Like any other organization, the IRS works hard to further provide better services to taxpayers. With the enactment of the IRS Restructuring and Reform Act of 1998, for the first time in 50 years, the Service reorganizes itself to resemble private sector models of organizing around customers with similar needs. The IRS now has three commissioner-level organizations to support its structure and improve accountability:
Commissioner.

Specialized IRS units report directly to the Commissioner’s office. The IRS Chief Counsel also reports to the Treasury General Counsel on certain matters.

• Commissioner, Internal Revenue — Douglas Shulman
• Chief of Staff — Jonathan M. Davis
• IRS Chief Counsel — William J. Wilkins
• Appeals — Diane Ryan, Chief
• Taxpayer Advocate Service — Nina E. Olson, National Taxpayer Advocate
• Equity, Diversity and Inclusion — Debra Chew, Executive Director
• Research, Analysis and Statistics — Rosemary Marcuss, Director
• Communications and Liaison — Frank Keith, Chief

Deputy Commissioner for Services and Enforcement

The Deputy Commissioner reports directly to the Commissioner and oversees the four primary operating divisions and other service and enforcement functions:

• Deputy Commissioner for Services and Enforcement — Steven T. Miller
• Wage and Investment Division — Richard E. Byrd, Jr., Commissioner
• Large and Mid-Size Business Division — Heather Maloy, Commissioner
• Small Business/Self Employed Division — Christopher Wagner, Commissioner
• Tax Exempt and Government Entities Division — Sarah Hall Ingram, Commissioner
• Criminal Investigation — Victor Song, Chief
• Office of Professional Responsibility — Karen L. Hawkins, Director
• Whistleblower Office — Stephen A. Whitlock, Director

Deputy Commissioner for Operations Support

The Deputy Commissioner reports directly to the Commissioner and oversees the integrated IRS support functions, facilitating economy of scale efficiencies and better business practices:

• Deputy Commissioner for Operations Support — Mark Ernst
• Chief Technology Officer — Terence V. Milholland
• Agency-Wide Shared Services — Dave Grant, Chief
• Human Capital Officer — James P. Falcone, Chief
• Chief Financial Officer — Greg Kane (Acting) Chief
• Office of Privacy, Information Protection and Data Security — Hun Kim (Acting) Director

Certain building reconstruction, renovation and restoration can help you receive tax credits, but it does not, however, include enlargement or new constructions. Up to 20% of cost for certified historic structures or 10% for buildings in service before 1936 may be taken as credit.

Disaster areas

The credit is temporally increased for property located in specific disaster areas:

• For pre-1936 building (other than certified historic structures) the credit percentage is increased from 10% to 13%.
• For certified historic structures, the credit percentage is increased from 20% to 26%.

GO Zone

The increase applies to property located in disaster areas impacted by Hurricanes Katrina, Rita, and Wilma with respect to qualified rehabilitation expenditures paid or incurred after August 27, 2005 and before January 1, 2010.

Notice 2006-38 provides relief for taxpayers located in these zones. The notice provides that 36 months will be deemed to be a reasonable period to repair and restore qualified rehabilitated buildings without being considered permanently retired from service provided that certain conditions are met. In addition, if the rehabilitated had begun but had not been completed before the President declared a major disaster in the area in which the property is located, the period for the substantial rehabilitation test is tolled for 12 months. For additional information, see Publication 4492, Notice 2006-28, and the instructions to Form 3468.

Midwestern Disaster Areas

The increase applies to qualified rehabilitation expenditures paid or incurred after the applicable disaster date, and before January 1, 2012 on any building damaged in a Midwestern disaster area as the result of severe storms, tornados, or flooding. For additional information see Publication 4492A and the instructions to Form 3468.

Tax Exempt Use Property

The rehabilitation tax credit is not allowed for expenditures with respect to property that is considered to be tax exempt use property. Under the tax-exempt entity leasing rules of 168(h) the threshold to determine if a disqualified lease exists has been raised from more than 35% to more than 50%. The provision is effective for expenditures properly taken into account for periods after December 31, 2007.

Alternative Minimum Tax

Business tax credits generally may not exceed the excess of the taxpayer’s income tax liability over the tentative minimum tax (or, if greater, 25 percent of the regular tax liability in excess of $25,000) Thus, business tax credits cannot offset the alternative minimum tax liability.

For qualified rehabilitation credits determined under Internal Revenue Code Section 47 attributable to qualified rehabilitation expenses properly taken into account for periods after December 31, 2007 the tentative minimum tax is treated as being zero with respect to the rehabilitation tax credit. Thus, a taxpayer may use the rehabilitation tax credit to offset his regular tax liability.

