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ISED Home-Based Business Workshop Coming to Indianola

Iowans for Social and Economic Development (ISED) is hosting a free workshop in Indianola on Thursday about starting a home-based business. I’m not presenting at this workshop, but am passing this along for my friends at ISED.

When I was first starting my own business, I took an ISED course and it was a great experience. I still refer back to the things I learned in that course. I’ve also presented at ISED workshops before, and their workshops are always high quality.

You can view a pdf about the workshop here.

Taxpayer Identity Theft — Part 7

I’ve been telling the story of Wendy Boka and the identity theft nightmare she’s going through with the IRS. Her husband Brian died at age 31 in 2010. Someone stole his identity and filed a fraudulent tax return in his name. We’re still waiting for the IRS to sort this out.

Brian and Wendy were native Iowans. After Brian died, Wendy — a widow at age 29 — moved to Texas. The names are real and are used with Wendy’s permission.

This is the final installment of this series (for now). You can read the other parts of this series: 1, 2, 3, 4, 5, 6.

Here is what I have learned through this process:

  • The IRS is woefully under-equipped to deal with identity theft on tax returns.
  • The departments of the IRS don’t communicate with each other — or with themselves. Things I told the practitioner hotline were lost to the wind, as my conversations with them were not available to the collections department. And even within the collections department, it takes them 9+ weeks to open the mail, and not every call gets logged.
  • I really wish the IRS would tell you whose desk a tax return is sitting on. This is true even in cases not involving identity theft. It’s almost impossible to get answers when you call the IRS, because you — and the IRS rep you talk to when you call — don’t know which IRS employee is actually looking at the return.
  • Congress needs to do something to fix the problem with the Death Master File. It’s ridiculous that the government publishes something that is such a goldmine for identity theft.

I can kind of understand the length of time it takes to resolve these things. I know the IRS is under-staffed, so the long time-frame, while annoying, is not the thing that bothers me the most.

What bothers me the most is the lack of communication. From the start, there has been zero communication from the IRS, other than notices (probably computer-generated) from the collections department. Example: last August, 4 months into this saga,  I found out that the IRS needed Form 14039 and Brian’s death certificate in order to move forward. But I wouldn’t have known that if I hadn’t called them, because there had been no communication at all from the IRS.

Even now, the only things the IRS has sent Wendy are collection letters, threatening her for “not filing a tax return.” No acknowledgment that she was a victim of identity theft. No communication along the lines of “hey, we received your return and it’s in review” or anything like that. Nothing. Absolutely nothing beyond threatening collection letters.

This wraps up this story … for now. As of today, we still don’t have resolution. As I get updates (and hopefully closure), I will add additional parts. I am supposed to call the IRS in mid-October for another update, so look for a Part 8 then.

And remember to check out Wendy’s website for the perspective of a young widow trying to rebuild her life: http://www.wendyrebuilding.blogspot.com/

Taxpayer Identity Theft – Part 6

This is the story of Wendy Boka and her husband Brian. Brian died in January of 2010. Someone stole his identity and filed a fraudulent tax return in his name. Wendy and I are still trying to get the IRS to sort this out, all these months later.

The names are real and are used with Wendy’s permission.

—–

Read the other parts of the series: 1, 2, 3, 4, 5

In my call with the IRS in mid-May, they told me to call again in 60 days if the matter wasn’t resolved yet.

Of course, the matter wasn’t resolved by then. Indeed, we heard not a peep from the IRS in those 60 days. So I called.

The IRS rep mentioned that they would need a Form 14039 before they could do anything. I told them that we sent that to them last fall, along with Brian’s death certificate. The response was “Oh, you sent that already?”

Sigh.

Once I got through the typical “let me tell you what I have already told the IRS multiple times in phone calls and letters” phase, I was told that Wendy’s case is, quote, ”where it is supposed to be in the process.”

I was also told that the IRS has been so slammed with identity theft cases that they are months and months behind. (It’s been almost 16 months now on Wendy’s case.)

This time I was told to call again in 30 days, in mid-August — and I was told that things “should be” wrapped up by then.

But of course when I called in mid-August, things weren’t wrapped up. On the bright side, the IRS seemed to have finally updated their documentation, so I didn’t have to re-tell the story from the beginning again.

The IRS representative on the August call said Wendy’s tax return has bounced between the identity theft unit and the audit unit several times, and is finally with the identity theft unit again.

