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IRS looking at a more digital future

By Bankrate

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!

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The Internal Revenue Service is looking to move its services solidly into the 21st century.

But an IRS executive says that the agency’s modernization aims, dubbed IRS Future State, will not overlook those taxpayers who aren’t comfortable with the idea of a totally digital tax system.

Donna Hansberry, deputy commissioner of the IRS’ Tax Exempt and Government Entities Division, gave a gathering of tax professionals at the agency’s tax forum just outside of Washington, D.C., an overview Aug. 23 of the IRS Future State plans.

Expanding IRS interaction options

During a seminar on the agency’s future service plans, Hansberry said that the goal is to make taxpayer service and compliance interactions timely, easier and more accurate.

Does that mean a computer will be required of every taxpayer? Not necessarily, she says.

“Our goal is not to contract options, but rather expand them,” says Hansberry. “Digital options are meant to supplement, not substitute for existing services.”

During her keynote address later to the hundreds of tax preparers at the 3-day continuing education event, Hansberry reiterated that the IRS is seeking feedback from many sources to help shape how the agency will do its job, including dealing with taxpayers, in the coming years.

Future State plans, she says, mean the IRS will enhance and expand services for all taxpayers no matter what their circumstances.

Some want to interact digitally, as they do in other parts of their lives such as banking and shopping. But some taxpayers will always want some personal contact with the IRS, she says.

And the preferences aren’t strictly generational, she says. “The point is there are many different needs and ways to interact.”

Hansberry did acknowledge, however, that there will be digital shifts, part of a natural outgrowth of IRS modernization already underway. She cited the agency’s online refund tracking system, as well as its mobile app IRS2Go. “They are indicative of what can be achieved,” she says.

Concerns about digital emphasis

Not everyone, however, is as enthusiastic about such changes. Some fear proposed online enhancements are a move by the IRS to do away with most of its personal services and staff.

This summer, National Taxpayer Advocate Nina E. Olson is holding her own public meetings across the United States. At those events, as well as in correspondence with Olson’s office, some have expressed concerns that a transfer to more digital services will cause problems for some taxpayers.

Olson herself expressed similar worries in her 2015 report to Congress, saying that an IRS Future State plan that reduces personal service could “leave taxpayer needs unmet and force millions of taxpayers to pay for help, and generate additional taxpayer frustration with the IRS.”

Hansberry acknowledged the concerns, but assured the tax preparers that is not the agency’s goal.

There is no secret plan for the IRS to do away with staff, Hansberry says, adding that her division is working with the Taxpayer Advocate to formulate a well-rounded future IRS.

“Even with more web services, taxpayers will still be able to call 1-800-829-1040. That’s not going away,” says Hansberry.

Digital IRS should improve compliance

But a more modern system and a more robust online experience will help improve tax compliance, says Hansberry.

Increased electronic transmission of information between taxpayers, their representatives and the IRS should help resolve time-consuming and burdensome interactions by phone and mail. That means the agency can find issues with tax returns when they are filed and work with taxpayers to correct them sooner, not years later, after penalties and interest have accrued.

“Wouldn’t it be better to have the IRS into the 21st century so you can get to resolution quicker?” Hansberry asks.

Do you agree with Hansberry? Do you think the IRS’ Future State should be one of increased digital interaction with taxpayers? Or do you prefer a more hands-on, personal tax system?

Paul S. Herman CPA, a tax expert for individuals and businesses, is the founder of Herman & Company, CPA’s PC in White Plains, New York.  He provides guidance and strategies to improve clients’ financial well-being.

Football and some fantasy sports games are back

By Bankrate

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!

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The 2016 Summer Olympics are underway, but fans of American football — not the soccer being played in Rio — also are celebrating.

The National Football League kicks off its 2016 season this week with preseason games across the country.

That also means that fantasy sports leagues are shaping up. And there’s some good news for players of the daily fantasy games.

More states are saying the daily games are good to go within their borders.

Fantasy sports comeback

In 2015, daily fantasy sports, or DFS, came under fire from most states’ attorneys general. The states’ top legal officers generally contend that DFS represent illegal gambling, not games of skill as the fantasy sports operators argue.

In many states, the game companies stopped accepting players from those locations.

DraftKings and FanDuel, the two biggest DFS operations, took their cases to state legislatures and are seeing some success.

