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Sunday April 30, 2017

Washington News

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IRS Help During Peak Tax Season

As the April 18 filing deadline approaches, millions of Americans are rushing to complete 2016 tax returns. In IR-2017-76, the Service announced extended hours for the IRS toll-free call centers.

There are new Saturday hours from 9 a.m. to 5 p.m. for the 800-829-1040 line. These new hours will be available on April 8 and April 15.

Taxpayer assistance centers are also available, but will require an appointment. You should call 844-545-5640 to set up your appointment.

In IR-2017-75, the Service reminded last-minute filers about IRS Free File. Twelve public software companies provide free commercial programs for taxpayers reporting income of $64,000 or less. All active duty military members with incomes of $64,000 or less may use any Free File program. Other taxpayers will have at least one free tax software preparation program available.

People with income of $54,000 or less, those with disabilities and the elderly may also qualify for the Volunteer Income Tax Assistance Program (VITA) or Tax Counseling for the Elderly (TCE). Trained volunteers will use tax software to help you file your return. You may use the VITA or TCE "locator tool" on www.irs.gov or the smart phone app IRS2GO to find a local site.

IRS Commissioner John Koskinen reports a smooth filing session for 2017. By March 31, the IRS received 93 million of the expected 152 million returns. The Service has issued 74 million refunds that total over $213 billion. The average refund is $2,900.

Koskinen reports, "The smooth operation of the filing season is a testament to the hard work and dedication of the IRS workforce. It is important to note that administering the filing season does not happen automatically or by accident, but because thousands of IRS employees spend months planning in advance for the filing season and then administering it effectively."

Chairman Brady and House Democrats Discuss Tax Reform


House Ways and Means Committee Chairman Kevin Brady (R-TX) met this week with Democratic members of the committee. Ranking Member Richard Neal (D-MA) noted agreement on one aspect of an infrastructure bill. He stated, "I did ask for one position that I thought was essential on the infrastructure side, which the Chairman agreed with me . . . that if they are going to use dynamic scoring for the tax cuts, I requested that we use dynamic scoring for infrastructure spending. He agreed with that."

Brady explained many of the provisions of the Republican "A Better Way" plan. Following the meeting, Neal urged committee Democrats to have "staff, in terms of their specialties, go through each one of the proposals the Republicans are going to lay out, spend some private time in the committee library for days or weeks if necessary so we can have a full understanding of the implications of what they are proposing."

The White House also reached out to House Democrats. After a meeting at the White House with moderate Democrats, White House Director of Legislative Affairs Marc Short stated, "Democrats have reached out to say that they want to help on this process. They recognize it has been 30 years since significant tax reform was done . . . I think there will be bipartisan interest to work on tax reform."

Speaker of the House Paul Ryan (R-WI) spoke at a Wisconsin forum. He emphasized efforts are under way to build agreement with House, Senate and White House Republicans. Ryan and Brady continue to encourage use of the border adjustable tax (BAT). At the Wisconsin event, Ryan noted, "It makes sense in tax law to shift your manufacturing and profits overseas. Right now the American tax code tells the American producer, 'outsource your supply chain, make your stuff overseas, then bring it back into America.' We do not want to keep incentivizing that. We want it to make sense to make things in America."

However, Senate Republicans remain very cool to BAT. Sen. Chuck Grassley represents Iowa and feels that the BAT could increase costs for imported fuels and chemicals. Grassley commented, "If the Senate is going to move ahead on a tax bill, I do not think anybody is getting in the weeds about border adjustment over here."

Editor's Note: The obvious challenge for tax reform is to find a new tax with over $1 trillion in revenue to pay for the rate reductions. Brady and Ryan support the BAT, but Senate Republicans do not yet agree that this is a good tax increase. A national media publication this week reported the White House is considering two other options – a value added tax (VAT) or a carbon tax as potential alternatives to the BAT. These three taxes are not popular, but a large new tax will be needed if there is to be a revenue-neutral tax reform bill.

IRS Launches Private Debt Collection


In IR-2017-74, the Service outlined the new plan to use private companies for tax debt collections.

In 2015, Congress authorized the new program. Most tax collection activity will continue to be managed by IRS personnel. However, some tax obligations are older and are not being pursued by the IRS.

These older tax debts may be transferred by the IRS to CBE Group of Cedar Falls, Iowa; Conserve of Fairport, New York; Performant of Livermore, California or Pioneer of Horseheads, New York. Only these four private collection companies are authorized to work with the IRS.

There are specific procedures for each account referred for private collection. First, the IRS will send a letter to the taxpayer giving notice that an account has been transferred. The notice will also include Publication 4518, "What You Can Expect When the IRS Assigns Your Account to a Private Collection Agency." Second, there will be a letter from the private collection agency. The private collection agency must also comply with the Fair Debt Collection Practices Act.

Taxpayers contacted by the private agency may set up various payment plans. All payments must be made to the IRS. Checks should be made out only to "U.S. Treasury."

Taxpayers also must exercise caution to avoid being victimized by phone scams. IRS Commissioner John Koskinen cautioned, "Here is a simple rule to keep in mind. You won't get a call from a private collection firm unless you have unpaid tax debts going back several years and you have already heard from the IRS multiple times. The people included in the private collection program typically already know they have a tax issue. If you get a call from someone saying they are from one of these groups and you have paid your taxes, that is a sure sign of a scam."

Taxpayers are urged to check their potential debts on www.irs.gov/balancedue. The IRS debt collectors will not demand immediate payment with a debit card, gift card or electronic fund transfer.

All payments will be to the U.S. Treasury. The private collectors will not threaten you with arrest by the local police.

There are payment options to keep in mind. If your tax debt is $50,000 or less, you may go to www.irs.gov and search for the "Online Payment Agreement."

If you have difficulty paying your debt, you may qualify for the "Offer in Compromise" program. The IRS website includes an "Offer in Compromise Pre-qualifier" that you may use to check whether or not you qualify for this program.

Editor's Note: Congress debated for years before authorizing private tax debt collectors. Commissioner Koskinen is obviously concerned about an increased risk of tax fraudsters claiming to represent the designated tax collection companies. All taxpayers are urged to be cautious, especially about any organization that contacts you and demands immediate payment.

Applicable Federal Rate of 2.6% for April -- Rev. Rul. 2017-8; 2017-14 IRB 1 (16 Mar 2017)


The IRS has announced the Applicable Federal Rate (AFR) for April of 2017. The AFR under Section 7520 for the month of April will be 2.6%. The rates for March of 2.4% or February of 2.6% also may be used. The highest AFR is beneficial for charitable deductions of remainder interests. The lowest AFR is best for lead trusts and life estate reserved agreements. With a gift annuity, if the annuitant desires greater tax-free payments the lowest AFR is preferable. During 2017, pooled income funds in existence less than three tax years must use a 1.2% deemed rate of return. Federal rates are available by clicking here.

Published April 7, 2017


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