They boast that they were able to help close to 7,000 taxpayers during their last open house on May 15.  I know it’s Saturday and the last thing you probably want to do is worry about taxes, but honestly, if you’ve got some free time and a tax issue to resolve, it may be worth paying them a visit.

The last open house is schedule for sometime this fall.

Each office will be open from 9:00 a.m. to 2:00 p.m. local time. You can find a listing of each IRS office here.

McCarthy was one of about 300 UBS clients whose names were turned over to the federal authorities this year as part of the federal court settlement. In this settlement, the bank agreed to provide financial data for clients whose accounts showed signs of tax evasion.

Since Mr. McCarthy agreed to plead gulity at his Sept. 14 hearing, he faces a maximum sentence of five years in prison and $250,000 in fines. He is still be liable for back taxes and penalties due on the unreported income.

With that being said, I think this is as good a time as any for other tax evaders to come clean using the IRS’ voluntary disclosure program.

Let’s take a look at the basic details surrounding this voluntary disclosure program. It essentially allows US taxpayers who are not currently under investigation (let’s face it, you can’t be under investigation and then decide to voluntarily disclose your offshore income) and have not reported taxable income in the past to come forward to avoid criminal prosecution and severe penalties. The tax liability relating to unreported offshore income that is voluntarily disclosed will be settled as follows:

• Taxes and interest due for the prior six years (2003 through 2008) will be assessed. The taxpayer must file or amend all returns and Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR). I realize at this point, if you’re aware of the statute of limitations when it comes to tax matters, you may be asking yourself, just how can the IRS assess taxes and interest for a six-year period, isn’t there a three-year statute of limitations? Simple; it’s one of the resolutions offered by the IRS in resolving the offshore voluntary disclosures. Also, if the IRS can prove fraud, then there is no statue of limitations. Oh joy!

• The IRS will assess an accuracy or delinquent penalty for all affected years.

• The IRS will assess a penalty equal to 20 percent of the amount in a foreign bank account or asset value. Under certain circumstances, the penalty can be reduced to five percent.

Apparently, some taxpayers have been doing what the IRS refers to as “quiet disclosures.” They are filing amended returns, reporting the previously unreported offshore income and are paying the related tax and interest on this income all while avoiding penalties. Of course, the IRS warns against this and also states that if the return is selected for examination, the 20 percent penalty offer would not be available. It should also be said that the IRS has identified and will continue to identify amended returns that have been filed with increased income.

Sept 23, 2009 is the last day the program’s settlement offer will be in effect. Taxpayers have until that date to enter into voluntary disclosure agreements. I’ve heard talks of the IRS possibly extending that deadline, but dare I say don’t count on it.

Please see here for a list of FAQs provided by the IRS.

During the course of our conversation, I learned a few things about him: he was in the business of tax preparation for 12 years, he relied very little on tax reference material and relied greatly on his tax software to detect errors, and he had absolutely no idea what an enrolled agent is. All of those things bothered me deeply, but the last one really crushed me. Now, admittedly, maybe I’m just a little biased because I’m an EA, but how can anyone be a tax professional nowadays, and not know what an EA is? That’s the equivalent of saying you’re a general dentist, but you have idea what an endodontist is.

The guy at Starbucks is what I would consider to be a tax preparer. Tax preparers are those that don’t keep up-to-date with new tax laws and changes. They don’t perform adequate research, they assume, and they don’t perform anything close to due diligence. They’re form-fillers, and they tend to be incompetent. There, I said it.

On the other hand, tax professionals are proficient. They’re involved. They’re passionate about their work, ensuring no detail is overlooked.

I’m by no means trying to disparage unlicensed tax accountants, nor do I think that you have to be licensed to be competent. Heck, even licensed preparers are incompetent. It’s simply my belief that when you’re a tax professional, to be good at what you do, and actually do your clients justice, you have to be involved, and possess a love for your profession.

With all that said, which one are you, tax preparer or tax professional?

