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Issue Number:    IR-2017-29

Inside This Issue

IRS Includes Falsifying Income Scam in 2017 List of “Dirty Dozen”

IRS YouTube Videos:

Dirty DozenEnglish | Spanish | ASL

WASHINGTON — The Internal Revenue Service today continued issuing its annual list of common tax scams by warning taxpayers to avoid schemes to erroneously claim tax credits. This year’s “Dirty Dozen” includes falsifying income to claim tax credits.

“Taxpayers should ensure all the information they provide on their tax return is accurate,” said IRS Commissioner John Koskinen. “Falsifying income to claim tax credits is against the law. Taxpayers are legally responsible for all the information reported on their tax returns.”

The “Dirty Dozen,” a list compiled annually by the IRS, describes a variety of common scams that taxpayers may encounter. Many of these schemes peak during filing season as people prepare their returns or hire others to help them.

Scams can lead to significant penalties and interest and possible criminal prosecution. IRS Criminal Investigation works closely with the Department of Justice to shutdown scams and prosecute the criminals behind them.

Don’t Make Up Income

Some people falsely increase the income they report to the IRS. This scam involves inflating or including income on a tax return that was never earned, either as wages or self-employment income, usually to maximize refundable credits.

Much like falsely claiming an expense or deduction you did not pay is not right, claiming income you did not earn is also inappropriate. Unscrupulous people do this to secure larger refundable credits such as the Earned Income Tax Credit and it can have serious repercussions. Taxpayers can face a large bill to repay the erroneous refunds, including interest and penalties. In some cases, they may even face criminal prosecution.

Fake Forms 1099-MISC

The IRS cautions taxpayers to avoid getting caught up in scheme disguised as a debt payment option for credit cards or mortgage debt. It involves the filing of a Form 1099-MISC, Miscellaneous Income, and/or bogus financial instruments such as bonds, bonded promissory notes or worthless checks.

Con artists often argue that the proper way to redeem or draw on a fictitious held-aside account is to use some form of made-up financial instrument such as a bonded promissory note that purports to be a debt payment method for credit cards or mortgage debt. Scammers provide fraudulent Form(s) 1099-MISC that appear to be issued by a large bank, loan service and/or mortgage company with which the taxpayer may have had a prior relationship, to further perpetrate the scheme. Form 56, Notice Concerning Fiduciary Relationship, may also be used by participants in this scam to assign fiduciary responsibilities to the lenders.

Taxpayers may encounter unethical return preparers who make them aware of these scams. Remember: Taxpayers are legally responsible for what’s on their tax return even if it is prepared by someone else.

Choose Return Preparers Carefully

It is important to choose carefully when hiring an individual or firm to prepare your return. Well-intentioned taxpayers can be misled by preparers who don’t understand taxes or who mislead people into taking credits or deductions they aren’t entitled to in order to increase their fee. Every year, these types of tax preparers face everything from penalties to jail time for defrauding their clients.

To find tips about choosing a preparer, better understand the differences in credentials and qualifications, research the IRS preparer directory, and learn how to submit a complaint regarding a tax return preparer, visit www.irs.gov/chooseataxpro.

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e-News for Tax Professionals February 10, 2017

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Issue Number:  2017-6

Inside This Issue


1.     Don’t Fall Prey to the Dirty Dozen

2.     Annual Filing Season Program Update

3.     Two New Members Join the Electronic Tax Administration Advisory Committee

4.     Alert to Return Preparers: Letters 4858 and 5364

5.     YouTube: Retirement Plan and IRA Rollovers

6.     Technical Guidance


1.  Don’t Fall Prey to the Dirty Dozen

Compiled annually, the Dirty Dozen is a list of common scams that taxpayers and tax professionals may encounter anytime of the year. But many of these schemes peak during filing season as people prepare their returns or hire someone to help with their taxes. Learn more about the Dirty Dozen in this video.

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2.  Annual Filing Season Program Update

More than 48,000 tax return preparers have participated in the 2017 IRS Annual Filing Season Program and obtained an official Record of Completion.

But another 37,000 return preparers who have completed the required amount of continuing education and been invited to participate have not consented to the Circular 230 requirements to receive a Record of Completion.

The deadline for preparers to consent to the Circular 230 requirements and become full participants is April 18. A video tutorial of the process is available here.

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3.  Two New Members Join the Electronic Tax Administration Advisory Committee

The IRS announced the selection of two new members for the Electronic Tax Administration Advisory Committee (ETAAC).