See the instructions on Form 3468, Investment Credit (PDF), for more information.

Façade Easement Market Studies (Dec 2009)

In 2008, the Conservation Easement Issue Management Team commissioned market studies for facade easements in Chicago, New York, and Washington D.C. for the period January 1, 2003 – December 31, 2007. A copy of the market study report prepared for any of the three cities can be obtained by sending an email to sbse.market.studies@irs.gov. In your email, you must indicate the city for which you are requesting a market study and provide your complete name and mailing address.

Due to size, the report will be mailed to you on disk. Multiple copies of the disks cannot be provided due to limited resources.

The Enactment of the HIRE Act on March 19, 2010 provided employers hiring the unemployed with much needed tax breaks. Employers are eligible for tax credit under the following conditions:

a. Hired a certified employee who has not worked for a total of 40 hours prior to the 60-day period he/she was to begin work. The employee must sign an affidavit under penalty of perjury to the effect mentioned above.

b. The 6.2% Employer Social Security Tax exemption and the tax retention credit will neither be applied to employers who replace an employee with another one unless the employee being replaced was let go for cause or voluntarily left the company. Also, you can not fire employees and then re-hire them to be able to benefit from the Act.

c. The 2010 earned wages of employees hired after March 18, 2010 to January 1, 2011 must not exceed $106,800 to be able to benefit from the tax breaks.

The Internal Revenue Service has released a revised form to help employers claim their tax breaks. The form and instructions can be found at www.irs.gov/pub/irs-pdf/f8846.pdf The benefit has no cap exemption, so the earlier you hire the better tax savings for your company. Employers can save as much as $6,600 per qualified employee under the scheme, and will only be available for all wages paid until December 31, 2010.

The reduced tax withholding will have no effect on the employee’s future Social Security benefits, and employers would still need to withhold the employee’s 6.2-percent share of Social Security taxes, as well as income taxes. The employer and employee’s shares of Medicare taxes would also still apply to these wages.

Further details on both the tax credit and the payroll tax exemption can be found in a recently-expanded list of answers to frequently-asked questions about the HIRE Act.

Some scams you hate simply for being scams, but some scams you hate because they keep coming back no matter how much you warn people. These scams, just like the villainous Dracula, suck the life out of people’s already strained finances. Sometimes, when you think you are saving money from paying your proper taxes, you end up paying for more. To avoid further headaches, the following scams are enumerated by the IRS to help you distinguish and avoid being victimized:

1. PhishingProbably the most common and the one that evolves the most of them all. This one comes in your email and tricks you to give up financial information so they can empty your bank account, raise your credit card charges and apply for loans and credit in your name. As this particular scam gets sophisticated, so should you. If you suspect an email that appears in your inbox to be a scam, report it immediately.
2. Scams Related to the Economic Stimulus Payment

This one tricks you into giving up financial information in exchange for promises related to Economic Stimulus Payment in the guise of rebates. Criminals posing as IRS representatives are trying to trick taxpayers into revealing their personal financial information by falsely telling them they must provide information to get a payment. The IRS urges taxpayers to be extra-vigilant. The IRS will not contact taxpayers by phone or e-mail about their stimulus payment.

3. Frivolous Arguments

Frivolous positions includes: misinterpretation of the 9th Amendment to the U.S. Constitution regarding objections to military spending, erroneous claims that taxes are owed only by persons with a fiduciary relationship to the United States, a nonexistent “Mariner’s Tax Deduction” related to invalid deductions for meals and the misuse of the fuel tax credit. Taxpayers filing a tax return or make submission based on one of these positions are subject to a $5,000 penalty.

4. Fuel Tax Credit Scams

The IRS is receiving claims for the fuel tax credit that are unreasonable. Some taxpayers, such as farmers who use fuel for off-highway business purposes, may be eligible for the fuel tax credit. But some individuals are claiming the tax credit for nontaxable uses of fuel when their occupation or income level makes the claim unreasonable.

5. Hiding Income Offshore

Individuals continue to try to avoid paying U.S. taxes by illegally hiding income in offshore bank and brokerage accounts or using offshore debit cards, credit cards, wire transfers, foreign trusts, employee leasing schemes, private annuities or life insurance plans. Be warned the IRS will find these out and will prosecute anyone caught.

