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Commissioner of Internal Revenue Service, John Koskinen, before the National Press Club

April 3, 2014

784x2048I had an opportunity to see the new IRS Commissioner, John Koskinen, at the National Press Club in Washington DC. The following are excerpts from his speech.

“Now that we’ve turned the calendar to April, I know there are usually two things on peoples’ minds. The first is Spring and the second is taxes. Plus watching the Final Four this weekend. As a former Chairman of the Duke Board of Trustees, we had a moment of silence earlier in the tournament. But the loss to Mercer was part of a longer term-strategy to increase the Duke endowment in the hopes of a substantial contribution from an unnamed major investor in the United States, in recognition of the billion dollars we saved him by losing the game.

Moving on, if you came to this luncheon or tuned in expecting to hear about the state of affairs at the Internal Revenue Service, you’ve come to the right place.

I was sworn in as IRS Commissioner a little over three months ago, and I feel exactly the same way I did on Day One: Excited and proud to lead an agency that’s critical to the functioning of our government and one that touches virtually every American. These last three months I’ve traveled to 18 of the 25 largest IRS offices around the country. I have talked with and listened to about 8,000 employees so far and been delighted to see the professionalism, skills and dedication of our employees.

I am on this journey because, throughout my career, I have found that the people who know most about what’s going on in an organization are the front line employees. They have important insights into the opportunities and challenges an organization faces.

In light of all that has happened to Federal employees in the last four years, and IRS employees in particular – no pay raises for four years, government shutdowns, furloughs and the negative publicity about the IRS the last year – you might have expected that I would have heard a lot of grumbling from employees about not being paid enough or having to work too hard. Instead, the consistent response I have heard is a concern that we do not have enough employees to provide the level of taxpayer services our employees want to provide and feel taxpayers deserve.

I also have heard at every stop – even in the 18th city last Friday – interesting observations and suggestions about how we can improve the day-to-day operations of the agency. And I have explained in town halls with front line workers and meetings with managers at each office that one of my goals is to foster an environment where information flows easily from the bottom up in the agency as well as from the top down.

This is critical, not only for us to get the benefit of observations and suggestions from employees, but also to learn as quickly as possible about problems or challenges. I have noted that it is illusory to think that we’ll never have a problem or make a mistake.  We have 90,000 employees administering the world’s most complicated tax code and dealing with millions of taxpayers. Instead, my goal is for us to find problems quickly, fix them promptly, make sure they stay fixed, and be transparent about the entire process. I’ve told our employees that if there’s a problem anywhere in the organization, it’s my problem and we’ll fix it together. If an employee makes an honest mistake, it’s my mistake as well, and we’ll work together to remedy the situation. And if there’s a problem that I don’t know about, that’s my fault, because it would mean we haven’t built a culture that encourages information to flow up from the front lines through the organization.

As I tell the employees, my theory is that “bad news is good news,” since the only problem we can’t solve is one we don’t know about. And, as a corollary, employees need to know that we don’t shoot messengers, we thank them.

In moving the IRS forward, one of the most important things we have to do is restore public trust in the agency, which was shaken by the management problems that came to light last year with regard to the determination process used for applicants to become tax exempt social welfare organizations under section 501(c)(4) of the IRS code. Organizations that have 501(c)(4) status can be everything from garden clubs to homeowners associations, but the focus for the last year has been on advocacy groups that spend part of their time and money on political campaigns.

As a result of the inappropriate use of an organization’s name alone as the criterion for setting its application aside for special treatment, doubt has been cast by some on the independence of the IRS. This is an important issue that deserves our attention.  But it is also important to put this issue into the proper perspective.  The IRS has about 800 employees in its Exempt Organizations Division, and only a small subset of those folks work on processing applications for tax-exempt status for social welfare organizations. Meanwhile, there about 89,000 other IRS employees in offices all across the country who are also doing critical work for our tax system and for the nation in other areas.

Nonetheless, taxpayers need to be confident that the IRS will treat them fairly. It doesn’t make any difference who they are, what organizations they belong to, or whom they voted for in the last election. None of that matters to us at the IRS. We will do about one million audits of individual taxpayers this year. Some who get audited may be Democrats, some may be Republicans, and others may be something else altogether. But they will all have one thing in common: They’re being contacted by us because there was something on their tax returns that needed follow up. Perhaps we just need a clarification. Maybe there was a mathematical error. Or there could be something seriously wrong with the return. But the return alone is the reason for our inquiry. And anyone else with the same issue would receive the same treatment from the IRS.

To make sure that this problem does not recur, we’ve done a number of things. We have accepted all nine of the recommendations from the Inspector General for Tax Administration. It was his report last May that found applications for 501(c)(4) status were being screened using inappropriate criteria in the determinations process.

Since then, for the last several months the IRS has been cooperating with the investigations into this matter that were launched last summer. There are six ongoing investigations, four conducted by Congressional committees, one by the Department of Justice and one by the IG.

We were asked by members of Congress to quantify the work we’ve done and how much it has cost. The answer is that more than 250 IRS employees have spent over 100,000 hours working directly on complying with the investigations. This work has cost more than $14 million, which includes adding capacity for our computer systems to make sure we are protecting taxpayer information while processing and producing these materials.

