May 2015 Tax Snacks
Tax Snacks: Bite-size tax news and information on the fly
2nd quarter estimated income tax payments are due for individuals and taxable calendar-year corporations.June 30:
Form FinCEN 114 is due, reporting direct and indirect ownership or control of certain foreign financial holdings.
For IRS purposes (as well as nearly every state revenue agency), filing deadlines are met if the filing is mailed and postmarked no later than the date of the deadline. It is not necessary that the IRS receives the package before the deadline. This is referred to as the “timely mailed, timely filed” concept. However, you can’t simply hand the package to your Uncle Skippy or a bike courier to meet this filing requirement; only certain delivery services are approved to accept packages in a manner that their receipt date is treated as the filing date. When this rule was made, the U.S. Postal Service was the primary delivery service, but the law authorizes the Treasury Secretary to designate alternative delivery services. Currently, eight FedEx services and seven UPS services qualify, but only certain enumerated priority services may be used. For instance, UPS Next Day Air is valid, but UPS Ground Service is invalid. Until recently, some DHL services qualified, but they have been removed. Any U.S. Postal Service method always qualifies. A complete list of other qualifying services and more information may be found here.
The IRS has for many year had a Criminal Investigation (“CI”) division, and it announced this month that within it, IRS is forming a cybercrimes unit to tackle internet-related crimes, like identity theft. As recently as three years ago, only 3% of the CI’s activity involved identify theft, and has now climbed to 18%. Most of the breaches arise from private firms (recently Anthem, for instance), but the IRS becomes involved when SSNs and other identifying data are sold on the so-called “dark internet” to allow buyers to abscond with taxpayers’ refunds. Each field office will have a designated cybercrimes contact, who will work with specialists in the IRS and other branches of government. The IRS has had notable success bringing down criminals where others have failed (Al Capone comes to mind), and hopefully this will slow down the pace of tax-related identity theft. One of their first tasks will be responding to the incident described in the “Tax Snack” that follows.
Hackers who were able to obtain some personal information regarding taxpayers were able in turn to use that information to clear authentication hurdles and gather much more personal and identifying information by using the IRS’s own computer service. The hackers did this by using an IRS web page that offers taxpayers a “Transcript of Account,” which is a detailed report showing all activity of a particular taxpayer during a particular year. Among other things, it shows that person’s income, tax liability, refund amount, SSN, name and address. Ironically, the Transcript of Account is a good place for taxpayers to see whether any unauthorized activity has taken place on their accounts, and that very service was used to enable that activity! The IRS will be sending letters to around 200,000 taxpayers whose accounts were attempted to be accessed, and will offer free credit monitoring for 100,000 taxpayers who are the unfortunate victims of a successful attempt. More information can be found here.
Disclaimer of Liability: This publication is intended to provide general information to our clients and friends. It does not constitute accounting, tax, or legal advice; nor is it intended to convey a thorough treatment of the subject matter.