March 22, 2011

Whistleblower Claims - Reporting Tax Cheats

The IRS Whistleblower Office pays money to people who blow the whistle on persons who fail to pay the tax that they owe. If the IRS uses information provided by the whistleblower, it can award the whistleblower up to 30 percent of the additional tax, penalty and other amounts it collects.

For almost 150 years, the IRS has had authority to pay rewards to whistleblowers. The initial reward was a minimum of 1% of the amount recovered from the taxpayer, maximum of 15%, and a cap of $10 million. In the Tax Relief and Health Care Act of 2006, Congress introduced legislation, which enhanced the whistleblower rewards as well as created a whistleblower office within the IRS.

On December 13, 2010, the Whisleblower Office submitted its annual report to Congress, and indicated that it received more than 5000 cases in fiscal year 2009, 460 of which will likely qualify for an award.

The rewards that are available can be large. To be eligible for the larger reward, the tax, penalties, interest, additions to tax, and additional amounts in dispute must be more than $2 million for any taxable year and, if the taxpayer is an individual, the individual’s gross income must exceed $200,000 for any taxable year at issue.

While the award is mandatory, the amount is somewhat discretionary. By statute the amount of award will be at least 15%, but no more than 30%, of the collected proceeds in cases in which the IRS determines that the information submitted by the informant substantially contributed to the collection of tax. The amount of the award can be reduced if the whistleblower was involved in the noncompliance. If the whistleblower is convicted of criminal conduct arising from his or her role in planning and initiating the action, the Whistleblower Office will deny the award.

On June 18, 2010, the IRS added new provisions to the Internal Revenue Manual (IRM) applicable for the whistleblower program. Topics include the following:

25.2.2 Whistleblower Awards
25.2.2.1 Overview: Authority and Policy
25.2.2.2 General
25.2.2.3 Submission of Information for Award under Sections 7623(a) or (b)
25.2.2.4 Initial Review of the Form 211 by the Whistleblower Office
25.2.2.5 Grounds for Not Processing Claims for Award
25.2.2.6 Processing of the Form 211 7623(a) Claim for Award
25.2.2.7 Processing of the Form 211 7623(b) Claim for Award
25.2.2.8 Whistleblower Award Administrative Proceeding
25.2.2.9 Award Computation
25.2.2.10 Appeal Rights under section 7623(b)
25.2.2.11 Confidentiality of the Whistleblower
25.2.2.12 Funding Awards
25.2.2.13 Award Payment Procedures
25.2.2.14 Annual Report to Congress

Read more about how you file a claim by clicking here.

March 18, 2011

IRS Ends Tax Package Mailing

Business and individual taxpayers will no longer receive paper tax packages in the mail from the IRS. Tax packages contained the forms, schedules and instructions for filing a paper tax return. The IRS is taking this step because of the continued growth in electronic filing as well as to help reduce costs.

Businesses may go to IRS.gov after January 10, 2011, and click on Forms and Publications, or go directly to IRS.gov/formspubs and follow the directions for getting forms and instructions.

Only 8 percent of individuals who filed tax returns last year received tax packages in the mail. The rest either used a paid tax professional or software or e-filed their tax returns. In 2010 to date, more than 96 million individual tax returns were e-filed, and an estimated 20 million paper returns were filed through paid preparers.

For more info, look at "Frequenlty Asked Questions To Help Taxpayers Obtain IRS Tax Products".

March 14, 2011

Who To Call About Whether You Are An Independent Contractor Or An Employee

In California, since different laws may be involved in a particular employment situation, it is possible that the same individual may be considered an employee for purposes of one law and an independent contractor under another law.

Not all workers are employees as they may be volunteers or independent contractors.

Employers sometimes improperly classify their workers as independent contractors so that the employers are not liable for payments under disability insurance, unemployment insurance, or social security. And, treating a worker as an independent contractor means the employer does not have to pay payroll taxes, the minimum wage or overtime. Finally, not treating workers as employees means the employer does not comply with other wage and hour law requirements and does not have to cover independent contractors under workers’ compensation insurance.

The state agencies most involved with the determination of independent contractor status are the Employment Development Department (EDD), which is concerned with employment-related taxes, and the Division of Labor Standards Enforcement (DLSE), which is concerned with whether the wage, hour and workers’ compensation insurance laws apply. There are other agencies, such as the Franchise Tax Board (FTB), Division of Workers’ Compensation (DWC), and the Contractors State Licensing Board (CSLB), that also have regulations or requirements concerning independent contractors.

Here are some good questions to help you decide what to do about your status as a worker. The answers to these questions can be found by clicking here.

1. How do I know if I am an employee or an independent contractor?

2. The person I work for tells me that I am an independent contractor and not an employee. He does not make any payroll deductions or withholdings for taxes, social security, etc., when he pays me, and at the end of the year he provides me with an IRS form 1099 rather than a W-2. By paying me in this manner does it mean I am automatically an independent contractor?

3. Does it make any difference if I am an employee rather than an independent contractor?

4. When I started my current job my employer had me sign an agreement stating that I am an independent contractor and not an employee. Does this mean I am an independent contractor?

5. How can it be that the Labor Commissioner determined I was an employee with respect to a wage claim I filed and won, and the Employment Development Department (EDD) determined I was an independent contractor, and denied my claim for unemployment insurance benefits?

6. As an employer, what obligations do I have to purchase Workers’ Compensation Insurance or comply with other labor laws for persons classified as independent contractors?

7. What can I do if I believe my employer has misclassified me as an independent contractor and as a result am not being paid any overtime?

8. What is the procedure that is followed after I file a wage claim?

9. What can I do if I prevail at the hearing and the employer doesn’t pay or appeal the Order, Decision, or Award?

10. What can I do if my employer retaliates against me because I thought I was misclassified as an independent contractor and objected to not being paid overtime?

March 7, 2011

Tax Problems: How To Resolve Disputes With The IRS

Preparing a Request for Appeals

Appeals Online Self-Help Tools

Online Videos and Podcasts of the Appeals Process

Is Appeals the Place for You?

Are You Ready to Request an Appeals Conference or Hearing?

What You Can Expect from Appeals

Forms and Publications About Your Appeal Rights

There are ways to resolve tax issues faster

Appealing Collection Issues

Appealing Examination Issues

What can Appeals do for you? The Appeals mission is to resolve tax controversies, without litigation, on a basis which is fair and impartial to both the Government and the taxpayer in a manner that will enhance voluntary compliance and public confidence in the integrity and efficiency of the Service.

Call a lawyer skilled in resolving tax controversies who has the experience you need to get it done. Call attorney Mitchell A. Port at (310) 559-5259 for tax help.