I, like many tax practitioners, used to believe that taking this deduction would be an automatic audit trigger, but after doing research and talking to other tax pros, I’ve determined that that is no longer the case.  Nowadays, to get the IRS to take notice, you have to deduct expenses for a home office and have a loss on your schedule C in the same year. But, one should keep in mind that this is the IRS, and frankly, they can audit you for just about any reason they want.

What are the requirements to be able to take the home office deduction? First, the home office, which doesn’t have to be a whole room, it can be part of a room, has to be used:

a) Exclusively (Yes, this means that this space can only used as your home office; it can’t double as the family’s TV room!)
b) Regularly
c) For your trade or business

and (Of course there’s more, we’re talking about taxes here, you didn’t expect it to be that easy, did you?)

The part of your home that you use as your home office has to be used as:

a) Your principal place of business or
b) A place where you meet with clients, patients, or customers in the normal course of your trade or business or
c) A separate, free-standing structure, such as a guest house, studio, barn or garage.

Contrary to popular believe, the home office deduction can be utilized by business owners as well as employees. For an employee to be able to deduct expenses for a home office, the employee:

a) Must be using the home office for the employer’s convenience
b) Must itemize deductions on schedule A
c) Cannot be renting the home office to their employer

So, now that you know what the requirements are to be able to deduct expenses for a home office, exactly what can be deducted? You can deduct expenses for things such as:

a) Mortgage interest
b) Rent
c) Real estate taxes
d) Casualty losses
e) Homeowner’s or renter’s insurance
f) Utilities
g) Repairs (only if it directly benefits the area used for your home office)
h) Depreciation (if you own your home)
i) Telephone (but not for the first line coming into the home)

I should note that on June 25, 2009, the Home office Tax Deduction Simplification and Improvement Act of 2009 was announced. This act should help streamline the reporting requirements and ease the burden of proof in claiming this deduction.

There are other rules for those that use their home for storing inventory or product samples, rental activity, or running a daycare facility. But, in the sake of keeping this post relatively simple and uncomplicated, I’ve decided to leave those out. Don’t fret, should you have specific questions regarding the home office deduction, drop me an e-mail at stefani@stefaniwhylie.com, and I’ll try to answer your questions as soon as possible.

Disclaimer: (C’mon, you knew it was coming!) Since every tax situation is unique and I am in no way aware of what your exact situation is, please, please consult your tax professional before deducting expenses for your home office (or any other expense for that matter), especially if you’re unsure exactly what the requirements are and how they will affect you. Also, this post was meant to give you a very brief overview of the requirements surrounding this deduction. Depending on your specific situation, this can get much, much, much more complicated. So, again, please consult your tax professional beforehand. Of course, you can always read IRS pub 587 in its entirety.

How will this affect tax return preparers? Potentially, these recommendations could focus on a new model for regulation, service and outreach, education and training, and enforcement.

The first part of this effort will focus on fact finding and receiving input from a very large and diverse constituent community that includes those that are licensed by state and federal authorities, which includes enrolled agents, accountants, and lawyers, and even unlicensed preparers and software vendors. Input and dialog will also be sought from consumer groups and taxpayers.

The IRS plans to hold meetings in Washington and around the country later this year. The Commissioner is expected to submit his recommendations to the Treasury Secretary and the President by the end of the year.

Please see the “Tax Professionals” page of the IRS website for more information such as schedules and agendas for upcoming public meetings.

This news should come as no surprise to you since it is completely inline with the IRS’ initiatives to crack down on unethical and noncompliant tax return preparers; one of the first signs of this was the increased tax return preparer penalties. I suspect there will be more programs just like this one. I, for one, am anxious to see what the end result will be. Though I am anxious, I do have a few concerns; for starters, if taxpayers will have the ability to review tax return preparers, what exactly will their review be based on? Normally, taxpayers don’t know exactly what the IRS’ rules and regulations are, which, might I add, is why they employ us. In such a situation, would they simply be reviewing the services provided by the tax professional, just like a regular reviewer would on, say, yelp.com? With that said, what exactly will this review system be based on and who will be doing the review? What are your thoughts? Please share in the comments.