Established in 1998, ETAAC provides an organized public forum for discussion of electronic tax administration issues, including the prevention of identity theft and refund fraud, in support of the overriding goal that paperless filing should be the preferred and most convenient method of filing tax and information returns. ETAAC members work closely with the Security Summit, a joint effort of the IRS, state tax administrators and tax software providers to fight electronic fraud.

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4.  Alert to Return Preparers: Letters 4858 and 5364

IRS is sending Letter 4858 to tax preparers who completed 2016 returns claiming the earned income tax credit but who may not have met the required due diligence requirements. Disregarding due diligence requirements could result in penalties and other consequences for preparers and their clients. Letter 4858 comes in both English and Spanish.

IRS is also sending Letter 5364 to tax preparers who completed two or more 2016 paper returns claiming Earned Income Tax Credit (EITC), American Opportunity Tax Credit (AOTC), or Child Tax Credit/Additional Child Tax Credit (CTC/ACTC) without including Form 8867, Paid Preparer’s Due Diligence Checklist.

For more information on the due diligence requirements, visit Tax Preparer Toolkit on EITC Central.

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5.  YouTube: Retirement Plan and IRA Rollovers

Find out how your clients can roll over funds in an IRA or retirement plan into another account by watching this IRS YouTube video.

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6.  Technical Guidance

Revenue Ruling 2017-05 includes covered compensation tables effective January 1, 2017.

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IRS to Contract with Four Private Collection Agencies for Back Taxes

Tax debt, Collection, Back taxes, harassment

IR-2016-125, Sept. 26, 2016

WASHINGTON – The Internal Revenue Service announced today that it plans to begin private collection of certain overdue federal tax debts next spring and has selected four contractors to implement the new program.

The new program, authorized under a federal law enacted by Congress last December, enables these designated contractors to collect, on the government’s behalf, outstanding inactive tax receivables. As a condition of receiving a contract, these agencies must respect taxpayer rights including, among other things, abiding by the consumer protection provisions of the Fair Debt Collection Practices Act. The IRS has selected the following contractors to carry out this program:

CBE Group
1309 Technology Pkwy
Cedar Falls, IA 50613

200 CrossKeys Office park
Fairport, NY 14450

333 N Canyons Pkwy
Livermore, CA 94551

325 Daniel Zenker Dr
Horseheads, NY 14845

These private collection agencies will work on accounts where taxpayers owe money, but the IRS is no longer actively working their accounts. Several factors contribute to the IRS assigning these accounts to private collection agencies, including older, overdue tax accounts or lack of resources preventing the IRS from working the cases.

The IRS will give each taxpayer and their representative written notice that their account is being transferred to a private collection agency. The agency will then send a second, separate letter to the taxpayer and their representative confirming this transfer.

Private collection agencies will be able to identify themselves as contractors of the IRS collecting taxes. Employees of these collection agencies must follow the provisions of the Fair Debt Collection Practices Act and must be courteous and respect taxpayer rights.

The IRS will do everything it can to help taxpayers avoid confusion and understand their rights and tax responsibilities, particularly in light of continual phone scams where callers impersonate IRS agents and request immediate payment.

Private collection agencies will not ask for payment on a prepaid debit card. Taxpayers will be informed about electronic payment options for taxpayers on IRS.gov/payments. Payment by check should be payable to the U.S. Treasury and sent directly to IRS, not the private collection agency.

The IRS will continue to keep taxpayers informed about scams and provide tips for protecting themselves. The IRS encourages taxpayers to visit IRS.gov for information including the “Tax Scams and Consumer Alerts” page.

For more information visit the Private Debt Collection page on IRS.gov.


If you are contacted by IRS Collections or one of these newly contracted collection agents don’t try to handle it yourself. Call 303-847-4038 and get professional help from Arena and Associates, Inc.

Settling Tax Debts with an Offer in Compromise

Radio and television are filled with advertisements claiming that tax debts can be settled for less than what you owe. This settlement program is known as offer in compromise. This can be a great solution, provided you qualify.

In this settlement program, you are offering to pay less than the full amount to the IRS. The IRS will accept an offer in compromise if the taxpayer doesn’t have to ability to pay the amount owed or if there is doubt that the person is actually liable for the tax debt.

The IRS’ stringent acceptance standards have made it extremely difficult for most taxpayers with outstanding balances to qualify. Prepare to be scrutinized when you attempt an offer in compromise. Think of it like a tax audit. But in addition to auditing your finances, they will also be auditing your assets and liabilities. They would even calculate future income to determine if you have the ability to make continuously monthly payments.

To file an offer in compromise, the first thing you need to do is to fill out Form 433-A and Form 656. Add to that, you also need to calculate the offer amount.