He also explained that part of the reason why it takes the IRS so long to resolve identity theft cases is is because these cases often involve undocumented workers, and the IRS has to be careful about stepping on the toes of other government agencies in going after these people.

I’ll wrap up the series (for now) with final thoughts in Part 7 on Wednesday.

Registration Deadline is Today for Health Care Reform Presentation

On Monday, August 20, I’ll be giving a presentation called “Obamacare, The Taxman, And You” through the Indianola Chamber of Commerce. My co-presenter will be Lisa Welshhons from Merit Resources.

We’ll be covering the things business owners and individuals need to know about health care reform. The presentation starts at 11:30 am Monday and will be held at the “Gallery Room” on the 2nd floor of the Wells Fargo building in Indianola. We have the room booked from 11:30 til 1:30, so there will be plenty of time for questions and discussion.

The registration fee is $15. This is a lunch and learn, so the fee includes your meal. You can contact the Chamber for more information – 515-961-6269.

Taxpayer Identity Theft – Part 5

This is the story of Wendy Boka’s saga with identity theft and the IRS. Her husband Brian died in January 2010 and someone stole his identity and filed a fraudulent tax return in his name. We’re still trying to get the IRS to sort this mess out — all these months later.

The names are real and are used with Wendy’s permission.

You can find out more about Wendy at her blog, http://www.wendyrebuilding.blogspot.com/.

—–

Read the other installments in this series: Parts 1, 2, 3 and 4.

During my call with the IRS in mid-May I learned some interesting information about the person who stole Brian’s identity.

The person filed a tax return showing $0 of income, $2,300 of tax withholding, and a $1,000 refundable education credit. This return was filed about one week before we tried e-filing the legitimate return.

To the IRS’s credit, they flagged the return as possibly fraudulent and sent out a notice to whatever address was shown on the return.

To the IRS’s discredit, they still haven’t resolved the situation.

So how did Brian’s identity get stolen? My guess is that someone looked on the “Death Master File.”

This is a file published by the government that gives all the information an identity thief could want. Basically, whenever someone dies, their name goes in this file, along with their date of birth, date of death and Social Security Number.

Accountants might be familiar with the Master Death File, but many average taxpayers are probably unfamiliar with it.

The IRS Taxpayer Advocate Service is aware of the problem and testified before Congress in late June to encourage lawmakers to limit access to the file.

Somehow I doubt lawmakers will do anything.

A common question that people have when they hear about this is: what can I do to protect myself? I honestly don’t know, other than to complain to your elected officials and get them to change the way the “death file” is handled.

Coming up in Part 6 on Monday — the saga continues with another call to the IRS!

Issue a 1099-C to a Deadbeat Client or Customer?

I’ve recently undertaken a bit of a research project with my friend Bruce McFarland, The Missouri Tax Guy. Bruce has a few clients who haven’t paid him (ironically, and perhaps a bit humorously, the deadbeat clients are CPAs!). Bruce was wondering if it would be okay to issue a Form 1099-C to the deadbeats.

This is my blog post on this topic. Bruce is posting his opinions today as well. You can find his post here.

Form 1099-C is issued when debt is canceled. The instructions to the 1099-C, and the code and regulations, only say that financial institutions and other businesses that are in the “business of lending money” are required to report canceled debt.

So unless your business is in the business of lending money, you aren’t required to issue a 1099-C to a non-paying client.

But are you prohibited  from doing so? It doesn’t appear so, at least not under tax law.

In IRS SCA 1998-020, the IRS tackles this subject and seems to conclude that it’s acceptable for businesses to issue a 1099-C to a non-paying client, even though such reporting is not required.

One thing the IRS memo points out is that even though it’s okay under tax law to issue a 1099-C to a deadbeat client, it might not be okay under other laws, such as laws relating to collection of debt. Since I’m not an attorney, I won’t go into that area.

Within tax law, it appears to be okay to issue a 1099-C to a deadbeat (or I suppose you could threaten to issue a 1099-C, just to scare them, even if you had no intention of actually doing it).

It’s All Right But It’s Not Okay — Or Should That Be, It’s Okay But It’s Not All Right?

Personally, I wouldn’t issue a 1099-C to a deadbeat client. I realize there may be some satisfaction in threatening a deadbeat and seeing them sweat. But I think it would cause more harm than good to go down the 1099-C route.

