The IRS mails millions of notices and letters to taxpayers every year.   This can be extremely upsetting when receiving this form of communication, whether it is from the IRS or any other taxing authority.  Here are some suggestions to help formulate specific action plan for any correspondence received from the IRS (or from your state or local taxing authority).

Don’t Panic: You can usually deal with a notice simply by responding to it. You should immediately contact your tax adviser to discuss this matter in more detail.  Waiting or ignoring the notice can only compound and complicate your tax problems.  Each notice has specific instructions, so read your notice carefully because it will tell you what you need to do.  Follow the instructions very carefully and give a specific and detailed response to the tax issue in question.

Your notice will likely be about changes to your account, taxes you owe or a payment request.  However, your notice may ask you for more information about a specific issue.  Only respond to the particular issue and do not provide or discuss issues that are not being raised by the IRS.  Do not assume that the taxes owed are correct.  In many cases, the IRS calculates taxes without all the relevant facts.

If your notice says that the IRS changed or corrected your tax return, review the information and compare it with your original return.  Just because the IRS says you owe taxes does not mean that they are correct.

If you don’t agree with the notice, you must respond within the time limit set out in the notice.  Write a letter that explains why you disagree, and include information and documents you want the IRS to consider.  Mail your response with the contact stub at the bottom of the notice to the address on the contact stub.  Always include a copy of the notice they sent you.  If a fax number is provided, use it. Allow at least 30 days for a response from the IRS.  The safest route is to have your tax adviser craft a well-conceived response that is supported with references to the relevant facts of your situation and the tax law in question.

If you agree with the notice, you usually don’t need to reply unless it gives you other instructions or you need to make a payment. If you choose not to respond to the IRS be sure you understand the IRS letter and its implications, because the next step from them is usually an assessment of additional taxes.

For most notices, you won’t need to call or visit a walk-in center. If you have questions, call the phone number in the upper right-hand corner of the notice. Be sure to have a copy of your tax return and the notice with you when you call.  Waiting time could easily exceed an hour.  Be careful when talking with the IRS; they are not your friend.  Only speak to the specific issues in question.

Warning:  Be alert for tax scams:  The IRS sends letters and notices by mail. They don’t contact people by email or social media to ask for personal or financial information.

If you need my assistance, I can be reached at ssiesser@verizon.net

The Internal Revenue Service issued a new warning Friday to taxpayers about bogus phone calls from IRS impersonators demanding payment for a non-existent tax that they call the “federal student tax.”  The IRS noted that scammers continue to use varied strategies to trick people, in this case students. In this newest twist, they try to convince people to wire money immediately to the scammer. If the victim does not fall quickly enough for this fake “federal student tax,” the scammer threatens to report the student to the police. “These scams and schemes continue to evolve nationwide, and now they’re trying to trick students,” said IRS Commissioner John Koskinen in a statement. “Taxpayers should remain vigilant and not fall prey to these aggressive calls demanding immediate payment of a tax supposedly owed.”

On Tuesday, the Treasury Inspector General for Tax Administration announced the arrests of five IRS phone scammers in Miami. Scam artists frequently masquerade as being from the IRS, a tax company and sometimes even a state revenue department. Many scammers use threats to intimidate and bully people into paying a tax bill, the IRS noted. They may even threaten to arrest, deport or revoke the driver’s license of their victim if they don’t get the money.

Some examples of the varied tactics seen this year are:

• Demanding immediate tax payment for taxes owed on an iTunes gift card.
• Soliciting W-2 information from payroll and human resources professionals
• “Verifying” tax return information over the phone
• Pretending to be from the tax preparation industry

The IRS is urging taxpayers to stay vigilant against these calls and to know the telltale signs of a scam demanding payment.

The IRS noted that it will never:

• Call to demand immediate payment over the phone, nor will the agency call about taxes owed without first having mailed you a bill.
• Threaten to immediately bring in local police or other law-enforcement groups to have a taxpayer arrested for not paying.
• Demand that a taxpayer pay taxes without first giving the opportunity to question or appeal the amount owed.
• Require a taxpayer to use a specific payment method for taxes, such as a prepaid debit card.
• Ask for credit or debit card numbers over the phone.

If taxpayers get a phone call from someone claiming to be from the IRS and asking for money and the taxpayer doesn’t owe taxes, here’s what to do:

• Do not give out any information. Hang up immediately.
• Contact TIGTA to report the call. Use the “IRS Impersonation Scam Reporting” web page or call (800) 366-4484.
• Report it to the Federal Trade Commission by visiting FTC.gov and clicking on “File a Consumer Complaint.” Please add “IRS Telephone Scam” in the notes.
• If you or a client thinks taxes are owed, call the IRS directly at 1-800-829-1040.

