The IRS has announced that it will allow taxpayers to file their 2015 tax returns, even though they may not receive their Health Care information, and will not have to will file an amended return if there are discrepancies, as long as they rely on other reasonable sources. IRS Notice 2016–4 states “Nonetheless, some employees (and related individuals) who enrolled in coverage through the Marketplace but did not receive a determination from the Marketplace that the offer of employer-sponsored coverage was not affordable could be affected by the extension if they do not receive their Forms 1095-C before they file their income tax returns. As a result, for 2015 only, individuals who rely upon other information received from employers about their offers of coverage for purposes of determining eligibility for the premium tax credit when filing their income tax returns need not amend their returns once they receive their Forms 1095-C or any corrected Forms 1095-C. Individuals need not send this information to the Service when filing their returns but should keep it with their tax records.”

The basic information regarding Health Care Forms can be found at Questions and Answers about Health Care Information Forms for Individuals

Following up my previous post, the IRS has now sent out new letters telling everyone they had the wrong date on the previous letter, as I discussed. I wonder how much that cost in postage? Or are they just subsidizing the U S Postal Service?

It was announced this week that letters were sent out giving taxpayers an identity theft pin number for filing their 2015 tax returns.

Unfortunately, they did not do enough proofreading and the letters say that the pins are supposed to be used for filing the 2014 tax returns which have come and gone, rather than saying they are supposed to be used for the 2015 tax returns. Please be advised that this is a typo and these pin numbers can be used when you electronically file your 2015 tax return in the next several months.

“Due to an error, taxpayers are receiving Identity Protection PIN letters with an incorrect year listed,” the IRS said in a statement. “Taxpayers and tax professionals should be advised the IP PIN listed on the CP 01A Notice dated January 4, 2016 is valid for use on all individual tax returns filed in 2016. The notice incorrectly indicates the IP PIN issued is to be used for filing the 2014 tax return when the number is actually to be used for the 2015 tax return. The IRS emphasizes the IP PIN listed on the CP 01A notice is valid for the 2015 returns. Taxpayers and their tax professionals should use this PIN number for 2015 tax returns, which the IRS will begin accepting from taxpayers starting Jan. 19, 2016. The IRS apologizes for the confusion and any inconvenience.”

I received a fake IRS phone call this morning and I had to smile because I was pulling into the driveway of a client for an IRS audit. If they had called 10 minutes later, I could’ve handed the phone to a real IRS agent.

The person on the phone call stated – This is Joe Smith from the IRS and I am calling because the IRS has filed a lawsuit against you. I hung up the phone at that point and I thought I would share how I knew it was a fake.

First, IRS agents are required to identify themselves, both by their name AND ID number. The fact that they left out their number was a red flag.

Also, you will get numerous computer-generated letters, including several certified letters from the IRS before they even assign a case to a real person. The fact that I had not received any correspondence was another red flag. And let me add here  the importance of keeping your address up-to-date with the IRS and notifying them of any change of address.

Finally, the statement that the IRS has filed a lawsuit against me was ridiculous. For the most part, the IRS does not file lawsuits unless there is criminal activity. And, I promise you, you would have had many meetings with the IRS prior to them commencing any lawsuit. What the IRS may do is file a lien against your property or a levy against your wages or bank account.

The bottom line is if you ever get a phone call from the IRS and you have not had any prior contact, it is probably a fraud. If they tell you they are sending a Marshall to arrest you if you don’t pay, that doesn’t happen. My recommendation, if you there may be some validity to it, ask them what address they have on file for you and then ask them to mail you a copy of the IRS notice and you will respond within two weeks. If they start getting aggressive, hang up.

You may also want to ask for their supervisors information, so you can call them back, but I’ve heard that they will normally give you someone else connected with them who acts like a supervisor.

#IRSFraudulentCalls #IRSPhoneScams

IR-2015-133, Nov. 24, 2015

WASHINGTON —The Internal Revenue Service today simplified the paperwork and recordkeeping requirements for small businesses by raising from $500 to $2,500 the safe harbor threshold for deducting certain capital items.

The change affects businesses that do not maintain an applicable financial statement (audited financial statement). It applies to amounts spent to acquire, produce or improve tangible property that would normally qualify as a capital item.

The new $2,500 threshold applies to any such item substantiated by an invoice. As a result, small businesses will be able to immediately deduct many expenditures that would otherwise need to be spread over a period of years through annual depreciation deductions.

“We received many thoughtful comments from taxpayers, their representatives and the professional tax community, said IRS Commissioner John Koskinen. “This important step simplifies taxes for small businesses, easing the recordkeeping and paperwork burden on small business owners and their tax preparers.“

Responding to a February comment request, the IRS received more than 150 letters from businesses and their representatives suggesting an increase in the threshold. Commenters noted that the existing $500 threshold was too low to effectively reduce administrative burden on small business. Moreover, the cost of many commonly expensed items such as tablet-style personal computers, smart phones, and machinery and equipment parts typically surpass the $500 threshold.

As before, businesses can still claim otherwise deductible repair and maintenance costs, even if they exceed the $2,500 threshold.

The new $2,500 threshold takes effect starting with tax year 2016. In addition, the IRS will provide audit protection to eligible businesses by not challenging use of the new $2,500 threshold in tax years prior to 2016.

For taxpayers with an applicable financial statement, the de minimis or small-dollar threshold remains $5,000.

Further details on this change can be found in Notice 2015-82, posted today on IRS.gov.

Here is a link for questions about the new CA sick leave policy:

EDD website

#sicktime #CAnewlaw

The more I work with the EDD and see the court cases, the more I think the answer the question is – NO, you cannot be an independent contractor in California!

The IRS has a 20 point test to figure out whether you are an independent contractor or an employee. Some of the things it looks at is control, whether you have other clients and advertise yourself as a business, whether you set your own hours and your skill level.

California, it seems, has thrown this out the window and is focusing on two issues:

First, are the services you are providing integral to the business.

And, are you paid by the business.

The CA courts just ruled that the individuals working for Uber are employees because they are integral to the business. And to talk from personal experience, I just had a case where the EDD ruled that music teachers were employees of a music studio because they were integral to the music studio and they were paid by the music studio (not by the students directly). They ignored lack of control, having another business which was advertised to the public, having outside students and the other factors in the 20 point IRS test.

To make it even worse, I asked the EDD auditor “what about the following situation?” – I assisted another CPA during tax season a few years ago. I have my own CPA license and prepare over 200 tax returns annually. I went into his office whenever I add extra time and prepared tax returns without any supervision whatsoever. I asked her if I would be considered an employee and she said probably, because I was integral to the business and I was paid by the CPA not his clients!

So what do you do about this? Setting yourself up as a Corporation or other legal entity other than a sole proprietorship would probably solve the problem, but that creates other issues. And it creates the interesting scenario that two consultants  could be doing exactly the same thing but the sole proprietor would be considered an employee and the other consultant, operating as a Corporation, would be a contractor.

The other thing I recommend to everyone is to get a business license from anyone you are thinking of hiring as an independent contractor. This isn’t written in any of the books, but in my mind if someone does not have a business license, which is required by most cities, then you cannot treat them as an independent contractor. If they hove a license, then you can start looking at the other tests.