In letters to Congressional Committees two weeks ago and in my testimony before the House Oversight and Government Reform Committee last week, I was pleased to report that we now have provided all the documents we have identified as being related to the determinations process – which was the focus of the IG’s report last May. We have provided the tax writing committees, our primary oversight committees, with almost 700,000 pages of documents.  We are still redacting taxpayer information from the last of those documents before they can be shared with the Committees that do not have authority to see taxpayer information.

As a result, my hope is that at least some of the six pending investigations will be concluded and reports issued in the near future. I have made it clear that we will respond appropriately to the facts and recommendations of those reports and move the agency forward.

Our production of materials has proceeded according to priorities set with all of the investigating committees and, as we have now completed our production of documents related to the determinations process, we are prepared to work with the committees on any new avenues they may want to pursue.

You may have noticed that, during my three-hour hearing last week before the House Oversight and Government Reform Committee, some members of the Committee expressed unhappiness with the rate at which we are producing redacted information for them. As I tried to make clear, we never indicated that we would not respond to the very broad subpoena for documents we received in mid-February. Indeed, we have produced documents responsive to each of the subpoena’s categories. In the private sector, a court would require these requests to be reduced to those relevant to the inquiry. Unfortunately, the subpoena contains no such limitations, so the volume of materials requested means we could be at this for a long time.

Another recommendation by the IG was that the Treasury Department and the IRS should provide clearer guidance on how to assess the permissibility of 501(c)(4) social welfare organizations’ activities. So last November, Treasury and the IRS issued proposed regulations that are designed to clarify the extent to which a 501(c)(4) organization can engage in political activity without endangering its tax-exempt status.

While I was not involved in the issuance of this draft proposal, because it happened before I was confirmed as Commissioner, I believe it is extremely important to make this area of regulation as clear as possible. Not only does that help the IRS properly enforce the law, but clearer regulations will also give a better roadmap to applicants, and will help those that already have 501(c)(4) status properly administer their organizations without unnecessary fears of losing their tax-exempt status.

During the comment period, which ended in February, we received more than 150,000 comments. That’s a record for an IRS rulemaking comment period. In fact, if you take all the comments on all Treasury and IRS draft proposals over the last seven years and double that number, you come close to the number of comments we are now beginning to review and analyze. It’s going to take us a while to sort through all those comments, hold a public hearing, possibly repropose a draft regulation and get more public comments. This means that it is unlikely we will be able to complete this process before the end of the year.

Before leaving this topic, I want to note one other thing. Last month, former IRS Commissioner Randolph Thrower passed away at the age of 100. Commissioner Thrower led the IRS from 1969 to 1971, during the early years of the Nixon Administration, which turned out to be a challenging time for the agency. Commissioner Thrower held firm against attempts being made at that time to politicize the agency. The White House eventually fired him for his principled stance.

I’m sure if Commissioner Thrower were here today, he would say he was only doing his job. But he was doing much more. His refusal to let politics compromise the IRS is an important reminder to all IRS Commissioners now and in the future of what our mission is. I intend to follow his example. I want to reassure everyone listening to me today that the IRS is an agency of career civil servants who are dedicated to serving the American taxpayer in a fair and impartial manner. That’s how it’s always been, and that’s how it will stay on my watch.

We have other important challenges to face. One example of this is insuring that the tax filing season goes smoothly. When I started in December, I told our employees that I wanted to help with the filing season and, as the new kid on the block, the best thing I could probably do was to stay out of the way. I’ve been very successful at that and, at least partially as a result, the filing season has gone very well thus far.  Through the end of March, we’ve received more than 90 million tax returns and issued more than 73 million refunds, for approximately $207 billion.

As we get closer to the April 15th deadline for filing returns, I think it’s important to realize what a tremendous accomplishment it is for the agency to process 150 million individual taxpayer returns every year. This doesn’t happen by accident and it doesn’t happen automatically. It happens because thousands of dedicated and experienced employees work for months planning for the next filing season and then administering it.

Another top priority of ours: taxpayer service. This filing season, as we do every year, the IRS provides services to taxpayers to help them fulfill their tax obligations.

Taxpayers want and need more online tax information and services, and we’re working to meet that demand by making improvements to our website, Last year alone, taxpayers viewed web pages more than 450 million times, to get forms and publications, find answers to their tax questions and check the status of their refunds.

One of the most popular features on is the “Where’s My Refund?” electronic tracking tool, which taxpayers used more than 200 million times last year. Now that doesn’t mean, of course, that there are 200 million taxpayers. Some of them just can’t resist checking over and over to see how their refund is doing.

This year we have several new digital applications that will expand what taxpayers can do online. One of these applications is IRS Direct Pay, which provides taxpayers with a secure, free, quick and easy online option for making tax payments. Another innovation, Get Transcript, is a secure online system that allows taxpayers to view and print a record of their IRS account, also known as a transcript, in a matter of minutes. We are also in the final stages of revamping the IRS Online Payment Agreement, which allows taxpayers to apply for an installment agreement online.

To provide better service, the IRS is also expanding the methods it uses to communicate information to taxpayers. We have moved beyond traditional media, like newspapers and TV news to also take advantage of social media, such as YouTube, Twitter and Tumblr.

During my three months on the job, I have been surprised to learn how much time, effort and resources we provide trying to help taxpayers determine the amount they owe and how to pay it. As I have said, it may take me a while to convince the average taxpayer that “we’re from the IRS and we’re here to help you,” but we really do work hard to make it as easy as possible to file your taxes.

