The Internal Revenue Service today announced it is providing transition relief to certain employers claiming the Work Opportunity Tax Credit (WOTC). The WOTC is a federal income tax credit available to employers that hire certified members of certain groups specified in the Internal Revenue Code who face significant barriers to employment, including Designated Community Residents or Qualified Summer Youth Employees.
The IRS today issued Notice 2021-43 PDF, which extends the 28-day deadline for employers to submit a request to a designated local agency (DLA) to certify that an employee hired between January 1 and October 8 of this year is a Designated Community Resident or a Qualified Summer Youth Employee. To be certified as a Designated Community Resident or a Qualified Summer Youth Employee under the WOTC, an employee must have a principal place of residence within an Empowerment Zone where the employee continuously resides.
Internal Revenue Service Security Summit partners today outlined for tax professionals how they can assist clients who were victims of unemployment compensation fraud schemes that targeted state workforce agencies in 2020 and 2021.
The IRS, state tax agencies and the tax industry – working together as the Security Summit – reported that unemployment compensation fraud was one of the more common identity theft schemes that emerged in 2020 as criminals exploited the COVID-19 pandemic and the resulting economic impact.
Addressing unemployment compensation fraud is the third in a five-part series sponsored by the Summit partners to highlight critical steps tax professionals can take to protect client data. This year’s theme “Boost Security Immunity: Fight Against Identity Theft,” is an effort to urge tax professionals to try harder to secure their systems and protect client data during the pandemic and its aftermath.
The Get Transcript Service is for individual taxpayers to retrieve their own transcripts for their own purposes. Use by any other entities is prohibited.
You can get various Form 1040-series transcript types online or by mail. If you need your prior year Adjusted Gross Income (AGI) to e-file, choose the tax return transcript type when making your request. To find out how much you owe or to verify your payment history, you can view your tax account.
The method you used to file your tax return, e-file or paper, and whether you had a balance due, affects your current year transcript availability. Note: If you need a photocopy of your return, you must use Form 4506
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Internal Revenue Service Security Summit partners called on tax professionals to increase efforts to inform clients about the Identity Protection PIN Opt-In Program that can protect against tax-related identity theft.
The IRS, state tax agencies and the nation’s tax industry – working together as the Security Summit – need assistance from tax professionals to spread the word to clients that the IP PIN is now available to anyone who can verify their identity.
Sharing information about the IP PIN Opt-In Program is the second in a five-part weekly series sponsored by the Summit partners to highlight critical steps tax professionals can take to protect client data. This year’s theme “Boost Security Immunity: Fight Against Identity Theft” is an effort to urge tax professionals to intensify efforts to secure their systems and protect client data during this pandemic and its aftermath.
Accessing The Offshore Funds
How do taxpayers involved in these schemes enjoy the fruits of their abusive scheme since their funds are offshore? There are several methods to repatriate the taxpayer’s funds to the U.S. All of these methods, at some point, involve the opening of foreign bank accounts. Two examples are described below:
- A bank account is opened in the tax haven country and a debit or credit card is issued from the account. These cards are used by the taxpayer in the U.S. to withdraw cash and to pay for everyday expenses. Since the cards are issued by banks located in tax haven countries, it is very difficult for the IRS to trace these transactions back to the taxpayer.
- An International Business Corporation (IBC) is established. Funds are transferred from the foreign trusts to the IBC via foreign bank accounts. Fraudulent loans are set up from the IBC to taxpayers and funds are wired back to the taxpayers in the U.S. Because loans are generally not taxable, the repatriation of funds is not reported on a U.S. tax return. In addition, because the ownership of IBCs is documented with bearer shares and IBCs are located in tax haven countries, it is very difficult for the IRS to prove that fraudulent loans are actually the taxpayer’s income.
The United States has tax treaties with a number of foreign countries. Under these treaties, residents (not necessarily citizens) of foreign countries are taxed at a reduced rate, or are exempt from U.S. taxes on certain items of income they receive from sources within the United States. These reduced rates and exemptions vary among countries and specific items of income. Under these same treaties, residents or citizens of the United States are taxed at a reduced rate, or are exempt from foreign taxes, on certain items of income they receive from sources within foreign countries. Most income tax treaties contain what is known as a “saving clause” which prevents a citizen or resident of the United States from using the provisions of a tax treaty in order to avoid taxation of U.S. source income.
