Be careful of tax  preparers who claim they can get their customers “instant” federal income tax refunds.  They may not be giving their clients all the money they’re owed.

Some accountants offer “refund anticipation loans” as a “rapid” way to give customers tax refunds, but according to the New York City Department of Consumer Affairs, such loans are a fast way to lose money.

“Between the fees and interest rates that are charged for these refund loans, we’ve seen costs as high as a 500-percent rate when you take a look at what’s being borrowed,” says  NYC Consumer Affairs Commissioner Jonathan Mintz.

The loans are advertised as “fast” or “instant” refunds, but they’re really high-interest loans that lure people who do not want to wait the standard eight days to receive their refund from the Internal Revenue Service.

On Tuesday, DCA officials denounced such loans while announcing the results of a month-long citywide crackdown on over 800 income tax preparers.

“Three out of 10 preparers were misleading their customers about their rights and in most cases were telling them that a refund loan was somehow just a ‘rapid’ refund or a ’same day’ refund, and that kind of advertising is deceptive and illegal,” says Mintz.

The Bronx is the borough with the most offenders, with a 50-percent non-compliance rate.

“We issued over 2,000 violations to preparers across this sweep. Those violations which could total up to a million dollars in fines,” says Mintz.

However, the number of compliant tax preparers has increased from last year.

To protect yourself when purchasing tax preparation services, the DCA offers the following tips:

• Avoid “instant,” “rapid,” “same day” or “fast cash” refunds. They’re actually loans with extremely high interest rates.

• Know your rights. Tax preparers must post their qualifications, fees and charges and must give a consumer bill of rights. They must sign every tax return and provide you with a copy of your return and a receipt.

• Protect yourself. Tax preparers may not charge you fees based on the amount of taxes you owe.

• Never sign a return that is blank, incomplete or filled out in pencil.

• Do not pay cash.

Protect yourself and your federal income tax refund by choosing a reputable tax preparer.  If you’re having trouble finding a good tax preparer, ask a family member or a friend.  Advice from a trusted source should put your worries at ease.

source:  ny1.com

With tax and accounting professionals heading into the beginning of the TY 2009 income tax filing season, the IRS has announced significant new changes that it plans to implement starting in Jan. 2011, along with enhanced enforcement measures that will start this season. The changes are geared toward providing regulation of the thousands of unlicensed and uncredentialed tax preparers across the country who offer filing services.

The most notable of the proposed changes schedule to start in 2011 (for 2010 income tax reporting) includes requiring paid preparers to register with the IRS, receive a “preparer tax identification number (PTIN), take an initial competency test and take at least 15 hours or continuing professional education (CPE) courses per year. Ethics rules found in Circular 230 would also be extended to this new group of paid preparers. The changes in licensing and CPE would not affect professionals already recognized by the IRS, such as CPAs, enrolled agents and attorneys, so long as they are in good standing with their respective licensing agencies.

“As tax season begins, most Americans will turn to tax return preparers to help with one of their biggest financial transactions of the year. The decisions announced today represent a monumental shift in the way the IRS will oversee tax preparers,” said IRS Commissioner Doug Shulman. “Our proposals will help ensure taxpayers receive competent, ethical service from qualified professionals and strengthen the integrity of the nation’s tax system. In addition, we are taking immediate action to step up oversight of tax preparers this filing season.”

Changes for 2010
In addition to the changes proposed for next year, the IRS has started sending notices to to approximately 10,000 preparers across the country who handle “large volumes of specific tax returns where the IRS typically sees frequent errors.”

These include reminding the professionals to practice due diligence when handling Schedule C income and expenses, Schedule A deductions and qualification for the EITC and homebuyer credits. Agents may also visit many of these preparers and, under a separate enforcement program, the IRS is also planning to conduct compliance investigations of paid preparers that may include agents posing as taxpayers.

Do you suppose the IRS has an ulterior motive for making these changes - like increasing revenue? The global recession has resulted in less Americans working and that means less tax revenue for the IRS. By implementing these measures, the IRS can make up some of the difference by dissuading tax preparers and tax advisors from taking chances on questionable deductions. If you are a tax preparer or tax advisor - beware!

source: cpatechnologyadvisor.com

Employees from the US Nonprofit housing group ACORN were fired after being caught on hidden camera assisting a man posing as a pimp and a woman pretending to be a prostitute, advising them to lie to the Internal Revenue Service (IRS) and giving guidance on how to claim underage girls from El Salvador as tax dependents.

Initially, two ACORN staffers from the Baltimore office were fired on Thursday, September 10, for recommending illegal activities to secure a housing loan. 24 hours later two ACORN staffers in the Washington office were also fired for offering to help the same “pimp” and “prostitute” secure a loan.

25-year-old independent filmmaker James O’Keefe, posing as the pimp, secretly taped the meeting that have ignited calls for investigations of ACORN, the Association of Community Organizations for Reform Now.

ACORN’s leaders said Friday they were “appalled and angry” at what their employees had done, but insisted the videos were part of a political “smear” campaign and not representative of the institution as a whole.