For example, in the June edition of the NATP “Tax Pro Monthly,” there was a story about someone getting sued for fraud because they issued a 1099-C to someone who owed them money. A court ruled in favor of the person who issued the 1099-C. That’s the good news. But the case shows that a recipient of a 1099-C is likely to fight and protest and threaten and make your life more difficult.  That’s why I say you’d be causing more harm than good by issuing a 1099-C.

I would just fire them, move on with my life and replace the deadbeat with a better client.

One Taxpayer’s Identity Theft Saga Part 4b – The Taxpayer’s Perspective

I’ve been blogging about Wendy Boka, a client of mine, who has been going through a ridiculous amount of trouble with the IRS over the theft of her deceased husband’s identity. So far, I’ve told 4 parts, and will have at least 8 or 9 total parts to the story.

Wendy was just 29 years old when Brian died — way too young to become a widow. Her and Brian were native Iowans but she moved to Texas after Brian died, as she was trying to put her life back together.

Wendy maintains a great blog, http://www.wendyrebuilding.blogspot.com/, where she blogs about the struggles of being a young widow. On Tuesday, she posted her thoughts about the identity theft. Here’s a small sample:

The left hand doesn’t know what the right hand is doing at the IRS, to put it simply.  The division in charge of processing returns, the division in charge of identity theft, and the division in charge of hunting down tax evaders all do their own thing without any communication or cross-reference.  I thought a phone call and letter from Jason would straighten all this out.  Instead, I continued to get those scary letters every few months.

Finally, Jason was able to get the letters to stop.  He simply had the nasty-gram people put a hold on those letters until the identity theft people can get this sorted out.  Eighteen months later, that’s all the progress that has been made.  I’m not getting letters threatening legal action anymore, but I still don’t have my tax refund that the government owes me, and more important — I don’t have resolution.  I don’t know what is happening with the scum that took my dead husband’s social security number and filed a fraudulent return.  I don’t know who that is, or whether that person has been caught.  I know he or she has created a painful nightmare for me and a lot of work for my tax advisor.

Today I have another call scheduled with the IRS so I can update them on what’s going on (that’s what they told me the last time I talked to them– that I had to call them to give THEM updates on what THEY are doing).

The last time I talked to the IRS, they told me Wendy’s case was “where it is supposed to be in the process.” However, if there’s no forward movement soon, we will need to escalate to Taxpayer Advocate Services and see if they can help.

One Taxpayer’s Identity Theft Saga – Part 4

This is the story of Wendy Boka’s saga with identity theft and the IRS. Her husband Brian died in January 2010 and someone stole his identity and filed a fraudulent tax return in his name. We’re still trying to get the IRS to sort this mess out — all these months later.

The names are real and are used with Wendy’s permission.

You can find out more about Wendy at her blog, http://www.wendyrebuilding.blogspot.com/.

—–

Read the previous parts of this story: Part 1, Part 2 and Part 3.

The person I talked to at the IRS in mid-May was confused about what was going on. I had to explain (again!) about the identity theft, that it was Brian’s identity that had been stolen but that he had died and the notices were being sent to his surviving spouse, Wendy. This seemed to boggle the mind of the IRS representative. They couldn’t understand why I was calling on behalf of Wendy when it was Brian’s identity that had been stolen.

After a ridiculous amount of re-explaining everything I had told them at least three times before, the collections department agreed to place another 60-day hold on further collection actions against Wendy.

I was told — again — to call in 60 days and “update them on what’s going on.” And again, I was told to call before the 60 days were up if we heard anything from the identity theft unit.

Of course, the 60 days came and went with nothing happening. There was another phone call with the IRS in July, which I’ll talk about in Part 6, but still no resolution. So to summarize: Brian died in January of 2010. Wendy moved to Texas that year to try to rebuild her life. And here we are, almost 31 months later, and Wendy still has no official closure because of this mess.

I did learn some interesting information from the IRS, though, about the fraudulent tax return that was filed in Brian’s name. I’ll share those details in Part 5 on Thursday.

One Taxpayer’s Identity Theft Saga – Part 3

This is the story of Wendy Boka’s saga with identity theft and the IRS. Wendy’s husband Brian died in January 2010. After Brian’s death, someone stole his identity and filed a fraudulent tax return in his name. We’re still trying to get the IRS to sort this mess out — all these months later.

