Where is the Illinois Department of Revenue Taxpayer Ombudsman hiding? Our responde from Governor Rauner

Here is the form letter response to our letter requesting the restoration of the Taxpayer Ombudsman.

Where is the Illinois Department of Revenue Taxpayer Ombudsman hiding? Our letter to Illinois Governor Bruce Rauner

Bruce Rauner, Governor

Office of the Governor

207 State House

Springfield, IL 62706

Dear Governor Rauner,

In 2014 CEO.net ranked Illinois as one of the three worst states to do business in.  Here is one comment from CEO.net, “Illinois is rated in the worst category; their taxing scheme is deleterious (harmful) toward small business.The Illinois Dept of Revenue seems most adversarial with respect to small business support and promotion.”

As a Springfield based accountant for very small business I can tell you that things have gone from bad to worse at the Department.

Here are four examples:

A few weeks ago a client stopped by our office just in tears.  Her deceased husband’s business had been turned over to an attorney for collection of a past due balance tax account by the Illinois Department of Revenue.  Does she have to pay the bill?  He died two years ago.  The Department is aware of the death. We attached a death certificate to a previous notice. Why didn’t the Department file a claim against the taxpayer’s estate?  Why didn’t someone associate the dead taxpayer to the accountant forwarded to the attorney for collection.

A client who was a victim of identity fraud, whose social security number was used to obtain a sales tax number in the 1980’s, had her refund of $544.00 applied to a 1989 sales tax liability that she doesn’t owe, never incurred and is not liable for. Ironically the notice issued by the Department directing the client to call the “phone number below for the location your overpayment was applied”…..has no telephone number.  By the way when we contacted the Department, the obviously burdened and frustrated employee, recommended that the only way to clear up the matter was to have our State Representative intervene.  Otherwise it would take at least four to six months to review our inquiry.

A client made a mistake in reporting his payroll tax wages and liabilities.  Our office prepared the necessary amended payroll forms and filed them with both the Internal Revenue Service and the Illinois Department of Revenue.  No problems with the Internal Revenue Service.  The returns were accepted as filed. Not so with the Illinois Department of Revenue.  The Department rejected our amended returns based on our failure to include corrected W-2 forms.  Of course we did include the forms.  No explanation of what happened to them after they reached the Department for processing.

A single parent of two children just had his bank account levied by the Illinois Department of Revenue in the amount of $200.00 to meet his past due liability. I can understand that the state is knee deep in serious financial difficulties, and should collect every dollar owed. But $200.00 is not going to make much of a difference in things in the long run.  I can assure you that the $200.00 makes all the difference to this struggling taxpayer.  Common sense should prevail in all enforced collection issues.  It appears that the chase for tax dollars is clouding the Department’s judgement. Oh and this just in.  I spoke with a client this morning who told me that the Illinois Department of Revenue has levied his bank account for $38.00.  In this case the taxpayer does not owe the State any money.  We are bogged down with the inability of the Department to process any type of amended return or claim for refund efficiently and accurately.   

We can do better.

I read with interest your “Cutting the Red Tape” initiative. Good start on what may be Mission Impossible in the State of Illinois.  Still solutions to the day to day problems such the ones I listed above,  should not be the sole responsibility of our State Representative to solve. No one is acting as an ombudsmen at the Illinois Department of Revenue to help taxpayers such as the Taxpayer Advocate Service does with the Internal Revenue Service.

Ironically the Department regulations make reference to a “Taxpayer Ombudsman.”  I have quoted below from Title 86, Section 205.20 Illinois Department of Revenue Regulations.

Department Responsibilities

The Department of Revenue shall have the following powers and duties to protect the rights of

Taxpayers:

1. To furnish each taxpayer with a written statement of rights whenever such taxpayer

receives a protestable notice, a bill, a claim denial or reduction regarding any tax. Such

statement shall explain the rights of such person and the obligations of the Department

during the audit, appeals, refund and collections processes. All such written taxpayer

contact shall include the phone number of the Taxpayer Ombudsman.

(Section 4 of the Act).

Restoring the office of “Taxpayer Ombudsman” is a good start.  