If the treaty does not cover a particular kind of income, or if there is no treaty between your country and the United States, you must pay tax on the income in the same way and at the same rates shown in the instructions for the applicable U.S. tax return.
The Internal Revenue Service launched a new feature that will give taxpayers digital control over who can represent them or view their tax records, a groundbreaking step in the agency’s expansion of electronic options for taxpayers and tax professionals.
The new feature, one of many recent enhancements to the Online Account for individuals, will allow individual taxpayers to authorize their tax practitioner to represent them before the IRS with a Power of Attorney (POA) and to view their tax accounts with a Tax Information Authorizations (TIA).
“The ability for taxpayers to connect online with their tax professional is a groundbreaking step for the IRS,” said Chuck Rettig, IRS Commissioner. “This is the first, basic step toward a more fully integrated digital tax system that will benefit taxpayers, tax professionals and the IRS.”
The Internal Revenue Service and the Treasury Department announced today that millions of American families have started receiving monthly Child Tax Credit payments as direct deposits begin posting in bank accounts and checks arrive in mailboxes.
This first batch of advance monthly payments worth roughly $15 billion reached about 35 million families today across the country. About 86% were sent by direct deposit.
The payments will continue each month. The IRS urged people who normally aren’t required to file a tax return to explore the tools available on IRS.gov. These tools can help determine eligibility for the advance Child Tax Credit or help people file a simplified tax return to sign up for these payments as well as Economic Impact Payments, and other credits you may be eligible to receive.
CRIMINAL INVESTIGATION’S (CI) primary resource commitment is to develop and investigate tax crimes, both legal and illegal source. Prosecution of these cases supports the overall IRS compliance goals and enhances voluntary compliance with the tax laws. CI works some of these investigations with our federal, state and local law enforcement partners and also coordinates with foreign tax and law enforcement agencies. The Illegal Source Financial Crimes Program encompasses tax and tax-related, money laundering and currency violations. These investigations focus on individuals deriving income from illegal sources, such as money obtained through embezzlement, bribery, and fraud.
The individuals can be legitimate business owners but obtain their income through illegal means. These investigations focus on methods through which individuals seek to launder their ill-gotten income by making it appear the income is from a legitimate source. Frequent money laundering techniques include the manipulation of currency reporting requirements, layering of transactions and international movement of funds.
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Tax professionals are key targets of criminal syndicates that are tech-savvy, tax-savvy and well-funded. These scammers either trick or hack their way into tax professionals’ computer systems to access client data. They use stolen data to file fraudulent tax returns that make it more difficult for the IRS and the states to detect because the fraudulent returns use real financial information.
IRS highlighted recommendations will be to:
- Use multi-factor authentication to protect tax preparation software accounts. All tax software providers now offer multi-factor authentication options, which require more than just a username and password to access accounts. This feature is offered on tax preparation products for both tax professionals and taxpayers. This is a key step to securing sensitive financial data. Multi-factor authentication is in addition to traditional actions such as using anti-virus software, strong password phrases and virtual private networks to protect connections between telework locations and offices – all critical steps for tax pros
IRS wraps up its 2021 “Dirty Dozen” scams list with warning about promoted abusive arrangements.
The Internal Revenue Service concludes the “Dirty Dozen” list of tax scams with a warning to taxpayers to watch out for schemes peddled by tax promoters, including syndicated conservation easements, abusive micro-captive insurance arrangements and other abusive arrangements.
The IRS warns people to be on the lookout for promoters who peddle false hopes of large tax deductions from abusive arrangements. These “deals” are generally marketed by unscrupulous promoters who make false claims about their legitimacy and charge high fees to boot. These promoters frequently devise new ways to cheat the system and market them aggressively. Some taxpayers play the audit lottery hoping they don’t get noticed.
Certain deceased nonresidents who were not citizens of the United States are subject to U.S. estate taxation with respect to their U.S.-situated assets. For estate tax purposes, a citizen of a U.S. possession is not a U.S. citizen.
U.S.-situated assets that are subject to estate tax include, for example:
- Real estate located in the U.S.,
- Tangible personal property (excluding some art), and
- Stock of corporations organized in or under U.S. law, even if the nonresident held the certificates abroad or registered the certificates in the name of a nominee.
Examples of property treated as situated outside the U.S., and therefore not subject to the U.S. estate tax, include certain deposits and debt obligations described in Section 871(g)-(i), bank accounts deposited with a foreign branch of a domestic commercial banking business, and proceeds of life insurance on the life of a nonresident who is not a U.S. citizen.