Brian and Wendy were native Iowans, but Wendy moved to Texas after Brian’s death. You can find out more about Wendy at her blog,  http://www.wendyrebuilding.blogspot.com/. As time allows, Wendy will share her thoughts about the identity theft mess on her blog.

The names are real and are used with Wendy’s permission.

—–

Click here for Part 1 and here for Part 2.

The first notice from the IRS came in late December, 2011. The notice said that Wendy hadn’t filed a 2010 tax return and that the IRS would take collection action against her if she didn’t file the return immediately.

She had, of course, filed a 2010 tax return. I had talked to the IRS about this in August. We had sent them the forms they requested. But now they were saying she hadn’t filed a return.

So I prepared a letter in response to the notice, and mailed it to the IRS. I knew the IRS had received the letter because I sent it certified mail with return receipt. But as usual, we heard nothing back from the IRS … until another notice came in mid-March.  The IRS was again threatening to take collection action against Wendy unless she filed her 2010 tax return immediately.

So this time I called the IRS. The collections department was now handling her case, so that is who I talked to. They had no idea about the identity theft. I had to tell them the whole story, from the beginning.

Apparently the conversation I had with the IRS practitioner hotline in August wasn’t documented in anything the collections department could see. And apparently the IRS’s identity theft unit doesn’t talk to the collections department, either.

I asked about the letter I had sent to them in response to the December notice. If they had read that letter, it would have explained everything.

I was told that they had received the letter, but it hadn’t been processed yet. They received the letter in early January. This was the middle of March. Apparently it takes the IRS 9+ weeks to open the mail….

On the bright side, I did get the collections department to put a 60-day hold on further action. I was supposed to call again in mid-May, when the 60 days were up.

They also told me that if I heard anything from the identity theft department in the meantime, I was supposed to call and let the collections department know. Obviously the various departments at the IRS don’t communicate with each other, so I had to act as middleman.

But of course, the 60 days passed quietly, with no contact from anyone at the IRS.

As requested, I called the IRS again in May, at the end of the 60-day period. That was another fun phone call.

(Part 4 will appear on Tuesday.)

One Taxpayer’s Identity Theft Saga – Part 2

This is the story of Wendy Boka’s saga with identity theft and the IRS. Her husband Brian died in January 2010 and someone stole his identity and filed a fraudulent tax return in his name. We’re still trying to get the IRS to sort this mess out — all these months later.

The names are real and are used with Wendy’s permission.

Wendy and Brian were native Iowans. Wendy moved to Texas after Brian died. Wendy maintains a blog, http://www.wendyrebuilding.blogspot.com/, where she talks about the struggles of being a young widow. As time allows, Wendy will be blogging her thoughts on the identity theft saga as well.

—–

(Find Part 1 of the series here.)

When the e-file for Brian and Wendy’s 2010 tax return rejected, I assumed I had done something wrong, or that the software had done something wrong.

The printout of the rejection said Brian’s Social Security Number had already been used on a previously filed 2010 tax return. I once had an e-file reject because, instead of typing in the person’s Social Security Number, I entered an employer identification number from a W-2 instead. That was embarrassing, but easy enough to fix.

After I received the rejection notice, I double- and triple-checked Brian’s SSN. It was entered correctly.

So I assumed my software messed something up, and I submitted the e-file again. And again it rejected.

I called Wendy and told her what was going on. I asked her to call the IRS and see if they could tell her anything.

They couldn’t. In fact, the person she talked to just told her, brusquely, that she’d have to file the return on paper if we couldn’t get the e-file to go through.

So we filed on paper. This was mid-April, right before the filing deadline.

Months passed.

Wendy was owed a refund from this IRS, but the refund never came. In fact, no correspondence came from the IRS at all.

By August, I decided it was time to rattle the IRS’s cage. I had Wendy sign a power of attorney form and I called the IRS.

I was informed that in order for them to process the return, they would need a special form filled out (Form 14039) and a copy of Brian’s death certificate.

I don’t know why they didn’t tell us they needed these things at some point in the four months between when we filed the return and when I called.

I helped Wendy fill out the Form 14039, and she had to open up painful memories by finding Brian’s death certificate. By this time, Wendy had sold her and Brian’s house in Iowa and moved to Texas to try to put her life back together. This sort of thing was the last thing she needed.

But we sent the paperwork to the IRS, and then waited for a response.

And waited.

And waited.

Nothing at all from the IRS.

Then the ominous-sounding IRS notices started coming.

(The series continues with Part 3 on Friday.)

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