What should you do if you receive a tax refund check from the IRS that is unexpected, or that you suspect is incorrect or otherwise in error.  Do not cash the check. Instead, contact the IRS to determine the nature of the check and to confirm its propriety. Any refund that you receive by mistake must be returned to the IRS, to help insure that you won’t be assessed any unnecessary interest or penalties.

If you receive an erroneous paper refund check from the IRS:

1. Do not cash the check.
2. Write or type “VOID” in the endorsement section on the back of the check.
3. Send the check to the correct IRS location listed here. The location is based on the city on the bottom text line in front of the words TAX REFUND, written on the refund check.
4. Do not staple, bend, or paper clip the check.
5. Include a note stating “Return of erroneous refund check because (and give a brief explanation of the reason for returning the check).”

You may also return the check in person, to your local IRS Taxpayer Assistance Center (“TAC”).

If you have already cashed the check, then you will need to repay the funds to the IRS as soon as possible. Follow these steps:

1. Submit a check for the refunded amount to the appropriate IRS location listed here. The location is based on the city on the bottom text line in front of the words TAX REFUND, written on the refund check. If you no longer have access to a copy of the check, call the IRS toll-free at 800-829-1040 and explain to the assistor that you need information to repay a cashed refund check.
2. Write on the check/money order: Payment of Erroneous Refund, the tax period for which the refund was issued, and your taxpayer identification number.
3. Include a brief explanation of the reason for returning the refund.
4. You may instead bring the repayment check to your local TAC.

It is important to note that repaying an erroneous refund in this manner may result in interest and/or penalties due to the IRS.

There is no guarantee that returning an uncashed refund check to the IRS will allow you to avoid interest and penalties. However, it is much more likely that IRS will assess interest and penalties if you cash the check and attempt to repay the funds later. Returning or repaying the refunded amount in a timely manner will also help mitigate any potential assessments.

The Internal Revenue Service and the Treasury Inspector General for Tax Administration continue to hear from taxpayers who have received unsolicited calls from individuals demanding payment while fraudulently claiming to be from the IRS.  Based on the 90,000 complaints that TIGTA has received through its telephone hotline, to date, TIGTA has identified approximately 1,100 victims who have lost an estimated $5 million from these scams.

The Internal Revenue Service issued a consumer alert providing taxpayers with additional tips to protect themselves from telephone scam artists calling and pretending to be with the IRS.

These callers may demand money or may say you have a refund due and try to trick you into sharing private information. These con artists can sound convincing when they call. They may know a lot about you, and they usually alter the caller ID to make it look like the IRS is calling. They use fake names and bogus IRS identification badge numbers. If you don’t answer, they often leave an “urgent” callback request.

“There are clear warning signs about these scams, which continue at high levels throughout the nation,” said IRS Commissioner John Koskinen. “Taxpayers should remember their first contact with the IRS will not be a call from out of the blue, but through official correspondence sent through the mail. A big red flag for these scams are angry, threatening calls from people who say they are from the IRS and urging immediate payment. This is not how we operate. People should hang up immediately and contact TIGTA or the IRS. These telephone scams are being seen in every part of the country, and we urge people not to be deceived by these threatening phone calls,” IRS Commissioner John Koskinen said. “We have formal processes in place for people with tax issues. The IRS respects taxpayer rights, and these angry, shake-down calls are not how we do business.”

The IRS reminds people that they can know pretty easily when a supposed IRS caller is a fake. Here are five things the scammers often do but the IRS will not do. Any one of these five things is a tell-tale sign of a scam. The IRS will never:

1. Call you about taxes you owe without first mailing you an official notice.
2. Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe.
3. Require you to use a specific payment method for your taxes, such as a prepaid debit card.
4. Ask for credit or debit card numbers over the phone.
5. Threaten to bring in local police or other law-enforcement groups to have you arrested for not paying.

When unsuccessful the first time, sometimes phone scammers call back trying a new strategy.

Other characteristics of these scams include:

• Scammers use fake names and IRS badge numbers. They generally use common names and surnames to identify themselves.
• Scammers may be able to recite the last four digits of a victim’s Social Security number.
• Scammers spoof the IRS toll-free number on caller ID to make it appear that it’s the IRS calling.
• Scammers sometimes send bogus IRS emails to some victims to support their bogus calls.
• Victims hear background noise of other calls being conducted to mimic a call site.
• After threatening victims with jail time or driver’s license revocation, scammers hang up and others soon call back pretending to be from the local police or DMV, and the caller ID supports their claim.