6. Abusive Retirement Plans

The IRS continues to uncover abuses in retirement plan arrangements, including Roth Individual Retirement Arrangements (IRAs). The IRS is looking for transactions that taxpayers are using to avoid the limitations on contributions to Roth IRAs. Taxpayers should be wary of advisers who encourage them to shift appreciated assets into Roth IRAs or companies owned by their Roth IRAs at less than fair market value.

7. Zero Wages

Filing a phony wage- or income-related information return to replace a legitimate information return has been used as an illegal method to lower the amount of taxes owed. Typically, a Form 4852 (Substitute Form W-2) or a “corrected” Form 1099 is used as a way to improperly reduce taxable income to zero.

8. False Claims for Refund and Requests for Abatement

This scam involves a request for abatement of previously assessed tax using Form 843, “Claim for Refund and Request for Abatement.” Many individuals who try this have not previously filed tax returns. The tax they are trying to have abated has been assessed by the IRS through the Substitute for Return Program. The filer uses Form 843 to list reasons for the request. Often, one of the reasons given is “Failed to properly compute and/or calculate Section 83-Property Transferred in Connection with Performance of Service.”

9. Return Preparer Fraud

Tax return preparers can cause many problems for taxpayers who fall victim to their schemes. These scam artists make their money by skimming a portion of their clients’ refunds and charging inflated fees for return preparation services. Make sure your preparers are honest.

10. Disguised Corporate Ownership

Some people form domestic shell corporations in certain states for the purpose of disguising ownership of a business or financial activity. Once formed, these anonymous entities can be used to facilitate underreporting of income, non-filing of tax returns, engaging in listed transactions, money laundering, financial crimes and even terrorist financing. The IRS is working with state authorities to identify these entities and to bring the owners of these entities into compliance.

11. Misuse of Trusts

For years, unscrupulous promoters have urged taxpayers to transfer assets into trusts. They promise reduction of income subject to tax, deductions for personal expenses and reduced estate or gift taxes. However, some trusts do not deliver the promised tax benefits. As with other arrangements, taxpayers should seek the advice of a trusted professional before entering into a trust.

12. Abuse of Charitable Organizations and Deductions

The IRS continues to observe the misuse of tax-exempt organizations. Misuse includes arrangements to improperly shield income or assets from taxation, attempts by donors to maintain control over donated assets or income from donated property and overvaluation of contributed property.

Reporting Scams

Suspected tax fraud can be reported to the IRS using IRS Form 3949-A, Information Referral. Form 3949-A is available for download from the IRS Web site at IRS.gov. The completed form or a letter detailing the alleged fraudulent activity should be addressed to the Internal Revenue Service, Fresno, CA 93888. The mailing should include specific information about who is being reported, the activity being reported, how the activity became known, when the alleged violation took place, the amount of money involved and any other information that might be helpful in an investigation. The person filing the report is not required to self-identify, although it is helpful to do so. The identity of the person filing the report can be kept confidential.

Whistleblowers also could provide allegations of fraud to the IRS and may be eligible for a reward by filing Form 211, Application for Award for Original Information, and following the procedures outlined in Notice 2008-4, Claims Submitted to the IRS Whistleblower Office under Section 7623.

Qualifying Meals and Entertainment could be 100% tax deductible if it is part of running your business. Making sure you win that big contract through a little R&R, or having lunch meetings with clients, or even a simple employee meal will help you pay less tax besides providing an added perk to your employees. The key is having a separate record for all meals and entertainment provided to your clients and employees to help your accountants determine which would be 100% deductible, 50% deductible and not at all deductible. A separate travel expenses record should also be in place because it is 100% deductible.

The following are fully deductible expenses:

• Minor employer-provided meals, entertainment and other benefits that are relatively difficult to track. Examples are free coffee, soft drinks, snacks, etc. usually consumed within the office premises
• Tickets or packages involving sporting events whose proceeds are payable to a registered charity, and are staffed primarily by volunteers.
• Employer-reported meal or entertainment expenditure as W-2 income to employees. Examples are team-building trips reportable to the participating employees.
• Corporate-incurred expenses on behalf of a client/customer provided there is an adequate accounting of such expenditures
• Costs associated with various IRC 501 organizations
• Trade show costs, receptions, etc. open to the general public, or seminars/conferences/entertainment/ etc. open to the general public or for which customers/clients pay for attendance
• Meals Provided to Certain Employees Working at Remote Locations: including, oil platforms, vessels and certain long-haul truckers

With the proper understanding of the rules, you need not add up all your meal and entertainment expenses and deduct 50% from the total as your tax savings. Keeping good records and documentations for these expenses will help you save on tax, improve cash flow and keep your employees and clients happy.