Along with taxpayer service, another high priority for the IRS is maintaining a robust tax compliance program and building on the work that’s been done to improve compliance in a number of areas. One of the most important of these is the battle against refund fraud, especially fraud caused by identity theft. I say “battle” because we really do have a fight on our hands against identity thieves who steal peoples’ information outside the tax system and use that information to file a tax return claiming a refund.

We’re doing a much better job of stopping suspicious returns before they can be processed compared to a couple of years ago, and our criminal investigators are making great progress in helping the Justice Department find these criminals and put them behind bars. Last year we protected $17.8 billion from refund fraud, we initiated 1,400 investigations, and we obtained over 1,000 indictments and 400 convictions. We’re also doing a lot better at helping identity theft victims clear up their IRS accounts after they have been victimized. The time for resolving a new case has been reduced from over 300 days to roughly 120 days. But there’s still room for improvement, and we intend to do even better.

Perhaps our most intense challenge is fulfilling the responsibility Congress has given us to implement tax-related provisions of enacted legislation, including the Affordable Care Act.  We have a lot of work to complete if we are going to be prepared for major ACA provisions that go into effect this year, including the premium tax credit and the individual shared responsibility provision. As I have told our employees, the significant challenge of implementing the Affordable Care Act provides us with a major opportunity to demonstrate the skill, dedication and competence of the IRS. After the difficulties experienced last fall with the rollout of ACA, if we can have a smooth filing season next year including the appropriate review of the returns of taxpayers who took or were eligible for the advanced premium tax credit, the public and the Congress will have to say, “That’s some organization with an amazing work force.”

Along with the ACA, another important piece of legislation we’re in the process of implementing is the Foreign Account Tax Compliance Act, which is more commonly known as FATCA. This law is important because it requires foreign financial institutions to tell us about accounts owned by U.S. citizens. With this information, we can do a much better job of combatting offshore tax evasion. Our goal is to make it more and more difficult for Americans to hide their money in a tax haven to avoid paying taxes.

The importance of FATCA is not just that we’ll be collecting more money. It is also important because the average taxpayer has to be confident that, while they are paying their taxes, the very wealthy, with fancy lawyers and accountants, are no longer able to hide their money in foreign countries and avoid paying their fair share to support the operations of the government.

When I became Deputy Mayor of Washington, the city’s theory of snow removal had been that “the sun will come up tomorrow.” So, when I began, we had a “snow summit” and I told the leadership team that, whatever else we were going to do, we were going to get the snow off the streets. That’s my feeling today at the IRS. Whatever else we are going to do, we are going to implement the non-discretionary legislative mandates we have been given: the Affordable Care Act and FATCA.

This brings me to what I believe is the biggest challenge facing the IRS today, the substantial decline in our funding, which puts significant strain on our ability to provide adequate services to taxpayers and to maintain strong service and enforcement levels to ensure the integrity of our voluntary compliance system.

For the IRS to keep making progress in all the areas I’ve just mentioned, it is critical for us to receive adequate resources. The agency continues to be in a very difficult budget environment since we are the only major agency functioning basically at the post-sequester level rather than having been moved back toward the pre-sequester level of funding. Since Fiscal 2010, IRS appropriations have been cut by about $900 million and we have 10,000 fewer employees even as our responsibilities continue to expand.

We recognize the need to become more efficient, no matter what happens to our funding level. Since 2010, the IRS has cut annual spending on professional and technical service contracts by $200 million. We generated $60 million in annual printing and postage savings by eliminating the printing and mailing of certain tax packages and publications, and by transitioning to paperless employee pay statements.

Real estate is another area where we have found major savings. In 2012 the IRS began a sweeping space-reduction initiative that is projected to reduce rent costs by more than $40 million and reduce total IRS office space by more than 1.3 million square feet by the end of this fiscal year. Taken together, we’re spending $300 million a year less in these areas.

We will continue our efforts to find savings and efficiencies wherever we can.  And we will continue to carry out our core responsibilities and work toward preserving the public’s faith in the essential fairness and integrity of our tax system. But these budgetary constraints will pose serious challenges to our efforts to enforce the tax laws and provide excellent customer service.

Essentially, the federal government is losing billions in revenue collection to achieve budget savings of a few hundred millions dollars, since the IRS estimates that, for every $1 invested in the IRS budget, it produces $4 in revenue.

As I said during my confirmation hearing, I didn’t find a single organization in my 20 years of private-sector experience that said, “Let’s take our revenue operation and starve it for funds and see how it does.”

So far this filing season, we have been fortunate that the volume of phone calls to our toll-free lines is actually down a bit compared to this time last year. One factor is the lack of major tax changes in 2013, which means fewer questions from taxpayers. Our improved website and its applications also have helped provide taxpayers with important support without requiring a phone call.

As a result, for now, we’re maintaining a level of phone service around 72 percent. That’s much better than last year’s overall average of 60.5 percent. But we expect that for the year we will drop well below 70 percent and end up closer to last year’s 60.5 percent. That would mean more than 30 percent of taxpayers trying to reach us on the phone couldn’t get through.  It wasn’t that long ago, with proper funding, that our level of service was 88 percent.

Along with phone service, we’re also concerned about the amount of time it takes for people to get help in person when they go to one of our Taxpayer Assistance Centers. We’ve had reports from field staff in offices across the country of taxpayers lining up outside our centers well before the centers open in the morning to make sure they receive service the same day, sometimes waiting up to three hours to be served after they enter the office. Expanding our online offerings can only go so far to ameliorate these problems. As Forbes magazine noted earlier this year, when you punish the IRS you punish taxpayers.

