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I was around for the last quarter (roughly) of that year. So here is a giggle for y'all: less than two months before my 56th birthday I got carded! Was buying a bottle of wine at a new-to-me grocery store, in company with Gwen (the younger daughter). Cashier asks for my ID. I asked if she was serious and she said yes. Gwen & I both busted out laughing, I handed my license over, and the response was, "I don't believe that year." But she let me buy the wine...

Washington, D.C. (August 26, 2014) By Michael Cohn The Internal Revenue Service recovered $576 million in erroneously issued tax refunds last year thanks to outside tips provided by financial institutions and other sources such as tax preparers, more than double the amount from three years ago. A new report from the Treasury Inspector General for Tax Administration examined the IRS’s External Leads Program, which receives leads about questionable tax refunds identified by a variety of organizations, including financial institutions, brokerage firms, government and law enforcement agencies, state agencies and tax preparers. The questionable tax refunds include Treasury checks, direct deposits and prepaid debit cards. The program helps the IRS to recover erroneous tax refunds and save money, but the TIGTA report noted that improvements are needed to ensure that the IRS verifies the leads on a timely basis. The External Leads Program has grown from 10 partner financial institutions returning $233 million in calendar year 2010 to 258 partner financial institutions and partner organizations returning more than $576 million in calendar year 2013, the report noted. “The IRS’s External Leads Program has more than doubled the amount of questionable refunds returned over the past three years, thus saving tax dollars,” said TIGTA Inspector General J. Russell George in a statement. “However, opportunities exist to improve the program.” Since taking over the External Leads Program in January 2010, the IRS’s Wage and Investment Division has performed outreach in an effort to continuously increase the number of organizations participating in this program. Participation and the number of questionable refunds returned and the dollars associated with them have grown significantly. However, the IRS is not always verifying leads in a timely manner, and the verification time frame goals differ significantly based on the lead type, according to the report. The goals do not take into consideration the burden on legitimate taxpayers whose refunds are being held until verification is completed. In addition, the IRS inconsistently tracked the leads in multiple inventory systems, and the inventory systems did not provide key information such as how the lead was resolved, that is, whether the refund was confirmed as erroneously issued or legitimate. TIGTA recommended that the IRS establish more consistent time frames to verify the leads it receives based on an analysis of the current and historical lead verification data and, once established, communicate the verification time frames with its external partners. The report also suggested the IRS develop a process to ensure that leads are verified within established time frames. The IRS should also consolidate the current four lead inventory tracking systems into a single tracking system and ensure that key information is captured as to how each lead is resolved, according to the report. The IRS agreed with TIGTA’s recommendations. The IRS said it is evaluating the treatment streams and work processes associated with the various types of referrals received in the External Leads Program to identify appropriate time frames. The agency is also completing other systemic and procedural enhancements to improve the effectiveness of existing reporting capabilities in evaluating program quality and timeliness. In addition, the IRS is evaluating the feasibility and potential benefits of consolidating the four independent inventory tracking databases into one system. “The IRS is committed to the proactive detection of fraudulent refund claims and preventing their payment from occurring,” wrote Debra Holland, commissioner of the IRS’s Wage and Investment Division, in response to the report. “Unfortunately, those individuals who commit fraud against the U.S. taxpayers continually modify their tactics to evade or avoid detection, which sometimes results in the issuance of erroneous refunds. Since 2010, the IRS has reached out to financial institutions, government entities, federal agencies, software providers and other stakeholders to develop processes whereby those partners may alert the IRS to suspected refund fraud, and return those funds to the Treasury when the suspected fraud is confirmed.”

It really was like that, once upon a time, long, long ago. Sic transit gloria fisci.

I added a few minor words to my posts, underlined and bolded the important dates. I asked Karen Hoskins in person, if we would be held accountable for clients answers to the question about having qualified coverage for tax year 2014, since this question will determine if the taxpayer owes any "shared responsibility" payments. Due to the fact that there is no way to document or verify the answers from the taxpayer about this question (except those that received coverage through one of the exchanges), she said that there would be no verification process by the IRS, so there would be no liability on our part for verifying the answer. Now we all know that all our clients will answer that question truthfully and honestly.

I love that we have moved from the politics of this law to the mechanics of it. No matter what our opinion, this is the kinda stuff we need to know for our clients good. Thanks for the discussion. Tom Hollister, CA

I can remember the day when the IRS could answer some very difficult questions. Once I called and asked how to write off an investment in a worthless oil well. The person who answered the phone explained exactly how to do it. My client thought I was a genius when I took care of the write-off on his tax return.

And, of course, some states have very different rules for Std deductions [AR being one] so often they get the deduction on the state even if federal uses std.

Art of Accounting: Break-even Analysis August 8, 2014 By Edward Mendlowitz One of the best tools to evaluate a business and get a quick handle on the knowledge of the owner or manager is the break-even analysis. Break-even analysis is a simple calculation that tells how much sales are needed to break-even, and how much will be lost or earned when sales fall short of that amount or exceed it. A key part of this is to determine the “product lines” a business has and its direct cost structure. A simple explanation is to imagine a bar and restaurant. There are two basic product lines—liquor and food. Generally the direct costs for the bar are around 20 percent and the food around 35% percent. If bar sales are 40 percent of the total and food 60 percent, we can then get a weighted average of sales. This information can be applied to almost any business. Now, how I get this information is very insightful to me. I get it over lunch with my client—primarily new clients—and write it on a napkin. I believe most owners or managers should understand and have a handle on the product lines and the approximate direct costs. Most do, but some do not. I am appalled when clients do not have a clue about this information. This tells me a lot about them and how the business is being managed—it isn’t. I then draw up a proposal to provide a methodology for helping them get a better grasp and establish controls. For those that know, I test what they told me and then complete the B/E analysis for them. It then becomes one of their management tools. The more knowledgeable the client, the better it is to work with them. Edward Mendlowitz, CPA, is a partner in WithumSmith+Brown, PC, CPAs. He has authored 20 books and has written hundreds of articles for business and professional journals and newsletters plus a Tax Loophole article for every issue of TaxHotline for 27 years. Ed also writes a blog twice a week that addresses issues his clients have at www.partners-network.com. He is the winner of the Lawler Award for the best article published during 2001 in the Journal of Accountancy. He has also taught in the MBA graduate program at Fairleigh Dickinson University, and is admitted to practice before the U.S. Tax Court. Ed welcomes practice management questions and he can be reached at WithumSmith+Brown, One Spring Street, New Brunswick, NJ 08901, (732) 964-9329, [email protected].