You don’t want to initiate a settlement with the IRS with a ridiculous offer. There is a formula that used to calculate the offer amount. It is not simply picked out of the air.

If you choose to go this route, then you have to be very patient. Why? It’s because the negotiation process can seem to drag on forever. It may take anywhere from a few months to a few years to determine whether or not you’re approved.

It is essential that you do the math before filing an offer in compromise. Not only will you be wasting valuable time if you don’t get approved, you’ll also be wasting thousands of dollars on application fee and professional fee.

If your offer has been approved, do your best to keep it from being revoked. Be sure to file and pay your taxes on time for the next 5 years and pay the offer amount.

If you think you might be a candidate for an OIC, your best bet is to seek help from a company with experiences in such matters such as Arena & Associates Incorporated.

IRS Data Breach and Theft of Personal Tax Information.

A computer breach of the IRS “Get Transcript” tool, which allowed cyber thieves to steal tax information from thousands of taxpayers is much bigger than the agency originally disclosed.

An additional 220,000 potential victims had information stolen from an Internal Revenue Service website as part of a sophisticated scheme to use stolen identities to claim fraudulent tax refunds, the IRS said Monday. The revelation more than doubles the total number of potential victims, to 334,000.

The breach also started earlier than investigators initially thought. The IRS first disclosed the breach in May.

The thieves accessed a system called “Get Transcript,” where taxpayers can get tax returns and other filings from previous years. In order to access the information, the thieves cleared a security screen that required knowledge about the taxpayer, including federal pension identification number, date of birth, tax filing status and street address, the IRS said.

The personal information was presumably stolen from other sources. The IRS believes the thieves were accessing the IRS website to get even more information about the taxpayers, which could help them claim fraudulent tax refunds in the future.

In all, the thieves used personal information from about 610,000 taxpayers in an effort to access old tax returns. They were successful in getting information from about 334,000 taxpayers.

The IRS isn’t the first agency – public or private – to initially underestimate the magnitude of a data breach. The Office of Personnel Management announced earlier this year that hackers had stolen sensitive information on 4.2 million people. The number of affected people has since grown to more than 21 million.

The IRS said it is notifying all potential victims and offering free credit monitoring services. The IRS is also offering to enroll potential victims in a program that assigns them special ID numbers that they must use to file their tax returns.

The IRS said Monday that thieves started targeting the website in November. Originally, investigators thought it started in February. The website was shut down in May.

IRS investigators believe the identity thieves are part of a sophisticated criminal operation based in Russia.

If you or someone you know is concerned that your have had your information stolen then contact Arena and Associates. We can get direct access to your account and cure any identity theft issue with the IRS. Call 303-847-4038.

Penalties for Failing to File Your Taxes

file-your-taxes-for-freeWe’ve all heard the countless tales of people avoiding income tax. Maybe they don’t have enough money to pay their taxes or they don’t have the information to complete their return. No matter what the reason is, ignoring the IRS is certainly not a good idea. Mind you, delaying filing or payment can be more costly for you.

The following penalties shall be imposed for not filing or paying your taxes on time.

Late penalties

Tax payers who do not file or pay their income tax by the due date are subject to fees, interest and penalties in addition to the amount of tax due.

Failure to file your income tax by the April 15 deadline will incur a 5% penalty on top of the amount you owe. But if you do not pay your taxes by the due date, a penalty of .5 -1% of the unpaid tax per month applies. The penalty will take effect immediately after the deadline and will be charged for every month you delay.

Since the penalty for failing to pay is lesser than the failure to file, we urge you to file your taxes on or before the deadline whether or not full payment can be made.


In addition to the penalty, you’ll also be charged an interest for not paying your taxes in full. The interest rate is set quarterly by the federal government. Pay as much as you can to reduce the amount you owe.

Tell the IRS why you’re late

Everyone makes mistakes, especially when under the stress. So if you have a good excuse for not being able to file or pay taxes on time, do not hesitate to let the IRS know. If they consider your excuse, then you may not have to face penalties.

Filing an extension

If you requested for an extension to file and you were able to pay 90% of your tax by April 15, then you don’t have to face a failure-to-pay penalty. But be sure to settle the remaining balance on or before the extended due date.

Tax Deductions for Self-Employed Individuals

Being self-employed means taking on costs and risks that you don’t have when you work for someone else. While most self-employed people celebrate the freedom of not having a boss, they often cringe at the sight of their taxes.

With the high rising costs of doing business and securing your own health insurance, it is important that you get all the tax write-offs you are entitled to in order to thrive and survive.

Here are some tax deductions that can benefit self-employed individuals and small business owners alike.