Our information technology operation is still another area that the IRS has always been focused on. Our use of IT helps us do a better job of stopping potentially fraudulent returns before they are processed and allows us to keep making improvements to our operations and our website.  Our 2014 budget had $330 million for IT work related to implementing ACA. None of that money was provided. Since we are mandated by statute to implement ACA, that has meant that other vital IT projects have had to be shelved.

The solution to the budget problem that we face starts with the Administration’s Fiscal Year 2015 budget proposal, which was released last month. The Administration proposes a funding level of approximately $12.5 billion for the IRS for Fiscal 2015, which would reverse the erosion in our budget over the last several years.

I think it’s fair to ask what value the American taxpayer would get for that extra billion or so dollars that the Administration is proposing. It would help taxpayers get the service they need and strengthen compliance efforts in key areas, especially the two I mentioned earlier – refund fraud and offshore tax evasion. The budget proposal halts the declines in key enforcement personnel we’ve had and allows the IRS to again invest in necessary basic infrastructure.

Ultimately, it’s in everyone’s best interests to have an IRS that can do its job. We don’t believe that any member of Congress wants their constituents – be they taxpayers, tax preparers or financial advisors – to go through the aggravation of not getting the help they need from the IRS. They don’t want their constituents waiting in line for hours at a taxpayer assistance center or having trouble getting through on our toll free lines.

So my hope is that once we get beyond the issues surrounding the 501(c)(4) application process, and once the major tax-related provisions of the Affordable Care Act that I mentioned earlier are up and running, we can have a more normal discussion about our budget. I look forward to working with Congress to solve this budget problem. I hope that one of the legacies of my time as IRS Commissioner will be that we put the agency’s funding on a more solid and sustainable footing.

There’s another way in which Congress can help the IRS improve the work it does to assist taxpayers and ensure compliance with the tax laws, and that is to simplify the tax code. Congressman Dave Camp, Chairman of the House Ways and Means Committee, put it well when he introduced his tax reform proposal a few weeks ago. He said that the tax code is ten times the size of the Bible, without the good news. The IRS Taxpayer Advocate has estimated that individuals and businesses spend about 6.1 billion hours a year complying with the filing requirements of the tax code. All in an effort to determine and pay the right amount of taxes.

We can do better than that. And, while tax policy is the domain of the Treasury Department, the Administration and the Congress, those of us involved in tax administration are anxious to do whatever we can to assist in the process.”

Identity theft….what can you do when it happens to you

March 2, 2014
identity-theft-shoulderLike Share


Tips for Taxpayers, Victims about Identity Theft and Tax Returns

IRS YouTube Videos
ID Theft: IRS Efforts on Identity Theft

FS-2014-2, January 2014

Identity theft remains a top priority for the Internal Revenue Service in 2014. Identity theft is one of the fastest growing crimes nationwide, and refund fraud caused by identity theft is one of the biggest challenges facing the IRS. This year, the IRS continues to take new steps and strong actions to protect taxpayers and help victims of identity theft and refund fraud.

Stopping refund fraud related to identity theft is a top priority for the tax agency. The IRS is focused on preventing, detecting and resolving identity theft cases as soon as possible. The IRS has more than 3,000 employees working on identity theft cases. We have trained more than 35,000 employees who work with taxpayers to recognize and provide assistance when identity theft occurs.

Taxpayers can encounter identity theft involving their tax returns in several ways. One instance is where identity thieves try filing fraudulent refund claims using another person’s identifying information, which has been stolen. Innocent taxpayers are victimized because their refunds are delayed.

Here are some tips to protect you from becoming a victim, and steps to take if you think someone may have filed a tax return using your name:

Tips to protect you from becoming a victim of identity theft

  • Don’t carry your Social Security card or any documents that include your Social Security number (SSN) or Individual Taxpayer Identification Number (ITIN).
  • Don’t give a business your SSN or ITIN just because they ask. Give it only when required.
  • Protect your financial information.
  • Check your credit report every 12 months.
  • Secure personal information in your home.
  • Protect your personal computers by using firewalls and anti-spam/virus software, updating security patches and changing passwords for Internet accounts.
  • Don’t give personal information over the phone, through the mail or on the Internet unless you have initiated the contact or you are sure you know who you are dealing with.

If your tax records are not currently affected by identity theft, but you believe you may be at risk due to a lost or stolen purse or wallet, questionable credit card activity or credit report, contact the IRS Identity Protection Specialized Unit at 800-908-4490, extension 245 (Monday – Friday, 7 a.m. – 7 p.m. local time; Alaska and Hawaii follow Pacific time).

If you believe you’re a victim of identity theft

Be alert to possible identity theft if you receive a notice from the IRS or learn from your tax professional that:

  • More than one tax return for you was filed;
  • You have a balance due, refund offset or have had collection actions taken against you for a year you did not file a tax return;
  • IRS records indicate you received more wages than you actually earned or
  • Your state or federal benefits were reduced or cancelled because the agency received information reporting an income change.

If you receive a notice from the IRS and you suspect your identity has been used fraudulently, respond immediately by calling the number on the notice.

If you did not receive an IRS notice but believe you’ve been the victim of identity theft, contact the IRS Identity Protection Specialized Unit at 800-908-4490, extension 245 right away so we can take steps to secure your tax account and match your SSN or ITIN.