Thank you for your prompt response.

Donald C. Fuener E.A.

President

Cc:  Sara Wojcicki Jimenez

A Short History of Tax Cuts and We Have Enough of the Illinois Department of Revenue. Exerpts From Our May 1, 2017 Newsletter

“You can’t be for big government, big taxes, and big bureaucracy and still be for the little guy.” – Ronald Reagan

Tax cuts are in the news again.  Back in 1981, when I was just a young tax geek, then president Ronald Reagan, presided over the biggest tax cut in U.S. history -- equivalent to 2.9 percent of GDP -- when he cut the top individual tax rate from 70 percent to 50 percent in 1981, right after taking office. In 1981 the economy was just a mess. Stagnant I think is the term. Much like today. However back then the inflation rate was 13.55% and a 30 year fixed mortgage would cost you 15.45%. Just imagine qualifying for a mortgage back then. I couldn’t.  The light at the end of the tunnel was a train coming this way.

Reagan soon discovered that revenue needed to be increased.  More than half of the bill's changes, including faster write-offs for businesses and a credit on investments, were subsequently undone.  According to CBS news “the most durable effect of the 1981 cuts was to lay the groundwork for a tax reform in 1986, which was intended not to raise revenue but to clean up the tax code. In the century-old history of the income tax, the 1986 effort gets high marks from left and right alike as the only substantial effort to streamline the tax code.

"That was the last remotely aggressive effort to pare back loopholes," said Matthew Gardner, senior fellow at the Institute on Taxation and Economic Policy. "Since then we've had a gradual but continual increase in the number of loopholes."

As part of the deal, capital gains, which for most of U.S. history have been taxed at relatively low rates, were treated as ordinary income; the number of tax brackets was reduced; many tax shelters were eliminated and tax rates overall were cut.

How did the 1986 cut affect the economy? GDP did pick up over the next two years, before slamming into a wall during the 1990-91 recession. Bill Clinton would go on to raise taxes to close the growing deficit. Some economists blame the tax cut for contributing to the late-80s real estate crash, and the recession, by making it less attractive to invest in real estate. (Donald Trump made the same charge in 1991). Others say there's no connection.”

The 12 bullet point memo released last week proposes a 15% business tax rate.  I assume that would cover us small business owners, as well as, very large businesses. This is a very good thing.  The Financial Samurai writes “For anybody who has ever made money, you know that paying tax on your income is one of your largest ongoing lifetime expenses. A progressive tax system that taxed my income at a Federal + State marginal rate of over 50% during the Obama years was one of the catalysts for negotiating my severance and leaving the workforce for good in 2012. It didn’t feel worthwhile anymore to work 60-70 hours a week and go through so much stress for the privilege of paying the government more than I kept.

What’s even more amazing is that the vast majority of Americans save LESS than their effective tax rate! Can you imagine being taxed at a 20% effective rate when you can only save 6% of your after tax income? No wonder why so many people can’t escape the Matrix.”

Two final points from the Cato Institute to consider:

1. In a free country, money belongs to the people who earn it. The most fundamental reason to cut taxes is an understanding that wealth doesn’t just happen, it has to be produced. And those who produce it have a right to keep it. We may agree to give up a portion of the wealth we create in order to pay for such public goods as national defense and a system of justice. But we don’t give the government an unlimited claim on our money to use as it sees fit.

2. Private individuals and businesses use money more efficiently than governments do. People with their own money at risk spend or invest it carefully. You don’t find many $600 hammers or insolvent retirement programs in the private sector. Money will do more good for more people in private hands than in government hands.

Two weeks ago a client stopped by our office just in tears.  Her deceased husband’s business had been turned over to an attorney for collection of a past due balance tax account by the Illinois Department of Revenue.  Does she have to pay the bill?

In 2014 CEO.net ranked Illinois as one of the three worst states to do business in.  Here is one comment from CEO.net, “Illinois is rated in the worst category; their taxing scheme is deleterious (harmful) toward small business.The Illinois Dept of Revenue seems most adversarial with respect to small business support and promotion.

