CALLING THE IRS

I don’t know if you’ve ever had the chance to call the IRS. I hope it never happens that you do. In our line of business we get this opportunity quite often.

I wanted to share with you the frustration of dealing with the IRS.

Recently I called regarding a client matter. After going through the tree of questions, what language I wanted to hear, the notice and ID number etc., I was finally told to wait, which I did for twenty minutes (which is normal). I then heard the beep that told me I might be next; I heard some crackling on the other end and then a dial tone. I spent twenty-five minutes sitting there waiting to speak to an IRS agent just to get cut off. I redialed the number and the same thing happened the second time.

These are the people who will be in charge of our health care.

MOVING – HERE IS HOW YOU LET THE IRS KNOW

The IRS has issued updated procedures for determining a taxpayer’s “last known address” which is used for all IRS communications with taxpayers, including refunds. In general, taxpayers are encouraged to submit change of address, Form 8822.

IRS STRIVES FOR 71%

It’s NFL playoff time. Football gets interesting to me this time of year. As I was reading the latest report on the working of the IRS I had to think, “what would people say if an NFL coach said that he expects his team to give 71% in the playoff game?" Athletes always promise to give 110%, which by the way is impossible. I wonder what one of my tax clients would say if I told him or her that I was going to find 71% of the tax deductions that are available. But I guess 71% is good enough for the IRS. The IRS is only promising to try to answer 71 percent of calls from the taxpaying public. The thing is that they consider 71% a great goal.

More than that, the expected average wait time is 12 minutes and if you do get through, the question is do you get the correct answers. The odds of that happening are most likely going to be the same as in the past; 33% to 50% odds they are wrong.

Here is this IRS announcement per a recent article in USA Today.

And the government thinks that they can do a better job running our health care?

THE IRS IS LOOKING AT INDEPENDENT CONTRACTORS

If you have been following my blog you know that I am concerned about the practice of classifying workers as independent contractors. I am talking about the practice by many of simply not treating their workers as employees. This is good for the owner because they do not have to match Social Security and Medicare; pay Unemployment Taxes; pay Workman's Compensation; provide fringe benefits, or worry about the worker reporting their tips.

That sounds pretty good, but I don't think it will pass the IRS muster. If you provide control over the worker, most likely the worker is an employee. That is a discussion for another time.

Here is the issue that you need to be aware of. The IRS is now looking at worker classification. The IRS has just announced that it is going on the attack against firms that have misclassified workers. It is unveiling an electronic matching system to identify firms that issue 1099s with payments of at least $25,000 to five or more workers who don’t have any other sources of earned income. The Service suspects that in such cases the contractors may be employees for tax purposes. Businesses meeting these criteria will see employment tax audits in 2008.

You can't say that I did not warn you.

BARRY BONDS, BASEBALL AND THE IRS

Friday, July 27, 2007

Yesterday's Wall Street Journal offered a unique take on slugger Barry Bonds' chase for Hank Aaron's home run record. What will be the tax consequences for the lucky fan who catches the record-breaking ball? The article quoted sports-memorabilia experts estimating it will be worth half a million dollars or more.

Being an accountant I can't help but associate this with taxes.

When will the fan recognize the income? Now, when they accede to wealth? Or down the road, when they sell it?

If tax is due now, before the fan sells, how will they determine the ball's value?

If the proceeds qualify as capital gain (taxes at the special 28% rate for collectibles) what will the fan's basis be? Zero? The price of the ticket to the game? The price of their season-ticket package?

What if the catcher isn't a fan? What if it's a stadium employee or fellow player?

Back in 1998, just before Mark McGwire beat Babe Ruth's single-season 60-homer record, a reporter asked an IRS spokesman what would happen if the fan who caught the ball handed it back to McGwire. The spokesman replied that the fan might actually owe -- and sparked howls of protest. Then-Commissioner Charles Rossoti quickly changed course, confessing that the Tax Code could be as hard to understand as the infield fly rule.

There is a tax lessen here. Most taxpayers generally don't think about taxes until they're due. For most Americans, that means prior to April 15th. Now is the time to start planning.

By the way, if you should be the one to catch the record breaking ball, give us a call and we will help you keep from having a "tax strike out."

Larry Kopsa CPA