Also, fill out the IRS Identity Theft Affidavit, Form 14039. Please write legibly and follow the directions on the back of the form that relate to your specific circumstances.

In addition, we recommend you take additional steps with agencies outside the IRS:

More information is available at

Help if you have reported an identity theft case to the IRS and are waiting for your federal tax refund

The IRS is working to speed up and further streamline identity theft case resolution to help innocent taxpayers.

The IRS more than doubled the level of employees dedicated to working identity theft cases between 2011 and 2012.  As the IRS enters the 2014 filing season, we now have more than 3,000 employees working identity theft issues.

These are extremely complex cases to resolve, frequently touching on multiple issues and multiple tax years. Cases of resolving identity can be complicated by the thieves themselves contacting the IRS. Due to the complexity of the situation, this is a time-consuming process. Taxpayers are likely to see their refunds delayed for an extended period of time while we take the necessary actions to resolve the matter. A typical case can take about 180 days to resolve, and the IRS is working to reduce that time period.

If you have an open identity theft case that is being worked by the IRS, you need to continue to file your tax returns during this period.

For victims of identity theft who have previously been in contact with the IRS and have not achieved a resolution to their case, you may contact the IRS Identity Protection Specialized Unit, toll-free, at 800-908-4490. If you are unable to get your issue resolved and are experiencing financial difficulties, contact the Taxpayer Advocate Service toll-free at 877-777-4778.

More Information

It is a top priority for the IRS to help victims and reduce the time it takes to resolve cases. In addition, the IRS continues to aggressively expand its efforts to protect and prevent refund fraud involving identity theft before it occurs as well as work with federal, state and local officials to pursue the perpetrators of this fraud.

For more information, see the special identity theft section on and IRS Fact Sheet 2014-1, IRS Combats Identity Theft and Refund Fraud on Many Fronts.

Dealing with the IRS doesn’t have to be scary

February 9, 2014

irs-cartoon-3As licensed tax professionals, Enrolled Agents:

  • Stand between you and the IRS
  • Help you avoid common filing mistakes
  • Are experts in complicated tax situations
  • Understand letters that the IRS may send you
  • Can prevent you from paying additional taxes you might not owe
  • May represent you before all administrative levels of the IRS for audits, collections, & appeals
  • Are required by law to complete 72 hours of continuing education every 3 yeras
  • As members of the NAEA (National Association of Enrolled Agents) we are required to complete 90 hours
  • Specialize in Taxation

Why risk it?

Only Enrolled Agents are empowered by the US Department of the Treasury to represent taxpayers before the IRS. In contrast, CPAs and attorneys are state licensed and may or may not specialize in taxation.

Take the stress out of tax time

Enrolled Agents are the only federally licensed tax professionals. According to the IRS, it takes 30-40 hours to prepare your own tax return. We save you valuable time and provide peace of mind by helping you avoid many common filing mistakes.

Contact Kevin O’Reilly, EA today
(301) 883-1040 

The Premium Tax Credit to offset Obamacare expenses

February 1, 2014
funny-ambulance-death-raceStarting in 2014, if you get your health insurance coverage through the Health Insurance Marketplace, you may be eligible for the premium tax credit. This tax credit can help make purchasing health insurance coverage more affordable for people with moderate incomes. The open enrollment period to purchase health insurance coverage for 2014 through the Marketplace runs from Oct. 1, 2013, through March 31, 2014.

The Department of Health and Human Services administers the requirements for the Marketplace and the health plans they offer. For more information about your coverage options, financial assistance and the Marketplace, visit


In general, you may be eligible for the credit if you meet all of the following:

  • buy health insurance through the Marketplace;
  • are ineligible for coverage through an employer or government plan;
  • are within certain income limits;
  • file a joint return, if married; and
  • cannot be claimed as a dependent by another person.

If you are eligible for the credit, you can choose to:

  • Get It Now: have some or all of the estimated credit paid in advance directly to your insurance company to lower what you pay out-of-pocket for your monthly premiums during 2014; or
  • Get It Later: wait to get all of the credit when you file your 2014 tax return in 2015.

Getting the Credit

To qualify for the credit, you must get insurance through the Marketplace.

During enrollment through the Marketplace, using information you provide about your projected income and family composition for 2014, the Marketplace will estimate the amount of the premium tax credit you will be able to claim for the 2014 tax year that you will file in 2015.

You will then decide whether you want to have all, some or none of your estimated credit paid in advance directly to your insurance company.

Change in Circumstances

Report income and family size changes to the Marketplace throughout the year. Reporting changes will help make sure you get the proper type and amount of financial assistance and will help you avoid getting too much or too little in advance. Receiving too much or too little in advance can affect your refund or balance due when you file your 2014 tax return in 2015.

For example, if you do not report income or family size changes to the Marketplace when they happen in 2014, the advance payments may not match your actual qualified credit amount on your federal tax return that you will file in 2015. This might result in a smaller refund or balance due.

Claiming the Credit on Your Federal Tax Return

For any tax year, if you receive advance credit payments in any amount or if you plan to claim the premium tax credit, you must file a federal income tax return for that year.

If you choose to get it now: When you file your 2014 tax return in 2015, you will subtract the total advance payments you received during the year from the amount of the premium tax credit calculated on your tax return. If the premium tax credit computed on the return is more than the advance payments made on your behalf during the year, the difference will increase your refund or lower the amount of tax you owe. If the advance credit payments are more than the premium tax credit, the difference will increase the amount you owe and result in either a smaller refund or a balance due.