Home office

The cost of any workspace that is especially devoted to your business, whether you own or rent it, can be deducted as a home office expense. This allows you to deduct a portion of your utilities, repairs, home improvement and rent or mortgage payments to your home.

To calculate your deduction, measure your work area and divide it by the square footage of your home. Then, multiply that by the home’s expenses for the year.

Health insurance premiums

If you are paying for your family’s health insurance out of your pocket, then you can deduct 100% of your premiums as an adjustment to your business income.

Vehicle and mileage

The IRS also allows you deduct the cost of using your car for your business. Keep a record of the miles you drive business-related activities and deduct the dollar value of business miles travelled on your tax return. Be sure that personal and business use is completely separated.

Phone and internet

You are also entitled to deduct your phone and internet expenses. If you only one have phone in the house, it means that the phone is used for both personal and business purposes. That said, you shouldn’t deduct the entire monthly bill. The key is to deduct the expenses that are directly related to your business.

Educational expenses

Think about any classes, workshops, seminars you’ve attended to improve your job or business. All of these are tax-deductible. Also, don’t forget, books, magazines and other research materials.


IRS Phone Scam Continues to Pose a Significant Risk

WPTV-IRS-Scam_1402421805728_6125775_ver1.0_640_480An aggressive and sophisticated phone scam has been making rounds throughout the country. Tax season may be over, but the IRS has been seeing a surge of these phone scams in recent months.

Tax payers, including recent immigrants have been receiving aggressive and threatening phone calls from criminals, who are pretending to be IRS agents.

This swindle is incredibly simple and straightforward. Armed with a long list of potential victims, these con artists are demanding tax payers to send them past-due taxes through wire transfer or a preloaded debit card. They also try to scare their victims into providing financial information. If the amount owed is not paid immediately, they threaten their victims with arrest, financial penalties, driver or business license revocation and deportation.

It can be pretty easy to determine whether or not the call is fake. The fact that you have received a call from a person who claims that he/she is from the IRS is a big red flag. Why? Because the IRS does not contact people over the phone, they do it by post mail. Besides, the IRS respects taxpayer rights. They do not ask for credit card information over the phone and do not ask people to pay via wire transfers or prepaid debit cards.

These con artists may sound convincing since they may know a lot about you. Many of them will even spoof the caller ID and make the display the IRS toll free number to make the pitch seem more legit.

If you received a call from someone claiming to be from the Internal Revenue Service and demanding payment, then hang up the phone immediately and report the incident to the IRS. Call (800) 829-1040 if you know you don’t owe taxes or have no reason to believe that you do. But if you received an email, forward it to phishing@irs.gov. Be sure not to open any links or attachments in that email.

Denver IRS Tax Relief Help

IRS Tax Relief Help in Denver

There’s a better way. Back tax or tax debt is the unpaid taxes assessed by the state, federal or local government from a taxpayer. Back taxes are past dues that the taxpayer has to pay. These are past due federal income taxes.

How to resolve IRS back taxes?

You can simply pay the full amount of the back taxes you owe. You’ll have to pay the interest and penalties and with the total income tax due from you. The interest and penalty accrue on the tax amount if you fail to pay the tax due on time. Interest and penalty can add thousands of dollars to the total payable amount.

An expert tax relief lawyer, CPA or IRS licensed enrolled agent can help you, as a taxpayer, to resolve your back tax issues. We can help you file the un-filed back tax returns and negotiate a tax relief settlement. We can also help you with an Offer In Compromise or a payment plan with the IRS, which will help you resolve your tax problem and sleep well at night.

Back taxes may lead to serious problems with the IRS. Wage garnishment, levy of bank accounts, tax lien, penalties, fines etc. are some of the steps that the IRS can take against taxpayers who are not addressing their back taxes timely and ignoring their back tax problems.

If you do not pay your back taxes, they keep on doubling with time. The IRS can get the tax owed from your bank account and can seize all the property you have.

There are a number of ways to settle back taxes-

You can ask for a compromise, wherein the actual amount will be reduced to an amount that is acceptable to both parties.

You can also go for an installment agreement. Here, you need to pay a small amount every month on tax, interest and penalty. It is very convenient to you as a taxpayer.

You can also request for a delay in payment to settle back taxes. When you first get the notifications from the IRS, you should respond by applying for extended time period. An expert tax relief professional can help resolve your nightmare tax problems.

When you settle your back taxes, you get peace of mind. A good tax relief attorney, CPA or IRS licensed enrolled agent can help you get the desired tax relief and can get you the desired peace of mind. We will look into your situation, your financial situation and will find out different options to settle your IRS tax problems.

Get expert tax help today by calling Rob Arena at 866-208-8837