Staying within IRS rules
- From: "Ablang" <ron916@xxxxxxxxx>
- Date: 9 Apr 2007 10:39:29 -0700
Staying within IRS rules
By Gilbert Chan - Bee Staff Writer
Published 12:00 am PDT Monday, April 9, 2007
Story appeared in BUSINESS section, Page D3
Don't worry if you're feeling a little taxed these days. You're not
alone.
More than 65 million Americans are under the gun this week to squeeze
out that last tax deduction and complete their state and federal
returns by the April 17 deadline.
While tax experts and Uncle Sam are urging taxpayers to take advantage
of overlooked benefits, they also warn against scam artists touting
"secret deductions" and "tax breaks of the rich and famous."
Consumers, they say, should beware of the promises of an American
Indian heritage deduction, a state conservation easement credit or a
tax filing exemption under Fourth Amendment privacy rights. These
deductions could earn you a date with the Internal Revenue Service
auditors.
"This is the time of year people feel they are overtaxed. There is the
money (tax bill) and the stress side of it," said Conrad Davis,
incoming president of the Sacramento chapter of the California Society
of Certified Public Accountants.
Nationwide, Americans spend about 6.6 billion hours a year preparing
their taxes, according to the IRS. The government plans to process
more than 130 million federal returns this spring with about half
filing their forms at the last minute. As many as 10 million returns
could be filed by low-income Americans taking advantage of the
standard phone tax refund of $30 to $60.
Bill Steiner, an IRS spokesman in Sacramento, said more than a third
of the taxpayers who have already filed have not applied for the
refund.
"A lot of people aren't taking advantage of some of the tax credits
because they aren't keeping up with the legislation," Steiner said.
Last year, Congress ended a 3 percent federal excise tax on long-
distance telephone calls and authorized a one-time tax refund on taxes
paid since March 2003. The Treasury Department estimates $13 billion
could be returned to taxpayers.
"This is the only year. You're basically throwing away (at least) $30
to $60," Steiner said.
At the same time, Congress renewed a series of tax breaks in December,
including deductions for up to $4,000 for college tuition and fees and
a $250 break for teachers who spent their own money for school
supplies.
While tax preparation software sold by retailers has incorporated
these two changes, the information is not included in the IRS tax
forms and instructions. To meet deadlines, Uncle Sam sent all of its
documents to the printer in the fall -- well before lawmakers extended
these deductions.
The IRS said the tuition credit should be listed on Line 35 of the
1040 form and a letter "T" should be written on the adjacent dotted
line. The educator's deduction should be listed on Line 23 with "E"
written on the adjacent line.
Taking advantage of tax breaks, however, has its limits, authorities
warn. In listing its annual "dirty dozen" tax scams for 2007, the IRS
puts the telephone tax refund on top with early returns indicating
some taxpayers are inflating the credit due.
Businesses and individuals can recoup the entire excise tax payment,
which can amount to thousands of dollars for heavy long-distance phone
usage. But taxpayers must document the payments.
The IRS said some tax preparers are helping clients file wrong amounts
such as an entire telephone bill.
Some promoters are encouraging taxpayers to shift undervalued stock
into Roth IRAs, report no wages, claim deductions as an American
Indian, transfer assets into questionable trusts, invest in
partnership schemes or create their own tax-sheltered charitable
organizations.
Others are trying to avoid paying taxes entirely by claiming Fourth
Amendment privacy rights or Fifth Amendment protections against self-
incrimination. Scam artists also are skimming client tax refunds or
using the Internet to steal consumer bank account information or
Social Security numbers.
"People are getting e-mails from fictitious sites that appear to be an
official IRS site suggesting they owe money, or they could be getting
another $60 in refunds," Steiner said. "The IRS doesn't send out
unsolicited e-mails."
Last year, the Treasury Department shut down 40 unscrupulous Web sites
worldwide.
"At tax time taxpayers are vulnerable prey to criminals," said Davis,
a CPA with Ueltzen & Co. in Sacramento. "It's a common feeling that if
you have the right (tax preparer) they will save you a lot in taxes.
You assume there are secret deductions."
But Davis said there aren't any real hidden tax breaks or preparers
with magic credits under their sleeves.
"There are not that many deductions left," Davis said.
Increasingly, the IRS is looking closer at tax returns because of a
widening U.S. tax gap. The IRS says the government is owed $290
billion more than it collects from taxpayers every year.
"The tax gap has caught everybody's attention," Davis said. "There
will be more scrutiny under the reporting of taxes."
Oftentimes, scam artists target certain professions or groups with
promises of hefty refunds. They count on word-of-mouth referrals to
boost business. In a short time, the scamsters close shop before the
IRS comes knocking at the door of unsuspecting taxpayers.
"Understand what's on your return. If it sounds too good to be true,
it probably is," Davis said.
http://www.sacbee.com/103/story/151563.html
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