Next month we will write to you about our answer. In short no. We will explain why. And more importantly our reaction to what happened and what you can do to help us.

Tax Benefits for Higher Education Expense

Check Out Tax Benefits for Higher Education  

Higher education costs paid in 2016 can mean tax savings when taxpayers file their tax returns. If taxpayers, their spouses or their dependents took post-high school coursework last year, they may be eligible for a tax credit or deduction.
Here are some facts from the IRS about tax benefits for higher education.
For 2016, there are two tax credits available to help taxpayers offset the costs of higher education. The American Opportunity Credit and the Lifetime Learning Credit may reduce the amount of income tax owed. Use Form 8863 to claim the education credits.
The American Opportunity Credit (AOC) is:

• Worth a maximum benefit up to $2,500 per eligible student.
• Only for the first four years at an eligible college or vocational school.
• For students pursuing a degree or other recognized education credential.
• For students enrolled at least half time for at least one academic period during 2016. Taxpayers can claim the AOC for a student enrolled in the first three months of 2017 as long as they paid qualified expenses in 2016.

The Lifetime Learning Credit (LLC) is:

• Worth a maximum benefit up to $2,000 per tax return, per year, no matter how many students qualify.
• Available for all years of postsecondary education and for courses to acquire or improve job skills.
• Available for an unlimited number of tax years

The tuition and fees deduction can reduce the amount of income subject to tax. This deduction may be beneficial for taxpayers who don't qualify for the American Opportunity Credit or the Lifetime Learning Credit. Use Form 8917 to claim the tuition and fees deduction.
The Tuition and Fees Deduction is:

• Worth a maximum benefit up to $4,000,
• Claimed as an adjustment to income,
• Available even if a taxpayer doesn’t itemize deductions on Schedule A,
• Limited to tuition and certain related expenses required for enrollment or attendance at eligible postsecondary educational institutions.

Additionally:

• Beginning in 2016, to be eligible for an education benefit, a student is required to have Form 1098-T, Tuition Statement. They receive this form from the school they attended. There are exceptions for some students. See Publication 970 for more details.
• They may only claim qualifying expenses paid in 2016.
• They can’t claim either credit if someone else claims them as a dependent.
• They can’t claim either AOTC or LLC and the Tuition and Fees Deduction for the same student or for the same expense in the same year.
• Income limits could reduce the amount of credits or deductions they can claim.
• The Interactive Tax Assistant tool on IRS.gov can help check eligibility.

IRS Free File. Taxpayers can use IRS Free File to prepare and e-file their federal tax returns for free. File Form 8863, Education Credits, with your Form 1040. Free File is only available at IRS.gov/freefile.
The IRS reminds students using the Free Application for Federal Student Aid (FAFSA) that the IRS Data Retrieval Tool currently is unavailable.  This does not limit an individual’s ability to apply for aid. Applicants can manually provide their tax return information. The IRS offers alternatives for the retrieval of the income information needed.
Additional IRS Resources:

• Tax Benefits for Education: Information Center
• Education Credits--AOTC and LLC
• American Opportunity Tax Credit
• Lifetime Learning Credit
• American Opportunity Tax Credit: Questions and Answers

Share this tip on social media -- Check Out Tax Benefits for Higher Education.  https://go.usa.gov/xXCFm#IRS

Source IRS email Tax tip 2017-31

The worst part of owning a business is.....

Two years ago I wrote, what is the worst part of owning a business?  If you guessed employees you would be wrong. According to the small business owners polled by the Service Corps of Retired Executives,  40 percent said bookkeeping and taxes are the worst part of owning a business.  It is still true.  

Want to save money on taxes?  Keep better records. Want to make more money, become more profitable?  Keep better records. Want to breeze through an IRS examination?  Keep better records.

We call it the very exciting world of record keeping for business.  Unfortunately us small business owners are doing it every day.  You know the things that your small business does. The production end. Recordkeeping is often put off or not completed at all. As most businesses grow, eventually the light bulb goes on, usually at tax time, and the realization that some record keeping needs to be done.  

What can you do?

