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Wilmington NC CPA firm discusses IRS issues

Wilmington NC CPA firm discusses FBAR

Gary Bode, CPA: We stay abreast of developing IRS issues. If you'd like a free initial phone consult with a Wilmington NC CPA, call 399-2705.

IRS Commissioner Doug Shulman made the following remarks at a speech for the John Hopkins Carey Business School.  All the following quotes are his, as reported in Accounting Today.

Revenue Matching

Example: your employer sends both you and the IRS a Form W2 in January.

“There’s general agreement both in the U.S. and around the globe that withholding and third-party information reporting are powerful tools to improve and maintain taxpayer compliance.  Indeed, over 96 percent of income that is subject to substantial information reporting and/or withholding, such as wages, interest, and dividends, is accurately reported on timely tax returns. However, most estimates show that only around 50 percent of income is accurately reported where there is little or no information reporting. Information reporting streamlines the process for the vast majority of honest taxpayers. And at the same time, it makes it more difficult for those trying to game the system.”

I think most Wilmington NC CPAs pickup tax cases and IRS audits secondary to the IRS finding inconsitencies between the information reported to them, and, the actual tax return.  While revenue matching is an effective technique, it places huge reporting burdens on employer, banks etc.  Congress recently repealed a provision in the Affordable Care Act and the Small Business Jobs Act that would have expanded Form 1099-MISC reporting requirements.  So, after years of grumbling about the costs of IRS paperwork, the country had enough.

Interestingly, the FATCA program, which forces foreign banks to reveal information on American account holders, is not being well received in other countries.  The Depart of Treasury requires Americans with foreign accounts to report them on TD F 90-22.1, commonly known as FBAR.  The IRS has had incentives for these Americans to voluntarily come forward on the, probably correct notion that foreign bank activity would surface eventually anyway.

“As we increased our enforcement efforts and gained significant momentum, we gave taxpayers their best chance to come in voluntarily and avoid going to jail. Now, in a typical year, we get 100 or so taxpayers who use our voluntary disclosure program. For this program, we thought that figure would rise to maybe 1,000. So, we were very pleased that we had approximately 15,000 voluntary disclosures from individuals who came in under a special program we created, which entailed payment of back taxes and stiff penalties. And since it closed, we’ve received an additional 4,000 voluntary disclosures from individuals with secret bank accounts from around the world. We’ve even launched a second disclosure program with much tougher financial penalties— but no jail time— if taxpayers come clean with us. We are now mining the information we have received to date and have launched our next wave of investigations on banks, bankers, intermediaries and taxpayers.”

1099-B | Brokerage House Reporting

Intro: Your brokerage house reports the gross sales amount of stocks you sold to the IRS.  In the past, the cost basis of those stocks was difficult to obtain.  The IRS defaulted to taxing folks on the sales amount instead of the actual capital gains.

“IRS research exposed the huge scope of misreported capital gains and losses largely due to taxpayers not accurately reporting their securities’ cost, or ‘basis. Congress took action and beginning this year, brokers must supply to their investors easy-to-understand basis information to help them file accurate and complete returns. The Joint Committee on Taxation estimates that the new law will yield almost $6.7 billion in revenues over a 10-year period.”

Although we’re a CPA firm in Wilmington NC, we serve a broad geographical base.  Distance doesn’t affect quality.  Our posts reflect our expertise and proactive attitude.  We stay abreast of IRS issues, so you don’t have to.  For a free initial phone consult, call (910) 399-2705.