution, contact the Identity Protection Specialized Unit at 18009084490. We have teams available to assist. How to reduce your risk Don’t routinely carry your Social Security card or any Identity Theft Help At a Glance If your SSN has been compromised, take these steps: — File a Police report — File an FTC complaint — Contact one of the three credit bureaus to place a fraud alert on your account: www.Equifax.com 18005256285 www.Experian.com 18883973742 www.TransUnion.com 18006807289 — Close any financial accounts opened without your permission. — Respond immediately to any IRS notice, according to instructions. — Complete IRS Form 14039, Identity Theft Affidavit. — Continue to your file tax return, even if by paper. Other Resources IRS Identity Protection home FTC Identity Theft home document with your SSN on it. Don’t give a business your SSN just because they ask – only when absolutely necessary. Protect your personal financial information at home and on your computer. Check your credit report annually. Check your Social Security Administration earnings statement annually. Protect your personal computers by using firewalls, antispam/ virus software, update security patches and change passwords for Internet accounts. Don’t give personal information over the phone, through the mail or the Internet unless you have either initiated the contact or are sure you know who is asking. The IRS does not initiate contact with taxpayers by email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels. Report suspicious online or emailed phishing scams to:[email protected]. For phishing scams by phone, fax or mail, call: 18003664484. Report IRS impersonation scams to the Treasury Inspector General for Tax Administration’s IRS Impersonation Scams Reporting. See the main Identity Protection page for more information. |
What If Tax Refund Theft Isn't Really About Refund Theft?
Jim* (not his real name) knows all about the importance of having a secure password for his financial accounts. It’s what he does for a living. He does security work and has spent a lot of his professional life learning how to avoid a hack. So when he signed in to his TurboTax account last week, he was more than a little bit surprised to find that Intuit INTU -0.74%’s system said that he had already filed a tax return. He had not yet filed but he was looking forward to doing so: this year, he expected a sizable refund. The idea that he had already filed must be, he thought, an error. He dialed up TurboTax to find out what had happened. TurboTax, he says, spent a lot of time reminding him about the importance of a secure password – information that Jim didn’t really need. He ended up spending 3-4 hours on the phone with TurboTax, answering questions and trying to find out what he needed to do next. TurboTax didn’t seem to have any answers for him but they did have an important question: did you have insurance through Anthem? Jim did. He was insured through a Blue Cross/Blue Shield account affiliated with Anthem. The successful hack at Anthem affected potentially 80 million Anthem customers, including accounts associated with Anthem Blue Cross, Anthem Blue Cross and Blue Shield, Blue Cross and Blue Shield of Georgia, Empire Blue Cross and Blue Shield, Amerigroup , Caremore, Unicare, Healthlink, and DeCare. It has been called the largest successful hack on an insurer – and possibly in the health care industry. Medical offices, pharmaceutical companies and health insurance providers have long been a target for identity thieves. And those thieves don’t care about your health records but the enormous amount of other data – names, addresses, Social Security numbers, employers and the like – that you easily offer up in the name of health care. As law enforcement told me in 2013, that data is matched to other data. Suddenly, you’re no longer just a random patient named Jane Smith. You’re Jane Smith, SSN 123-45-6789, born on January 1, 1970. You work at ABC Chemicals and you live at 123 Elm Street, Anytown, USA 12345. Your spouse’s name is William. You own your own home and a Subaru Outback. You have a dog named Asta that you take on trips to your favorite vacation spot in the Adironacks. You were born in Virginia. You went to Penn State for college and New York University for graduate school. That data – especially once it’s been matched – is incredibly valuable. Over the years, security experts – and the IRS – have been noting and warning that the health care industry could be vulnerable. Patterns of smaller hacks, probably instituted by criminal rings, have benefited from stolen data, usually orchestrated using someone on the inside. But that’s likely not what happened here. In the case of Anthem, the hack was massive. Potentially 80 million customers had their data compromised, prompting the state of Connecticut to warn taxpayers that it might be to their advantage to file their taxes early. That, security experts say, isn’t the work of a small time hack. It’s not folks working out of a van with stolen laptops or a teenage kid in a basement. It’s bigger. It’s been suggested that the hack could be related to an international crime group or perhaps even an international government. I spoke with experts in tech and security arenas – who, like Jim, wished to remain anonymous – and they’ve