If you choose to get it later: You will claim the full amount of the premium tax credit when you file your 2014 tax return in 2015. This will either increase your refund or lower your balance due.

More Information

More detailed information about the credit is available in our Questions and Answers.
The Department of the Treasury and the IRS issued the following legal guidance related to the premium tax credit:

  • Final regulations on the rules for individuals who enroll in qualified health plans through Marketplaces and claim the premium tax credit.
  • Final regulations on the premium tax credit affordability test for related individuals.
  • Proposed regulations on determining minimum value of eligible employer-sponsored plans and other rules regarding the premium tax credit.
  • Notice 2013-41 on determining whether or when individuals are considered eligible for coverage under certain Medicaid, Medicare, CHIP, TRICARE, student health or state high risk pool programs.

An electronic flyer (Publication 5120) and trifold (Publication 5121) entitled “Facts about the Premium Tax Credit” are available for public use and distribution.

Hot Topics in Tax including tax law changes and how to avoid an IRS audit

January 1, 2014

unnamedIMA’s National’s Capital Chapter asked us to give a presentation on “Hot Topics in Tax” which included key changes for 2014, impact of the Affordable Health Care Act, tax credits to offset insurance premiums, IRS collections and appeals, and other topics.

The IMA (Institute of Management Accounting) in an international organization that has over 60,000 member nationwide and 800 members locally. They are the organization that created and implements the CMA (Certified Management Accountant) certification which is highly sought after. Our academy, Emerald Tax Academy, offers a pre-licensing program to help students pass this test. You can find out more about this program here.

I have included some information from the presentation here. If you want a full pdf of the presentation with handout, please let us know through out contact page.

What is the penalty for not having health care?

Penalty “Shared Responsibility Payment”
◦2% or $325, 2.5% $695 (inflation adjusted)

Company penalty
$2,000 per employee ($167/month)
$2,400 per employee ($250 /month)

What employers need to know…

How to determine whether they are an Applicable Large Employer (ALE)
Definition of an ALE:
•Average of 50 or more full-time employees and full-time equivalents in the past calendar year
•Full-time = Per calendar month, average of at least 30 hours of service per week OR 130 hours of service per calendar month

What you need to know for 2015…
Individual Shared Responsibility §5000A
Starting in 2015, everyone must either:
Have Minimum Essential health Coverage (MEC)
OR Have a Coverage Exemption
OR Make a Shared Responsibility Payment

Minimum Essential Coverage (MEC) includes:
◦Employer-sponsored, including COBRA and retiree coverage
◦Coverage purchased in individual market and the new Marketplace
◦Medicare, including Medicare Advantage
◦Medicaid and Children’s Health Insurance Program (CHIP)
◦TRICARE and certain types of Veteran’s health coverage

Some tax prepares up to old tricks

December 7, 2013

4366183383_b95b2a2fd6_z-e1302784883675I wasn’t sure what to wright about this week and then I noticed a person I knew in the industry posted an ad for work in their tax office. This office posted the same ad everyone does this time of year that runs a “jiffy lube” style office. This is an office that starts up in January and closes late March. They pretend to be open the rest of the year, but that is simply because they were forced into a one year lease and try to figure out how to make money there the reminder of the year.

For tax season the formula is simple: hire a bunch of people that know nothing about taxes and train them on salesmanship….simply put to close the sale on the customer and pray hard that the software can actually handle their tax situation. These places pray on those with simple returns and are ripe with tax fraud.

There are currently zero requirements to become a tax preparer. The IRS is working to change this. So, in order to be sure you are actually talking to a knowledgeable tax person, seek one who is an Enrolled Agent, CPA, or RTRP. There are lawyers that do tax returns, but that is a very expensive proposition for most tax payers.

I listed a few examples of ads I saw today looking for tax prepares with zero experience, but who had sales experience. That should tell you all you need to know.


Tax office’s advertisement on Facebook (notice the part about experience):

“I am looking to hire someone for tax season for the office. Tax experience is NOT required. Sales/Customer Service experience is required. Paid weekly plus bonuses. Email me with a brief resume. Do not message me, do not call me and do not stop by my office. We are starting interviews this coming Thursday.


Liberty Tax advertisement on LinkedIN:

“Liberty Tax Service – Our CEO John Hewitt’s vision is to be the #1 Tax Preperation Company in the World by 2020.

Job Description:


Open House Thursday, October 3rd

Very busy growing offices hiring for the following locations:
Ballard and Capital Hill Area”


This comes from H&R Block’s owns web site:

“No previous experience preparing taxes? H&R Block offers a beginner course to give you the skills you need to launch your tax preparation career.

Enrollment in, or completion of the H&R Block Income Tax Course is neither an offer nor a guarantee of employment. Additional qualifications may be required. Enrollment restrictions apply. Book or other fees may also apply. Additional training may be required in MD and other states. This course is not intended for, nor open to any persons who are either currently employed by or seeking employment with any professional tax preparation company or organization other than H&R Block. During the course, should H&R Block learn of any student’s employment or intended employment with a competing professional tax preparation company or service, H&R Block reserves the right to immediately cancel the student’s enrollment. In the event of such cancellation, the student will not be entitled to a refund of any fees paid. Valid at participating locations only. Void where prohibited. H&R Block is an equal opportunity employer.”

