E-Filed and Computer Returns Surge: The Internal Revenue Service continues to receive more tax returns electronically, with especially big increases in taxpayers e-filing from their own computers - almost 4.8 million, up 40 percent over this time last year - and for those e-filing federal and state returns together - more than 11.5 million, up 20 percent from this time last year.
The IRS does not offer free tax software or direct filing for individual taxpayers, but the e-file section of its Web site - www.irs.gov - links to a list of 20 companies that sell software or online preparation services. There are also links to companies that offer free e-filing for low-income persons or very simple tax returns.
Six states are partnering with the IRS to offer their taxpayers a federal/state telephone filing option: Georgia, Indiana, Kentucky, Maryland, Oklahoma and West Virginia. This joint system is for taxpayers who qualify for the simplest tax return and who received TeleFile packages from both the IRS and the state tax agency. Nearly 209,000 taxpayers have used federal/state TeleFile so far this year.
Crackdown Continues on Off-Shore Bank Accounts: An investigation by the Internal Revenue Service - Criminal Investigations has resulted in the sentencing of a tax evasion scheme marketer and a number of medical professionals to prison terms.
United States attorney John K. Vincent announced the sentencing of Lonnie Crockett, 52, of Bountiful, Utah, to 42 months in prison. Three of his clients have already been sentenced to prison terms ranging from 18 to 24 months. Parole has been abolished in the federal criminal system, and those sentenced are required by law to serve at least 85 percent of the prison time imposed.
Crockett charged a fee for running client income through his system of bank accounts and then back to an account controlled by the client. The scheme involved the use of false invoices, code names and other means to conceal the movement of funds. The medical professionals then filed federal income tax returns in which they failed to disclose the income that had been routed through the offshore accounts.
IRS to Farmers: Tobacco Settlement Money Still Taxable: Landowners, producers and tobacco quota owners who receive money from the National Tobacco Settlement Trust must report those payments as income each year, the Internal Revenue Service says.
These payments are considered gross income for federal tax purposes and are taxable as ordinary income. Tobacco companies are required to make the payments as part of the National Tobacco Grower Settlement. Farmers in 14 states will receive the payments over a 12-year period that began in 1999. The 14 states are Alabama, Florida, Georgia, Indiana, Kentucky, Maryland, Missouri, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, Virginia and West Virginia.
Taxpayers should have received a Form 1099-MISC in January that shows the payment amount to report on their 2001 return. The payment is reported as income on different tax forms, however, depending on specific taxpayer situations. For example, a taxpayer who raises and sells a tobacco crop would report the payment as gross income on Schedule F, "Profit or Loss From Farming," and would be subject to applicable self-employment tax. Landowners or tobacco quota owners, who historically have leased their tobacco-related property and did not help to produce the crop, would report the settlement payments as farm rental income on Form 4835, Farm Rental Income and Expenses.
IRS Alerts Disaster Relief Charities of New Developments: The Internal Revenue Service has updated its publication - Disaster Relief: Providing Assistance Through Charitable Organizations - to include guidance explaining new rules for charities established under the "Victims of Terrorism Tax Relief Act of 2001."
This revised publication includes two new sections:
- The first explains the special rules that apply only to new and existing charities providing disaster relief to victims of Sept. 11.
- The second addresses the rules for qualified disaster relief payments by employer-sponsored assistance programs.
The IRS has also mailed letters to Sept. 11 relief organizations alerting them to the new rules and advising them of this and other pertinent publications. The letter advises the charities that, in light of the considerable funds contributed for September 11 disaster relief and the importance of the issues involved, the IRS will be reviewing available information and will contact certain organizations for additional information about their activities."The IRS shares the concerns of these organizations that their actions further their exempt purposes, and we want to help them ensure funds are distributed timely and efficiently,"said Steven T. Miller, Director of Exempt Organizations.
