IRS Theft and Scams

IRS Theft and Scams

Unfortunately, there are some people who refuse to earn an honest living.  Recently, a growing number of people have been impersonating agents from the IRS or another tax agency in order to collect confidential information and steal tax refunds. There are things you can do to prevent becoming a victim.

IRS-Impersonation Telephone Scam

An aggressive and sophisticated phone scam targeting taxpayers, including recent immigrants, has been making the rounds throughout the country. Callers claim to be employees of the IRS, but they are not. These con artists sound convincing when they call. They use fake names and bogus IRS identification badge numbers. They may know a lot about their targets, and they usually alter the caller ID to make it look like the IRS is calling.

These criminals appear to be targeting seniors and people who have telephone numbers published in printed phone directories. If your phone number is in a directory, you may wish to instruct the directory to remove your address from their publication.

Potential victims are told they owe money to the IRS, and it must be paid promptly through a pre-loaded debit card, wire transfer, or a cash payment. If the target refuses to cooperate, they are then threatened with arrest, deportation, or suspension of a business or driver’s license. In many cases, the caller becomes hostile and insulting.

If the phone isn’t answered, the scammers may leave an “urgent” callback request.

If you have been filing your tax returns and paying your taxes, the IRS can and will use your latest address to contact you. The IRS is required by law to correspond multiple times well in advance of directly contacting you by phone or visit. The IRS is required to mail letters in order to comply with their own rules concerning collection activities and statutes of limitations.

Note that the IRS will not typically:

  1. Call to demand immediate payment, nor will the agency call about taxes owed without first having mailed you a bill;
  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; or
  6. Use email for collection activities. The IRS does not permit any collection activities to occur via email.

What to Do if You Become a Target

Never provide any personal information to anyone who calls you, ever. Don’t provide your name, address, phone number, social security number, credit card numbers, banking information, email address, or anything else.

If you receive a phone call from someone claiming to be from the IRS, and you suspect they are not an IRS employee, don’t provide any personal information. Trust your instincts. We deal with the IRS from time to time, and they don’t get abusive and call people names. If you get a call from such a person, they are not from the IRS.

Record the employee’s name, badge number, call back number and caller ID if available. (The IRS ID (Badge) number is a ten digit number.) Call 1-800-366-4484 to determine if the caller is an IRS employee with a legitimate need to contact you.

If the person calling you is an IRS employee, do call them back, after speaking with your tax return preparer. Your CPA or tax return preparer is on your side, and will protect your interests.  Don’t act alone, and don’t become a victim.

If you are confident that it was a scam artist, you can report them at or by forwarding the email to

Fraudulent IRS Notices Alert

Fraudulent IRS Notices Alert

By David P. Dillwood, CPA, Partner

About this time of the year, the IRS sends out a flurry of notices to taxpayers alleging a variety of wrongdoing, ranging from mailing in tax forms late to not reporting all of the income which should have been reported.  The notice will claim that there is additional tax, penalties and interest due, usually in a small to annoyingly not-quite-large amount.  The first reaction in seeing correspondence from the IRS is dread.  They like it that way.  They encourage that reaction.  When the envelope is opened and there is a notice of an amount due, say $49, it is often met with a reaction of (somewhat) relief.  In many cases, thinking that it will not pay to do battle with the IRS over such a relatively small amount, the taxpayer simply writes a check to pay the balance, and dutifully sends it in.  The sad part is that most of the time, the error is not the taxpayer’s error, it is the IRS who is in error.

Many of the notices assert that a form was filed late.  For paper filed forms, we always recommend that our client use certified mail with return receipt requested for any document sent to the tax authorities.  Forms that are filed electronically automatically produce confirming evidence of filing and acceptance by the IRS.  Too many important things are date dependent to trust that the US Postal Service and the IRS will promptly deliver and record receipt of correspondence in a timely manner.  Certified mail with return receipt requested is the best way to prove that a package was mailed on the day you mailed it.  This alone could save you lots of money and headache.  In most cases, the monetary penalties for late filing a return are significant enough to warrant the extra step in using certified mail.  What many people forget or don’t know is that there can be other, far more onerous consequences to a late filed return.  Many tax elections, which allow taxpayers to claim favorable treatment for items on their tax returns must be included in a timely filed tax return.  If the election is with a late filed return, the election is invalid.  So while you may be concerned with the notice and a few hundred dollars of assessment, the problem may be far greater.  It could result in thousands of dollars, or even more in extra taxes over time.

Other notices claim that the taxpayer left something off of their return when they prepared it.  The government is relying on their computers to match the amounts taxpayers reported on their returns with the amounts reported to them by banks, brokerage houses and others who issued forms 1099 for the year.  In many cases, there is a problem with the amount in the government’s computer, or a slight difference between what is in the computer and the amount reported on the tax return.  The procedure is to treat any amounts on the taxpayers return as accepted, and then add the amounts from the government system which do not match an amount in the taxpayer’s forms.  In many cases, taxpayers combine stock or mutual fund sales which were reported separately to the IRS by the brokerage house.  This could result in a double counting of the gain or in the worst case, a double counting of the gross proceeds from the transaction.  We have found that in nearly all cases, the government’s notice is incorrect and the amount requested by the government is substantially overstated.  Usually a letter with copies of documents which prove the taxpayer position is enough to have the government reverse their position.

