The IRS just released an IRS Notice (IRS-2011-73) alerting taxpayers to some of the latest taxpayers scam. One scam they highlight is regarding unethical individuals persuading taxpayers to file false claims for tax credits or rebates.
Individuals behind these scams will start out with flyers or advertisements around churches and then allow "word of mouth" advertising to spread this illegal scheme. Members, believing they are assisting and helping fellow members, unknowingly share misinformation and help perpetuate these false filings.
The IRS Notice highlights what taxpayers should watch for.
"taxpayers should be wary of the following:
- Fictitious claims for refunds or rebates based on excess or withheld Social Security benefits.
- Claims that Treasury Form 1080 can be used to transfer funds from the Social Security Administration to the IRS enabling a payout from the IRS.
- Unfamiliar for-profit tax services teaming up with local churches.
- Home-made flyers and brochures implying credits or refunds are available without proof or eligibility.
- Offers of free money with no documentation.
- Promises of refunds for "low income-No Documents tax Returns."
- Claims for the expires Economic Recovery Credit program or recovery Rebate Credit.
- Advice on claiming the Earned Income tax Credit based on exaggerated reports of self-employment income."
Tax filers pay these unethical individuals to file these claims. The victims eventually discover they have been duped when their false claims are rejected. By the time the tax filer discovers that they have been scammed, the perpetrator is long gone.
The IRS requires tax preparers to register and obtain a tax preparer identification number. Before engaging the services of a paid tax preparer, make sure they are registered and have a proper tax preparer identification number. Additionally, you may want to consult with a licensed professional such as an Enrolled Agent or CPA.
Finally, if you have any questions regarding tax credits or current scams, you should visit the IRS web site, www.IRS.gov, or call the IRS toll-free number 1-800-829-1040.
Last month, North Carolina joined a growing list of states that require or will eventually require employers to use the Federal E-Verify system to check an employees Social Security number at the time of hire.
The NC law passed the legislation on June 18, 2011 and was signed into law by Governor Perdue on June 23, 2011.
What is E-Verify
The program is administered by the Department of Homeland Security in partnership with the Social Security Administration, and was set-up as a voluntary program for employers. The E-Verify system allows employers, via access to an on-line system, to verify that a worker is authorized to work in the United States.
Phase-In for New NC Law
The law will be phased in over the next three years. Currently state agencies and universities are using the E-verify system. Listed below are the phase in dates for other NC businesses and public employers to use the E-Verify System.
- October 1, 2011 - Municipal and county workers.
- October 1, 2012 - Employers with more than 500 employees
- January 1, 2013 - Employers with more than 100 employees but less than 500 employees
- July 1, 2013 - Employers with more than 25 employees but less than 100 employees.
E-Verify Requirement Spreading Throughout Country
In spring of this year, the US Supreme Court upheld Arizona's 2007 employment verification law requiring businesses to use the federal E-Verify System. This ruling paved the way for other states to move forward with their E-Verify laws.
In addition, a bill, put forth by Committee Chairman Lamar Smith (R-Texas), to make E-Verify mandatory for all employers throughout the US is currently being considered for approval by the US House Judicial Committee. If approved by the House Judicial Committee the bill would move to floor of the US House of Representatives for consideration and launch a national debate on the matter.
While this is considered and debated at the federal level, states are moving ahead with their E-Verify laws. Just this year alone nine additional states have already passed new laws that will phase-in some type of E-Verify requirements for employers.
Human Resouces Compliance Critical for Businesses
As additional requirements, such as this, are implemented, It will be important for the Human Resources (HR) departments of companies to maintain good accurate record keeping. Failure to comply with requirements such as a states E-Verify requirements or the federal I9 requirement, will result in fines and could lead to criminal charges.
The E-Verify and I9 requirement are two ways for employers to protect themselves from hiring and placing undocumented workers on their payroll. Good record keeping and documentation showing compliance will eliminate unnecesaary problems for you as an employer.
To assist you we have compiled a Guide to E Verify. In the guide we include all the states that currently require or will be phasing in E verify requirements. Just click the button below to obtain your free E Verify Guide.
Last week on July 1, 2011, a "temporary" Federal unemployment surtax of 0.2% expired and reduced the Federal Unemployment Tax, (commonly known as the FUTA tax) for employers. Although, no employee will directly benefit from this payroll tax reductions it does help businesses.
Every employer has to pay FUTA and SUTA (State Unemployment taxes for employers). The FUTA tax rate was 6.2%. the expiration of the surtax reduced the FUTA rate to 6.0% on the first $7,000 of wages you pay to each employee. Most employers do not pay that rate, since they receive a state unemployment tax credit that is applied against the FUTA tax rate.
An employer can receive a maximum credit of 5.4% on the State unemployment taxes paid, thus reducing the FUTA tax rate by up to 5.4%. For those receiving the maximum credit, their new FUTA rate will be 0.6% on the first $7,000 of wages earned by each employee.
On each employee that you pay $7,000 or more in wages, the savings will be $14 per year. Even for a small business, such as a restaurant, that requires 30-40 employee to operate and has to hire 70 employees during the year, the savings at $14 per employee can add up to almost $1,000.
However, don't budget the extra savings just yet. This "temporary" surtax was enacted in 1976 to fund extensions of unemployment benefits (sound familiar) and has been extended over the past 25 years by both Republicans and Democrats.
It is unclear whether they will reenact the surtax as is, leave it or increase the wage limit that is subject to the surtax. (President Obama, in his 2012 budget proposal, included raising the wage limit, subject to FUTA taxes, from $7,000 to $15,000 starting in 2014).
Given the strain placed on unemployment benefits over the past several years, businesses should not be surprised to see the FUTA rate or the SUTA tax rate increase, despite the harm it can do to businesses looking to hire.
Barbara Weltman in her blog has a good summary of the issue and history of the FUTA surtax. 