So far, 12 states — Colorado, Indiana, Kansas, Maryland, Massachusetts, Mississippi, Missouri, New York, Rhode Island, Tennessee, West Virginia and Virginia — have legalized daily fantasy sports. Legislation to do the same has been introduced in most of the other states across the country.

Those pending bills could pick up steam now that New York, the state that thrust the DFS-gambling controversy into the spotlight last year, has officially sanctioned the games. Before DraftKings and FanDuel pulled out of the Empire State, there were more New York daily fantasy players than in any other state, according to research firm Eilers & Krejcik Gaming.

Fantasy sports’ state payoff

Some lawmakers remain concerned about the cost of problem gambling. A 2011 Baylor University study found that each additional pathological gambler costs society more than $9,000 per year.

Anti-gambling groups argue that assembling virtual line-ups of athletes in order to win money on the fantasy teams is tantamount to gambling.

But other lawmakers see how popular sports and betting are with their constituents. Viewed from a cold, fiscal perspective, these legislators see how this convergence presents financial potential for their states.

Where DFS have been legalized, there is corresponding regulation. The states will issue permits and collect licensing fees from the operators.

Many state treasuries also will collect, or at least try to, taxes from the winners of DFS games. Like other gambling proceeds or prize winnings, the Internal Revenue Service and most state tax collectors view fantasy sports payouts as taxable income.

Given the state of many state budgets, look for fantasy sports to continue to make inroads.

Do you play fantasy sports? Has your participation been curtailed by your state? Most importantly, do you pay taxes on your winnings?

Paul S. Herman CPA, a tax expert for individuals and businesses, is the founder of Herman & Company, CPA’s PC in White Plains, New York.  He provides guidance and strategies to improve clients’ financial well-being.

Trump dumps 0% tax-rate proposal

By Bankrate

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!

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When Donald J. Trump issued his original tax plan in September of last year, the then-candidate for the Republican presidential nomination promised that some Americans wouldn’t owe any tax at all.

In a speech Monday before the Detroit Economic Club, the now nominee erased that no-tax option.

Original plan had a 0% rate

Trump’s original proposal called for 4 tax brackets, ranging from 0% to 25%.

“If you are single and earn less than $25,000, or married and jointly earn less than $50,000, you will not owe any income tax,” Trump proclaimed last year. “That removes nearly 75 million households — over 50% — from the income tax rolls.”

His new plan would put some of those folks back on the Internal Revenue Service’s radar.

Fewer brackets, higher tax rates

Trump, apparently in a sign of Republican Party conciliation and economic reality, has revised his tax plan to follow the tax rates and income brackets included in the House Republicans’ tax reform plan.

That proposal, backed by Republican budget guru and current House Speaker Paul Ryan, calls for 3 individual tax rates: 12%, 25% and 33%.

Trump’s 0% tax rate is gone.

Still, the Republican candidate told his packed house at the Detroit event that “many American workers” will find “their tax rate will be zero.” He’s basing this on a proposal for higher standard deduction amounts that was included in a GOP tax reform plan released in June.

“This, in effect, creates a larger 0 percent bracket,” the Republican tax plan says. “As a result, taxpayers who are currently in the 10-percent bracket always will pay lower taxes than under current law.”

Reaching out to parents

Trump has offered another new tax proposal that takes aim at Democratic opponent Hillary Clinton and her lead among women voters.

He wants to allow parents to fully deduct from their taxes the average costs of child care spending.

Clinton has proposed capping child care costs at 10% of a family’s income. The former secretary of state also supports a tax credit of up to $1,200 for adult family members who care for their aging parents.

Deficit question lingers

Trump’s speech to the Motor City gathering dealt with broad tax policy generalizations, as is generally the case for such talks during an election year.

He did promise, though, that “in the coming weeks, we will be offering more detail on all of these policies.”

Those details should tell us whether his new tax plan will be less costly than the nearly $10 trillion estimate that bedeviled his original proposal. Some Trump surrogates have suggested the new figure will be in the $3 trillion deficit range. Bankrate will let you know if that lower deficit amount is correct, as well as what’s in the other new Trump tax-plan specifics as they are announced.

Paul S. Herman CPA, a tax expert for individuals and businesses, is the founder of Herman & Company, CPA’s PC in White Plains, New York.  He provides guidance and strategies to improve clients’ financial well-being.

Any U.S. tax advice contained in the body of this website is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.