Monday, March 26, 2012

More Tax Scam

This one came across the news wire today and I’m sorry, but I just can’t resist a snarky comment.

An H&R Block manager was arrested in Van Nuys, CA in February for identity theft. Apparently he was using client’s information to prepare bogus tax returns on their behalf and obtain refunds using the H&R Block “Emerald” cards to withdraw the refunds from ATM machines.

The usual corporate caveats are being ladled out, ie H&R Block takes the matter very seriously, it involves only a handful of clients, they are cooperating with law enforcement, and so on.

First off, let me say that there are a lot of experienced, competent H&R Block people out there. We have a former HRB person in our office that is very knowledgeable. However, the little secret that you won’t see in their advertising is that each year they hire a lot of inexperienced people that have taken only a 3 month class on tax prep. Just enough to be dangerous.

If you want to avoid being the subject of a tax related fraud, you should deal with a legitimate professional you know or who has been around a long time. This guy was released on Bond and could conceivably be working again in a tax office somewhere right now.

Secondly, when police picked this guy up he was loitering around ATM machines at midnight with pantyhose over his head. Apparently none of his conduct during the daytime alerted anyone to his crimes, but if you are a confused cross-dresser, it’s a dead giveaway.

Wednesday, March 21, 2012

It’s Scammertime!

As we close in on April 15, the traditional tax filing hysteria with all the media attention helps spawn another side industry – tax scams. This time of year criminals use the fear of IRS to prey on victims and get them to disclose valuable info to steal identities and money.

The IRS issued a warning recently about one scam that offers free money to taxpayers who have little or no income based on the American Opportunity Tax Credit. Promoters take money to file fraudulent returns applying for bogus refunds. These tax schemes are often promoted to members of local churches or over the internet.

Recently Intuit, parent company of TurboTax software has seen an increase in phony “Phishing” scams. These thieves send emails that purport to be from Intuit or QuickBooks and ask you for personal information to complete processing of your tax returns. Once obtained, they have personal data that enables them to steal your identity and file false tax returns on your behalf.

Some things you can do to prevent becoming a victim:

Never respond to an email purporting to be from IRS. IRS does not contact taxpayers via email except when they issue public announcements to subscribers. Your email address is not on your tax return anywhere.

If you are contacted by someone purporting to be from IRS, they will have a badge and a business card. Do not disclose any information to them. If they are from IRS they will already have access to your tax files and will not need copies from you. Request their name and location and call them back on a telephone number that you obtain from public sources (phone book) as opposed to a printed business card. Ask for their supervisor’s name and which group they are located in to help you locate them.

Never deal with a tax preparer firm that is from out of state, or that promises free money from some government entitlement.

If you use tax prep software, do not disclose any personal information via email or respond to any such requests. If you have trouble with the software, deal with someone directly over the phone, and never disclose your SSN or other personal data to them.

Tuesday, March 6, 2012

Biting the hand that feeds

Usually whenever any political body starts tinkering with taxes it is another Right To Work act for accountants. Virtually every “tax simplification” or “tax reduction” act that comes along only serves to make compliance more difficult for the taxpaying public.
Given that tax accountants are arguably the only constituency that will always benefit from any change in the tax structure, it is interesting to note two recent events in the California State Capitol. First, AB 1963 was introduced which will extend the state sales tax to most services effective Jan 1, 2013. This bill has some special interest exceptions (of course) and lowers the overall rate to 4%, but would apply to sales of just about any services or goods as opposed to the current framework of only sales of tangible personal property.
Second, the California CPA Society has come out against this bill. Never mind the huge list of potential new clients who never had to file sales tax returns before, or the expanded list of taxable transactions for existing clients all of which will need to have help complying with the law. CalCPA opposes it.
It’s no wonder why the CPA profession is held in such high regard compared to most others.

Friday, March 2, 2012

Crisis Averted

If you operate a business or are a sole proprietor you may
have noticed a few new lines that appeared on your tax forms for 2011. In 2008
Congress passed a tax law that requires all businesses to separately disclose
the amount of their gross revenue that was collected via credit cards. This
amount was to be reconciled by the taxpayer to the new form 1099-K that reports
such transactions by month. Any differences were to be explained on the tax

This was going to create an accounting nightmare. Just think
of all the problems a small restaurant might have trying to reconcile their
gross income to a 1099-k showing all credit card receipts that include sales
tax and tips that are not a part of the restaurant’s earnings at all. It would be
even worse for businesses that report revenue on an accrual method (when it is
earned) versus a cash method (when it is received). The potential list of disparities
was enough to send any bookkeeper into early retirement.

IRS realized there were obstacles to compliance, and allowed
that even though the 2011 forms had lines set up for this data, they announced
that for this year only taxpayers can disregard those input lines and report
gross income as before. They gave everyone a one year reprieve.

The good news: After hearing the complaints from industry
groups IRS has backed off and will not require the reconciliations in 2012 or
in the foreseeable future. However we will still be required to disclose credit
card receipts, and any differences between taxpayer’s amounts and form 1099-k
amounts could be a red flag for future audits.