The IRS will make changes to Allowable Living Expenses, Transportation, Housing and Utilities, on October 2007.  The new standards are not completely known at this time, but the some of the changes are regarding health and living expenses, cell phone use, and transportation.  The IRS will have a new standard for health expenses for taxpayers under 65-years-old and thankfully a separate standard for taxpayers over 65-years-old.  The proposed changes for Allowable Living Expenses are vague at this point, the IRS is stating that “it will be more fair” for all taxpayers and that household income will not be determining factor anymore.  With transportation changes will be the area of the allowance for public transportation and operation costs for a second vehicle.  Cell phone expenses are now being included as an allowed expense. These changes will impact Offer In Compromise and Installment Agreements.  It is not known at this time of existing OIC’s will reviewed under the new standards

The Internal Revenue Service today alerted taxpayers to the latest versions of an e-mail scam intended to fool people into believing they are under investigation by the agency’s Criminal Investigation division.

The e-mail purporting to be from IRS Criminal Investigation falsely states that the person is under a criminal probe for submitting a false tax return to the California Franchise Board. The e-mail seeks to entice people to click on a link or open an attachment to learn more information about the complaint against them. The IRS warned people that the e-mail link and attachment is a Trojan Horse that can take over the person’s computer hard drive and allow someone to have remote access to the computer.

The IRS urged people not to click the link in the e-mail or open the attachment.

Similar e-mail variations suggest a customer has filed a complaint against a company and the IRS can act as an arbitrator. The latest versions appear aimed at business taxpayers as well as individual taxpayers.

The IRS does not send out unsolicited e-mails or ask for detailed personal and financial information. Additionally, the IRS never asks people for the PIN numbers, passwords or similar secret access information for their credit card, bank or other financial accounts.

“Everyone should beware of these scam artists,” said Kevin M. Brown, Acting IRS Commissioner.  “Always exercise caution when you receive unsolicited e-mails or e-mails from senders you don’t know.”

Recipients of questionable e-mails claiming to come from the IRS should not open any attachments or click on any links contained in the e-mails. Instead, they should forward the e-mails to phishing@irs.gov (the instructions may be found on IRS.gov by entering the term “phishing” in the search box).

The IRS also sees other e-mail scams that involve tricking victims into revealing private personal and financial information over the Internet is known as “phishing” for information.

The IRS and the Treasury Inspector General for Tax Administration work with the U.S. Computer Emergency Readiness Team (US-CERT) and various Internet service providers and international CERT teams to have the phishing sites taken offline as soon as they are reported.

Since the establishment of the mail box last year, the IRS has received more than 17,700 e-mails from taxpayers reporting more than 240 separate phishing incidents. To date, investigations by TIGTA have identified host sites in at least 27 different countries, as well as in the United States.

Other fraudulent e-mail scams try to entice taxpayers to click their way to a fake IRS Web site and ask for bank account numbers. Another widespread e-mail tells taxpayers the IRS is holding a refund (often $63.80) for them and seeks financial account information. Still another email claims the IRS’s ‘anti-fraud commission’ is investigating their tax returns.

Most of us have read about Wesley Snipes 12 million tax problem with the IRS, unfortunately this happens to thousands of taxpayers each year. I actually feel sorry for him because despite his apparent bad judgment, he did hire a “professional” to do his taxes; they broke the trust by taking advantage of him. Charging a percentage was unethical and now illegal by IRS circular 230.

The story usually goes like this, the taxpayer meets an accountant or CPA through a friend or co-worker that performs miracles on tax returns, giving the client huge refunds or explains why you don’t have to pay taxes through their unique brand of voodoo. Next, the IRS audits a return prepared by this magical accountant/CPA, and then you guessed it, the outcome is nasty for the taxpayer and then IRS audits everyone the accountant/CPA prepared returns for. The taxpayer then has to return of the refund for one or more years with the penalties and interested charged by the IRS, this creates a huge problem for the taxpayer, hence, the reason they contact us seeking help. Most of our clients tax debts are obviously much smaller than Wesley Snipes, but the problem is just a big in their world.

If it sounds too be good…it usually is.

Since we last wrote about the TRA of California problem we have had spoken to dozens of ex-TRA of California clients, or should we say victims. The situation is not very good for most of them, they paid in advance and believed they were going to get the help they needed, and obviously they didn’t get the help. Most are understandably angry, scared, and distrustful - who wouldn’t be. Many ex-clients of TRA of California had Offer-In-Compromises (OIC) filed, but it was rejected because they (the client) didn’t even qualify for the basic criteria of an OIC. Many other OIC’s were rejected because of sloppy work, incorrect information, and lack of follow through. Other ex-client returns were never completed or were done incorrectly, levies were not released and Installment Agreements were never set-up.

The most painful calls were from potential clients that spoke to us prior to signing up with TRA of California. Now they are back looking for help again after discovering what the “guarantee” and great BBB rating really means. The BBB now rates the company with an F and states the company is shut down.

Here is what to avoid if you a seeking help:

• Never hire a firm that demands full payment in advance or even half now and the balance in 30 days. You will most likely never see your money again.
• Never hire a firm that guarantees the outcome of an Offer-In-Compromise. The IRS takes a dim view on these guarantees or implied outcome promises and the IRS has even published warnings regarding this practice. Go to this link to read the IRS warning.
  http://www.irstaxreliefassociates.com/news20041025.php
• Never hire a firm that tells every potential client that they qualify for an Offer-In-Compromise. Our firm finds that about only 3 out 10 people who call should consider filing an Offer-In-Compromise.
• Never hire a firm that doesn’t stand by their Offer-In-Compromise submissions by supporting the client with appeals as part of the fee agreement.
• Never hire a firm that lumps all tax solutions into one fee structure. These firms like to call the service “Tax Resolution” or some other official sounding heading and list all services under that heading. Why should you pay the same for a service that takes less than 30-days to perform as you would for one that takes eight months or more?
• Watch out for the Penalty and Interest Abatement sales tactic. The outcome of this service cannot guarantee either and there are some basic circumstances that a client should have to even file for one. These “everything can be done by the “Great and Wonderful OZ” firms” are selling you a bill of goods.
• Watch out for traveling salesperson firms. These firms claim to have offices located throughout the United States. What they have is traveling salespeople who are paid commission to sell you on their services. They meet clients in temporary offices. They sell you and send your personal records to a central office. Most likely you will never ever talk to the “trusted” smooth talking salesperson again.
• Avoid firms that state what they charge is based upon the amount of taxes you owe. The amount of tax debt is only one factor in determining the complexity of the case. It is a way for these “gouging” firms to over charge potential clients.

Find a firm that doesn’t succumb to any of the above. Clearly we would like to have you for a client, but we also recognize we are not a fit for all clients. There are number of reliable firms that can help. Ask good questions and you will find the help you deserve.

We would welcome your comments on this blog.