In the old days we built our business on bookkeeping....an era before desktop computers and the internet. Nowadays the computer has revolutionized your small business record keeping.  Here are three options you can try to make things a little easier.  Don’t struggle.  Don’t miss out valuable deductions.  Make record keeping part of your daily routine.

1.  Go online. Free advertiser supported online accounting software is available.  Probably the most popular free software online is Wave.

Here is a link to their website: https://www.waveapps.com/.

It is easy. Fairly comprehensive. Working with your tax guy is easy, too. Just invite us as a Guest Collaborator and we can both see your data, securely, in real time.  Perhaps the best part is the automatic download your bank account into your accounting records limiting the amount of data input you have to do. Advantages? It is free.  It is intuitive.  No need to change the way you are doing business today.  We like wave accounting so much we became a Wave accounting pro advisor.

2.  Consider a stand alone accounting software.  We recommend the Quickbooks clone Avanquest Bookkeeper.  This program offers more bang for the bucks than the 800 pound elephant Quickbooks.  It is $39.95.  What do you get for your money?  A fully functioning accounting software that includes credit card processing for no additional charge.  

3.  The ubiquitous Quickbooks.  It is expensive.  Requires yearly updates.  Currently the payroll update alone is $400.00.  Our payroll service is cheaper. And it seems that you are constantly bombarded with additional add-ons to buy.  However, the accounting community has embraced it as the defacto standard that our client’s are using to keep track of their records. We work every day with Quickbooks.

I know that there are other methods and systems.  I have always taken the position that what works for you works for me.  However, I suggest that you give the Wave accounting folks a try first and help you not miss all those deductions next year.

IRS Busting Refund Myths

The IRS release a list of five common tax season myths.  Here is an explanation via our friends at Drake Software.

Myth: All Refunds Will Be Delayed this Year

While qualifying returns claiming the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) will not begin having refunds issued until February 15 at the earliest, the vast majority (90%) of federal tax refunds will be issued in less than 21 days.

Myth: Refunds Are Issued Faster if You Call the IRS

Calling the IRS or your tax preparer will not speed up the refund process. However, if you want to know the status of your refund, just use the IRS.gov “Where’s My Refund?” tool – it can also be accessed on the mobile app, IRS2Go.

Myth: Ordering a Tax Transcript will Give You a Refund Date

Tax transcripts can be used for several things, like verifying past income and tax filing status. One thing they can’t do: prophesy a refund date.

Myth: Since “Where’s My Refund?” Doesn’t Have a Deposit Date, It’s Wrong

Taxpayers claiming the EITC and ACTC will not see a projected deposit date on the “Where’s My Refund?” tool until after February 15.

Myth: EITC and ACTC Refunds Will Arrive on February 15

Direct deposit is currently the fastest way to receive a tax refund, and the earliest the IRS expects those refunds will be direct deposited is the week of February 27.

The Short Version

If you didn’t hear it from the IRS or it sounds too good to be true, it’s probably a refund myth.
Aside from making sure your tax information is accurate, filing in a timely manner, and opting for direct deposit, you can’t speed up the refund process. Even then, EITC and ACTC returns are being more closely scrutinized due to a provision in the Protecting Americans from Tax Hikes (PATH) Act of 2015 that focuses on stopping fraudsters from illegally filing returns using stolen taxpayer information. As a result, those refunds won’t be issued until February 15 and likely won’t arrive until the week of February 27. And don’t forget: some states may also delay state income tax refunds.
Source: Internal Revenue Service

Linking punctuality with integrity

Listening to some you tube videos featuring Dan Kennedy, my favorite small business guru I really liked this little insight linking punctuality with integrity. 


“The Number One Most Powerful Personal Discipline in All the World And How It Can Make You Successful Beyond Your Wildest Dreams.”If you aren’t punctual, you will not succeed it’s as simple as this." 

Being where you are supposed to be when you are supposed to be there, as promised, without exception, without excuse, every time, all the time. It really isn’t that hard and once you start to do this, it really affects every part of our lives and people will start to respect our time more. We need to build up this respect by providing it to others. If we want to earn more, we often have to learn to give more.

Here is a link to that video.