“But that does not excuse the behavior of the employees,” wrote ACORN’s president Alton Bennet and executive director Mike Shea. “We have fired them and are initiating an internal review of practices and reminding all staff of their obligation to uphold the highest legal and ethical standards.”

Rep. Charles Boustany, R-La., called for a hearing to investigate ACORN’s tax filing assistance programs following the release of the videos he said suggested multiple incidents of tax fraud.

“In light of the apparent flagrant and willful attempts to suborn tax fraud, I … (am seeking) a hearing of the Oversight Subcommittee of the House Ways and Means Committee as soon as practicable to investigate ACORN’s activities,” he said Friday.

O’Keefe was accompanied by 20-year-old Hannah Giles, posing as a prostitute. They both sought help from ACORN workers in Baltimore, who advised them how to falsify tax forms and seek illegal benefits for young girls from El Salvador they wanted to smuggle in as prostitutes.

“There’s like 10 girls,” O’Keefe says. “There’s ten El Salvodoreans.”

The ACORN staffer replies, “I understand what you are saying.”

ACORN — the Association of Community Organizations for Reform Now — calls itself a network of families “working together for social justice and stronger communities,” according to its Web site.

The organization has been accused by Republicans and conservatives of committing fraud in voter registration drives.

“Taxpayers should be outraged that their money has gone to an organization that, in addition to facing charges of voter fraud and tax violations, is willing to facilitate prostitution,” said Rep. Steve King, R-Iowa.

“As this video confirms, ACORN continues to operate as a criminal enterprise.”

The videotape was made public Thursday, September 10 by BigGovernment.com. Portions of the video were aired throughout the day on FOX News.

source: Fox News

Are U.S. States unfairly burdening smokers by taxing cigarettes to cut budget deficits?  Historically, states have used part of the revenues from cigarette sales to help smokers quit or to pay for their health care. But now, many states are proposing an additional cigarette tax to bail them out of the fiscal crisis without earmarks to help people stop smoking.

Sure, smokers are an easy target. There is little political opposition and health advocacy groups consider it a bane to society.  But does it make it right? Are they being singled out?

In more than 20 states, budget shortfalls are pushing more to look to tobacco for revenue. Even the tobacco-producing states are considering it.

According to the New York Times, “in the South, where such taxes have been lower than in the rest of the country, Arkansas has nearly doubled its tax, to $1.15 a pack, and Kentucky’s will double, to 60 cents, on April 1.

Increases are also under consideration in other tobacco-growing states like North Carolina, South Carolina and Georgia. With estimated state budget shortfalls nearing $50 billion, opponents of smoking see an opportunity to make headway with the most reluctant lawmakers.

A 10 percent increase in the price of cigarettes reduces consumption by 3 percent to 5 percent, according to the Centers for Disease Control and Prevention, and deters young people from picking up the smoking habit.

Tobacco industry representatives have argued that tobacco taxes unfairly burden smokers, who are mostly working class or poor, and jeopardizes jobs at retailers like convenience stores, where more than 30 percent of total sales can come from cigarettes.

“Many of these states are asking the very definition of Main Street to bail out state capitals,” said Frank Lester, a spokesman for Reynolds American, which makes Camel and other major brands. “It’s just another bailout.”

States whose cigarette taxes are already high are also considering increases. In Oregon, now at $1.18 a pack, Gov. Theodore R. Kulongoski has proposed a 60-cent increase. In New Jersey, Gov. Jon Corzine is asking the Legislature for a 12.5-cent increase over the current $2.58. New York has the highest state tax on cigarettes, $2.75 a pack.

In Mississippi, cigarette tax increases in surrounding states have helped dampen fears that people would cross state lines to buy cigarettes. After a tax study commission appointed by Governor Barbour recommended an increase, he reversed his opposition but warned that the tax should be viewed as a matter of health policy, not a generator of revenue.

Bill Phelps, a spokesman for the Altria Group, the parent company of Philip Morris, argued that states often overestimated revenues from cigarette tax increases. From 2003 to 2007, there were 57 state tax increases, Mr. Phelps said, and in 41 cases they fell short of projections.

“We don’t think it makes a lot of sense to fund what are often important government programs with a revenue source that is in decline,” he said. “Just in the last 10 years, sales have declined an average 3 percent a year.”

But Frank J. Chaloupka, an economist and director of the Health Policy Center at the University of Illinois, Chicago, said cigarette taxes had not reached the threshold of diminishing returns. “We haven’t yet seen a case where if you raise taxes you don’t raise revenues,” Mr. Chaloupka said.

New Jersey did see a decline in revenue after its last tax increase, he said, but other factors, like a comprehensive smoke-free-air law that went into effect before the increase, drove down consumption.”

On top of all this, a 62-cent increase in the federal cigarette tax will go into effect in April.  The tobacco industry believes this will overburden smokers and drive down state collections. But the federal increase does not seem to have derailed state efforts, in part because smokers cannot avoid it by crossing state lines.

The debate will continue but the bottom line is that states will come down to the last day of the session, when they realize they have to get the budgets down and they need X dollars.”

What vice will be taxed next?  Beer, Wine, Liquor?

source: NY Times