Phishing and Other Schemes Using the IRS Name

November 6, 2013

phishing-550x412The IRS periodically alerts taxpayers to schemes that fraudulently use the IRS name, logo or Web site clone to to gain access to consumers’ financial information in order to steal their identity and assets.

The scams may take place through e-mail, fax or phone. When they take place via e-mail, they are called “phishing” scams. The IRS website has information that can help you protect yourself from tax scams of all kinds. Search the site using the term: phishing.

The following is a list of known schemes:

  • The IRS warned consumers about a sophisticated phone scam targeting taxpayers, including recent immigrants, throughout the country. Victims are told they owe money to the IRS and it must be paid promptly through a pre-loaded debit card or wire transfer. If the victim refuses to cooperate, they are then threatened with arrest, deportation or suspension of a business or driver’s license.  [Added October 2013]
  • The IRS warns consumers about a new tax scam that uses a website that mimics the IRS e-Services online registration page. ‪The actual IRS e-Services page offers web-based products for tax preparers, not the general public. The phony web page looks almost identical to the real one. The IRS gets many reports of fake websites like this. Criminals use these sites to lure people into providing personal and financial information that may be used to steal the victim’s money or identity. ‪The address of the official IRS website is Don’t be misled by sites claiming to be the IRS but ending in .com, .net, .org or other designations instead of .gov. [Added October 2012]
  • A combination email and text message phishing scam that appears to be from the IRS lures people to a malicious website. The false message informs recipients that a federal tax transaction recently initiated from their checking account was &quotrejected by the Electronic Federal Tax Payment System.” The scammer’s true email address is masked as a legitimate IRS account ( Do not fall for this scam – the IRS does not initiate contact with taxpayers by email or social media to request personal or financial information. [Added August 2012]
  • A 2012 phishing scam involves a bogus email informing recipients that they will be penalized up to $10,000 for failing to a tax return on time.  The scam references a false deadline of January 31, 2012 and Section 6038 and can include the subject line, &quotPenalty for not filing tax return on time.” The email directs taxpayers to a phony web site that appears to be the official IRS site. Taxpayers who click on the email link are taken to a phony site and asked to provide personal or financial information that can be used by scammers and identity thieves. The alleged penalty and the deadline are both fictitious.  The tax deadline for 2012 is April 17, 2012. The IRS does not initiate contact with taxpayers by email or any social media tools to request personal or financial information. [Added February 2012]
  • A malicious e-mail, which claims to come from the IRS Tax Forums, requests that recipients register for this event for tax professionals by using an attached registration form.  This is not a legitimate request from the IRS.  The email contains a malicious attachment and a malicious URL. Do not open the attachment or click on the links provided in the email. The IRS does not send registration forms by e-mail but makes them available instead on the Nationwide Tax Forums Website. If you receive this email please forward it to and then delete the email. [Added July 2011]
  • This phishing e-mail, which claims to come from the IRS, references the president and theMaking Work Pay provision of the 2009 economic recovery law. It says that there is a refundable credit available to workers, consumers and retirees that can be paid into the recipient’s bank account if the recipient registers their account information with the IRS. The e-mail contains links to register the account and to claim the tax refund. In reality, most taxpayers receive their Making Work Pay tax credit, which was designed for wage earners, in their paychecks as a result of decreased tax withholding, not as a lump sum distribution from a federal fund. Additionally, consumers and retirees who are not wage earners are not eligible for this tax credit.[Added October 2009]
  • In this phishing scheme, recipients receive an e-mail claiming to come from the U.S. Department of the Treasury notifying them that they will receive millions of dollars in recovered funds or lottery winnings or cash consignment if they provide certain personal information, including phone numbers, via return e-mail. The e-mail may be just the first step in a multi-step scheme, in which the victim is later contacted by telephone or further e-mail and instructed to deposit taxes on the funds or winnings before they can receive any of it. Alternatively, they may be sent a phony check of the funds or winnings and told to deposit it but pay 10 percent in taxes or fees. Thinking that the check must have cleared the bank and is genuine, some people comply. However, the scammers, not the Treasury Department, will get the taxes or fees. [Added October 2009]
  • In a new scam, both a form and cover letter, supposedly from the IRS, are faxed to people with instructions to fax the completed form back to the number contained in the form. The letter says that the IRS requires an update of the recipient’s tax information and promises to deposit a nominal tax refund to the recipient’s bank account in return. The form is a &quotsubstitute and recertification” Form 1040, titled “Certificate of Current Status of Beneficial Owner For United States Tax Recertification & Withholding.” The form requests detailed personal and financial information, such as mother’s maiden name and bank account and PIN numbers, that can be used to steal the identity and access the bank accounts of anyone who responds to this scam. In reality, there is no such form and the IRS does not ask taxpayers to provide the type of information specified on the form. [Added June 2008]
  • Some people have received phone calls about the economic stimulus payments, in which the caller impersonates an IRS employee. The caller asks the taxpayer for their Social Security and bank account numbers, claiming that the IRS needs the information to complete the processing of the taxpayer’s stimulus payment. In reality, the IRS uses the information contained on the taxpayer’s tax return to process stimulus payments, rather than contacting taxpayers by phone or e-mail. [Added April 2008]