The Franchise Tax Board is also guilty of sending out fraudulent attempts to collect additional tax, routinely claiming that taxpayers aren’t entitled to claim head of household status when they are, and questioning dependency credits.

While it may seem like a lot of trouble to respond to the erroneous notice in order to have it corrected versus just paying the amount requested, taxpayer feedback is an important part of the ongoing integrity of our tax system.  In some ways, responding to erroneous notices demanding that they be corrected is the only way that the government will find out that they are making errors (or, as my cynical mind believes, that we caught them trying to get money they are not entitled to).  If the government does not receive this feedback, they will just continue making the errors or in the worst case, purposefully not correct problems and continue to issue fraudulent notices.

Marital Status, Community Property, and Tax Filing

Marital Status, Community Property, and Tax Filing

By Bruce Moeller, CPA, JD, Partner

Tax Filings –  What to do when your marital status changes during the year?

You got married this year. Congratulations!  You likely had a celebration with friends and family.   Or, you’re separated and in the process of “uncoupling?” You’ve probably met with an attorney. (Hopefully it isn’t too difficult a time and process for you.)

Either way, your tax situation just became substantially more complicated. We can help you understand how those rules affect your tax filings and help in many other ways. Sorting out all the issues can become quite involved, and a lot is at stake! Having a qualified and experienced tax advisor is vital, in addition to working with your qualified attorney. (This article doesn’t address important marital property issues, such as dividing assets, asset valuations, special tax considerations, spousal or child support, etc.) We understand what’s at stake and can help you.

What are the general rules – How do I report my income and file my tax returns?

For purposes of this short article, we’ll assume you are a California resident. California is one of nine community property states, and the rules apply to all residents unless they otherwise have a binding agreement (premarital or anti-nuptial) between themselves. Community property rules govern income and asset divisions. If you are unclear who “owns” the asset, the tax reporting also remains unclear. Ultimately, the court may resolve the issues for you, or you can mediate and agree privately.

Whether you are a husband-wife, or a same sex couple, the rules in California are now basically the same.

Filing Status (Married, Single, or ???)

Filing status is determined on the last day of the year. If you are not married you generally file as “single.” If you are married, you can either file a joint tax return with your partner, or file a return as “married filing separately.” Generally, filing separately causes higher tax, but there are many exceptions and reasons you should file separately. You may also meet an exception and file as “head of household” if you maintained a household for more than half the year for a qualifying household member other than your partner-spouse.

What Income do I report? What is Community Property?

You need to report your separate property income, withholding, payments, credits and deductions plus one-half of your share of the community property items. If you are required to file a tax return, you need to decide whether it’s community or separate, even if the issue is unresolved. If what you reported as separate turns out to be community (or vice-versa) you may need to file an amended tax return.

General Overlay – Community Property

Property acquired during a marriage is presumed to be community property. The basic idea is that property acquired by either partner-spouse during marriage through the time, energy and skill of one or both partner-spouses is treated as owned by the community.  In regard to tax returns, it means that you own one-half of the community income and one-half of the community deductions.

When the marital status changes during the year and the couple files separate returns, income, withholding, deductions and other tax items need to be allocate between community property and separate property. For example, if a couple marries on June 30th,   the community begins June 30th. Income and deductions prior to that date are generally considered “separate” property. When a couple uncouples, the key date is the “date of separation” which is generally defined as the date in which the parties separate with the intent not to return to the marriage.

During the year of marriage or dissolution, your tax professional will need to help you follow the time line and make appropriate distinctions and allocations between the parties.

New Tax Treatment for Section 105 Plans

New Tax Treatment for Section 105 Plans

The Patient Protection and Affordable Care Act (ACA) substantially changed health care law. One little known and surprising feature of the law is that it changed the rules for employers who reimburse employees for their health insurance costs. In the past, an employer could provide a non-taxable benefit to employees to help the employee pay for their health insurance costs.  


ACA has changed the Section 105 arrangements. Beginning in 2014, these health insurance reimbursement plans are considered “a separate health insurance plan” that must comply with all provisions of the ACA law.  Such plans do not generally meet the requirements of ACA , so these payments are no longer tax-free.  Employers who do not appropriately deal with this interpretation may be subject to a penalty of $100 per day, per employee, for non-compliance. For one employee out of compliance for one year, the penalty could be as much as $36,500!  The ACA enforcement team, the IRS, will be on the lookout to collect these penalties.


For 2014, there may be a “one-time” possible fix for this ACA dilemma.  Employers who provided this benefit in 2014 may be able to escape the penalty provisions if they amend payroll tax returns and treat the Section 105 benefit as taxable compensation, subject to income tax withholding, payroll, and related taxes.  Even so, the penalty may apply.  The rules and regulations surrounding the ACA are complex and expansive.


If you have a section 105 plan, or believe you have a plan that may be treated as one, please check with your employee benefit specialist or a qualified labor law consultant or attorney.

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