If you get a phone call from someone claiming to be from the IRS and asking for money, here’s what you should do:

• If you know you owe taxes or think you might owe, call the IRS at 1.800.829.1040. The IRS workers can help you with a payment issue.
• If you know you don’t owe taxes or have no reason to believe that you do, report the incident to the Treasury Inspector General for Tax Administration (TIGTA) at 1.800.366.4484 or at www.tigta.gov.
• If you’ve been targeted by this scam, also contact the Federal Trade Commission and use their “FTC Complaint Assistant” at FTC.gov. Please add “IRS Telephone Scam” to the comments of your complaint.

Remember, too, the IRS does not use email, text messages or any social media to discuss your personal tax issue. The IRS encourages taxpayers to be vigilant against phone and email scams that use the IRS as a lure. The IRS does not initiate contact with taxpayers by email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels. The IRS also does not ask for PINs, passwords or similar confidential access information for credit card, bank or other financial accounts. Recipients should not open any attachments or click on any links contained in the message. Instead, forward the email to phishing@irs.gov.

For more information on reporting tax scams, go to www.irs.gov and type “scam” in the search box.

Additional information about tax scams are available on IRS social media sites, including YouTube http://youtu.be/UHlxTX4rTRU?list=PL2A3E7A9BD8A8D41D. and Tumblr http://internalrevenueservice.tumblr.com where people can search “scam” to find all the scam-related posts.  If you need additional assistance, contact Steve Siesser at ssiesser@verizon.net

If you start a business, one key to success is to know about your federal tax obligations. You may need to know not only about income taxes but also about payroll taxes. Here are five basic tax tips from the IRS that can help get your business off to a good start.

1. Business Structure.  As you start out, you’ll need to choose the structure of your business. Some common types include sole proprietorship, partnership and corporation. A partnership must file an annual information return to report the income, deductions, gains, losses, etc., from its operations, but it does not pay income tax. Instead, it “passes through” any profits or losses to its partners. Each partner includes his or her share of the partnership’s income or loss on his or her tax return.  Partners are not employees and should not be issued a Form W-2. The partnership must furnish copies of Schedule K-1 (Form 1065) to the partners by the date Form 1065 is required to be filed, including extensions. You may also choose to be an S corporation or Limited Liability Company. You’ll report your business activity using the IRS forms which are right for your business type.  S corporations are corporations that elect to pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes. Shareholders of S corporations report the flow-through of income and losses on their personal tax returns and are assessed tax at their individual income tax rates. This allows S corporations to avoid double taxation on the corporate income. S corporations are responsible for tax on certain built-in gains and passive income at the entity level.  A Limited Liability Company (LLC) is a business structure allowed by state statute. Each state may use different regulations, and you should check with your state if you are interested in starting a Limited Liability Company.  Owners of an LLC are called members. Most states do not restrict ownership, and so members may include individuals, corporations, other LLCs and foreign entities. There is no maximum number of members. Most states also permit “single-member” LLCs, those having only one owner.

2. Business Taxes.  There are four general types of business taxes. They are income tax, self-employment tax, employment tax and excise tax. The type of taxes your business pays usually depends on which type of business you choose to set up. You may need to pay your taxes by making estimated tax payments.  All businesses except partnerships must file an annual income tax return.  Partnerships file an information return.  The form you use depends on how your business is organized.

3. Employer Identification Number.  You may need to get an EIN for federal tax purposes. Search “do you need an EIN” on IRS.gov to find out if you need this number. If you do need one, check out the IRS’s Interview-style online EIN application. No need to file a Form SS-4! If you don’t have your EIN by the time a return is due, write “Applied for” and the date you applied in the space shown for the number.

4. Accounting Method.  An accounting method is a set of rules that determine when to report income and expenses. Your business must use a consistent method. The two that are most common are the cash method and the accrual method. Under the cash method, you normally report income in the year that you receive it and deduct expenses in the year that you pay them. Under the accrual method, you generally report income in the year that you earn it and deduct expenses in the year that you incur them. This is true even if you receive the income or pay the expenses in a future year.

5. Employee Health Care.  The Small Business Health Care Tax Credit helps small businesses and tax-exempt organizations pay for health care coverage they offer their employees. A small employer is eligible for the credit if it has fewer than 25 employees who work full-time, or a combination of full-time and part-time. Beginning in 2014, the maximum credit is 50 percent of premiums paid for small business employers and 35 percent of premiums paid for small tax-exempt employers, such as charities.

For 2015 and after, employers employing at least a certain number of employees (generally 50 full-time employees or a combination of full-time and part-time employees that is equivalent to 50 full-time employees) will be subject to the Employer Shared Responsibility provision.  For additional information about starting a new business, contact Steve Siesser atssiesser@verizon.net