suggested that they would not be surprised to find that the hacks were orchestrated by the Chinese government. IP addresses from China have been linked to the Anthem hack though neither the FBI nor Anthem have been willing to confirm the details. It’s also been suggested that Chinese or possibly Russian sources were involved in security breaches affecting TurboTax users. For its part, TurboTax has consistently maintained that it was not a victim of a breach. They also deny that the FBI has made them a target of investigations relating to a data breach. Instead, they maintain that affected taxpayers had their data stolen elsewhere; while TurboTax has not publicly linked Anthem to taxpayer problems, that’s exactly what Jim says they told him. Jim’s situation was, however, a little bit different that what was plaguing other taxpayers at the time. Jim wasn’t worried about his state tax refund, where most of the fraud seemed to be targeted. He was worried about his federal refund. He had been somewhat assured by the fact that most of the TurboTax-related refund thefts making news were for state returns. Maybe, he thought, his federal refund was safe. It wasn’t. Jim called IRS and found out that “his” refund had already been issued. The refund had been loaded onto a GreenDot debit card issued out of state. If you feel like you’ve heard GreenDot linked to IRS before now, you’re right: the widely pervasive IRS phone scam making the rounds for the past couple of years have also involved GreenDot cards. In those cases, taxpayers were pressed into divulging bank information and loading money onto GreenDot MoneyPak cards to pay off alleged tax liabilities. GreenDot has also been in the news this tax season as a partner with Walmart through its Tax Products Group (TPG) to offer Walmart’s new Direct2Cashprogram. GreenDot has been making inroads into the tax refund market for quite sometime now – they even tout how you can get your tax refund on a debit card “faster than a paper check” by visiting their web site. Those debit cards are a double edged sword: since they’re easy to redeem and use, they’re convenient for taxpayers but also a target for scammers who have successfully stolen millions of dollars. While it’s true that identity theft is big business, stealing tax refunds debit card by debit card is tedious work especially if it requires filing returns in a number of individual states. Anecdotally, the thieves didn’t appear to make any real headway on the federal side; IRS has indicated that they have not seen any increase in identity theft linked to TurboTax (perhaps, as they suggest, because they have tougher security screens). Jim is the first taxpayer with ties to both TurboTax and Anthem I’ve spoken with who was able to link the use of the two to a problem with his federal return. Still, it felt very piecemeal. I asked Jim about it. He agreed that targeting state refunds feels like small potatoes in the grand scheme of things. And the scope of this latest hack, Jim surmises, is big. And the target is even bigger – especially if the target was actually IRS. It’s ballsy to try and cheat the feds using stolen data from a breach already made public. If he had to guess, he told me, based on his past work experience, he would not be surprised to learn that these efforts were well-coordinated. Perhaps, he said, it’s Chinese or Russian hacks. That was confusing. Jim’s thoughts about the source echoed what I had read and been told by other software and security experts. But it made no sense. So I asked some more questions. The answers lead me to wonder about the real target in all of this mess: Maybe it’s possible that these hackers didn’t really want your tax refund after all. Maybe they wanted something more. Maybe collecting data – including username and passwords used to file tax returns and other secure data – is a step towards hacking into systems at other companies. Maybe the Anthem breach was a chance to take a stab at attacking financial institutions (like this “great bank heist“), security organizations or quite possibly, government agencies. Maybe the data that was used to access those 2014 returns – most likely, 2013 data – was actually gleaned from TurboTax’ site not by a proper breach but by logging in using data from another source. Maybe those hackers are trying to figure out how far that data will take them… That’s a lot of maybes but, I was told, not quite so fantastic. The FBI is currently investigating the TurboTax hack but isn’t saying much. In fact, considering the scope of the Anthem hack and the state tax refund thefts, together affecting tens of millions of taxpayers, there’s not been much information made public. For their part, Anthem, Intuit and the state tax agencies have offered little information or advice about the hacks beyond suggesting that you change your passwords. It may well be that we won’t know what exactly happened – or specifically what the hackers were targeting – but what we do know whoever is responsible works fast. The turnaround time from stealing data (from Anthem) to stealing resources (assuming that stolen data was used to steal refunds) was remarkably quick. As for Jim? His own turnaround won’t be so quick. The IRS has told him that the time frame for recovering his refund could be as much as 180 days. |