  • An e-mail claiming to come from the IRS about the &quot2008 Economic Stimulus Refund” tell recipients to click on a link to fill out a form, apparently for direct deposit of the payment into their bank account. This appears to be an identity theft scheme to obtain recipients’ personal and financial information so the scammers can clean out their victims’ financial accounts. In reality, taxpayers do not have to fill out a separate form to get a stimulus payment or have it directly deposited; all they had to do was file a tax return and include direct deposit information on the return. [Added April 2008]
  • A scheme in which a tax refund form is e-mailed, supposedly by the Taxpayer Advocate Service (a genuine and independent organization within the IRS which assists taxpayers with unresolved problems), is particularly blatant in the amount and type of information it requests. The top of the form tells the recipient that they are eligible for a tax refund for a specified amount. The form asks for name, address and phone number and a substantial amount of financial information, such as bank account number, credit card number and expiration date, ATM PIN number and more. It also asks for mother’s maiden name (frequently used by many people as an account security password). At the bottom is a phony name and signature, claiming to be that of the Taxpayer Advocate. The implication is that the taxpayer must fill in and submit the form to receive a tax refund. In reality, taxpayers claim their tax refunds through the filing of an annual tax return, not a separate application form. [Added April 2008]
  • A new variation of the refund scheme (see items below) is directed toward organizations that distribute funds to other organizations or individuals. In an attempt to seem legitimate, the scam e-mail claims to be sent by, and contains the name and supposed signature of, the Director of the IRS Exempt Organizations area of the IRS. The e-mail asks recipients to click on a link to access a form for a tax refund. In reality, taxpayers claim their tax refunds through the filing of an annual tax return, not a separate application form.
  • In a variation, an e-mail scam claims to come from  the IRS and the Taxpayer Advocate Service (a genuine and independent organization within the IRS whose employees assist taxpayers with unresolved tax problems). The e-mail says that the recipient is eligible for a tax refund and directs the recipient to click on a link that leads to a fake IRS Web site.
  • A scam e-mail that appears to be a solicitation from the IRS and the U.S. government for charitable contributions to victims of the recent Southern California wildfires has been making the rounds. A link in the e-mail, when clicked, sends the e-mail recipients to a Web site that looks like the IRS Web site, but isn’t. They are then directed to click on a link that opens a donation form that asks for personal and financial information. The scammers can use that information to gain access to the e-mail recipients’ financial accounts.
  • A recent e-mail scam tells taxpayers that the IRS has calculated their &quotfiscal activity” and that they are eligible to receive a tax refund of a certain amount. Taxpayers receive a page of, or are sent to, a Web site (titled “Get Your Tax Refund!”) that copies the appearance of the genuine “Where’s My Refund?” interactive page on the genuine IRS Web site. Like the real “Where’s My Refund?” page, taxpayers are asked to enter their SSNs and filing status. However, the phony Web page asks taxpayers to enter their credit card account numbers instead of the exact amount of refund as shown on their tax return, as the real “Where’s My Refund?” page does.
  • In a new phishing scam, an e-mail purporting to come from the IRS advises taxpayers they can receive $80 by filling out an online customer satisfaction survey. In addition to standard customer satisfaction survey questions, the survey requests the name and phone number of the participant and also asks for credit card information.
  • In another recent scam, consumers have received a &quotTax Avoidance Investigation” e-mail claiming to come from the IRS’ “Fraud Department” in which the recipient is asked to complete an “investigation form,” for which there is a link contained in the e-mail, because of possible fraud that the recipient committed. It is believed that clicking on the link may activate a Trojan Horse.
  • An e-mail scheme claiming to come from the IRS’s Criminal Investigation division tells the recipient that they are under a criminal probe for submitting a false tax return to the California Franchise Board. The e-mail seeks to entice people to click on a link or open an attachment to learn more information about the complaint against them. The e-mail link and attachment contain a Trojan Horse that can take over the person’s computer hard drive and allow someone to have remote access to the computer.
  • Another scheme suggests that a customer has filed a complaint against a company, of which the e-mail recipient is a member, and that the IRS can act as an arbitrator. This appears to be aimed at business as well as individual taxpayers.
  • One e-mail scam, fraught with grammatical errors and typos, looks like a page from the IRS Web site and claims to be from the &quotIRS Antifraud Comission” (sic), a fictitious group. The e-mail claims someone has enrolled the taxpayer’s credit card in EFTPS and has tried to pay taxes with it. The e-mail also says there have been fraud attempts involving the taxpayer’s bank account. The e-mail claims money was lost and “remaining founds” (sic) are blocked. Recipients are asked to click on a link that will help them recover their funds, but the subsequent site asks for personal information that the thieves could use to steal the taxpayer’s identity.
  • E-mails claiming to come from, and similar variations told the recipients that they were eligible to receive a tax refund for a given amount. It directed recipients to claim the refund by using a link contained in the e-mail which sent the recipient to a Web site. The site, a copy of the IRS Web site, displayed an interactive page similar to a genuine IRS one; however, it had been modified to ask for personal and financial information that the genuine IRS interactive page does not require.The Treasury Inspector General for Tax Administration (TIGTA) has found numerous separate Web sites in at least 20 different countries hosting variations on this scheme.
  • A bogus IRS letter and Form W-8BEN (Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding) asked non-residents to provide personal information such as account numbers, PINs, mother’s maiden name and passport number. The legitimate IRS Form W-8BEN, which is used by financial institutions to establish appropriate tax withholding for foreign individuals, does not ask for any of this information.

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