US taxpayers must return millions after mistaken refunds

WASHINGTON -- Taxpayers in the US state of Louisiana got an unexpected windfall when a computer error issued their tax refunds a second time, local media reported on Saturday.

The state's Department of Revenue cautioned recipients of the wrongly-paid windfall: "Do not spend it." If they have, they must pay the money back in 30 days.

"An error in an electronic payment system caused 66,780 state individual income tax refunds issued on Tuesday, March 12 to be issued a second time on Wednesday, March 13," the department said on its website.

The duplicate refunds totaled more than $26 million, it said, adding that the state is working with financial institutions to recover the overpayments directly from recipients' bank accounts.

New procedures were put in place to prevent the error from happening again, the department said.

source: news.abs-cbn.com

US taxpayers get one-day reprieve after computer glitch

WASHINGTON - The US Internal Revenue Service said it would give taxpayers an additional day to file their 2017 returns after computer problems prevented some people from filing or paying their taxes ahead of Tuesday's midnight deadline.

"Taxpayers do not need to do anything to receive this extra time," the IRS said in a statement announcing the extension.

The agency said its processing systems were now back online.

Earlier, the agency said several systems were hit with the computer glitch, including one that handles some returns filed electronically and another that accepts online tax payments using a bank account.

The IRS said it believed the problem was a hardware issue and "not other factors."

It was not clear how many taxpayers might were affected, but the agency said it received 5 million tax returns on the final day of filing season last year.

"This is the busiest tax day of the year, and the IRS apologizes for the inconvenience this system issue caused for taxpayers," acting IRS Commissioner David Kautter said in a statement.

The agency said taxpayers should continue to file their taxes as normal on Tuesday evening - whether electronically or on paper.

Taxpayers could also ask for six-month extensions, as President Donald Trump did. The White House said on Tuesday that Trump, because of the complexity of his tax returns, would file his by Oct. 15.

source: news.abs-cbn.com

Qualifying for a Mortgage When You’re Self-Employed

When John Kennedy observed that “life is unfair,” at a press conference in 1962 he wasn’t referring to the challenges self-employed workers would face getting a mortgage fifty years later—but he would have been right.

If you are one of the 14.6 million people in the US[1] who make a living working for yourself—about 10 percent of the total workforce—you don’t fit neatly into the profile of borrowers whose income can be easily documented for a mortgage application.

Tax returns don’t tell the whole story

It’s not impossible to get a mortgage if you are your own boss, but you’ve got to jump through some extra hoops to qualify.  That’s because self-employed borrowers typically have to provide two years’ worth of tax returns, which lenders will want to obtain directly from the IRS.

Yet tax returns often don’t accurately reflect their take-home pay.  Self-employed people typically take advantage of a slew of tax deductions related to their businesses, from retirement plans to home offices.  These reduce their taxable income, but they also reduce their adjusted gross income, which is what lenders look at for proof of income.

In some cases, mortgage lenders will allow certain deductions to be added back to the income such as depletion, depreciation or a large, nonrecurring item.

Plan ahead if you can

One solution is to plan ahead and write off fewer expenses for the two years leading up to applying for a mortgage, a strategy that could either cost you significantly at tax time or require you to refile you taxes after your mortgage is approved.

Another suggestion is to separate your personal funds from your business by using a credit card devoted to your business expenses, then convince a lender that the debt isn’t against you because it belongs to the business.  Finding the right lender could still be difficult, and you could still miss some of the most popular deductions, such as home businesses and cars used for business.

Timing is also important.  Self-employed workers typically have highly volatile businesses.  By using income averaging over 24 months, borrowers can avoid declines in income from one year to the next.

Reduce debt to improve your chances

The reason lenders want to see your income is because they need it to determine whether you have enough income to make you monthly debt obligations, a calculation expressed as your debt to income ratio. The median DTI for recurring debt on closed conventional purchase loans today is about 35 percent for recurring debt payments.[2]

By reducing or eliminating your recurrent debt payments, such as your car or student loans, you can reduce your DTI ratio, which will help you qualify for a larger mortgage.

source: totalmortgage.com

5 Ways Taxes Can Affect Your Credit

Tax time can be stressful enough without worrying about whether your tax issues will spill over to your credit reports and affect your scores. The good news is that simply filing an extension or finding that you owe the IRS a chunk of money come tax time shouldn't affect your credit reports. It's only when you don't have the money to pay what you owe that it can affect your credit.

Following are five ways that your yearly payment to Uncle Sam can affect your credit.

Going Into Hock to Pay Taxes
Many years ago, in my first year of self-employment, my accountant calculated my estimated taxes but forgot about the "self-employment tax" -- the portion of taxes that cover Medicare and Social Security.
As a result, I learned on April 14 (!) that I owed a much bigger tax bill than I expected. At that time there was no option to pay by credit card, and I didn't want to drain my savings entirely to pay it. I ended up taking out a personal loan from my bank at a low interest rate and paid it off fairly quickly.

It worked out OK. The loan, however, did appear on my credit reports. It didn't create any problems for me, but if you are going to borrow from another source such as credit cards or a personal loan to pay your taxes, keep in mind that debt can affect your credit scores. How much it will hurt (or help) your scores depends on everything else in your credit reports. Keep it in perspective, though. After all, you may find it's better to owe a credit card issuer than to owe the IRS.

Another option is to enter into an installment agreement with the IRS where you pay them monthly until your balance is paid off. In most cases, these payment plans don't appear on your credit. However, if you owe a large amount, you could wind up with a Notice of Federal Tax Lien filed against you, and that will definitely affect your credit. (More on that later.)

Quick Refund Woes

If you need your refund fast, you may be tempted to take advantage of a "refund anticipation loan." Often marketed as "instant" or "rapid" refunds, these short-term loans basically advance you your refund, usually at a very high cost. Whether or not this will show up on your credit reports depends on the lender's policies.

For example, H&R Block (HRB) currently offers a refund anticipation check, and its website says that this is a "bank deposit, not a loan." But it also offers a line of credit called Emerald Advance and that does impact the taxpayer's credit. Their website says, "If you apply and qualify for an Emerald Advance, H&R Block Bank may report information about your account to credit bureaus. Late payments, missed payments, or other defaults on your account may be reflected in your credit report."

Also understand that if your refund takes longer than expected to arrive -- or doesn't come through at all -- you may wind up falling behind on this loan and that can end up on your credit reports. Don't think that won't happen to you. Tax-related identity theft is a large and growing problem I'll discuss in a moment.

The New York Department of Consumer Affairs warns:

    A RAL can damage your credit report ... If you're unable to repay the lender (usually a bank), the bank will report the unpaid debt to a credit agency which will negatively affect your credit report.

Tax Liens
If the amount of taxes you owe is large enough, or if you don't resolve your debt quickly with the IRS, you could find yourself with a tax lien on your credit reports. Tax liens fall in the "seriously negative" category with items like collection accounts or bankruptcy.

Fortunately, the IRS has become more lenient in their policies regarding tax liens in recent years. The threshold for automatically filing a lien has risen from $5,000 to $10,000. In addition, the IRS has a relatively new policy that allows taxpayers to request that lien be withdrawn once the debt has been paid in full. (After it has been withdrawn it can be removed from credit reports as well.) And finally, taxpayers who owe $25,000 or less and enter into a direct debit installment agreement may be able to get the tax lien withdrawn after a few monthly payments have been made.

If you do wind up with a tax lien on your credit reports, take the time to find out whether you can get it removed from your credit if you resolve the debt. If you're successful, your credit scores could rise significantly, provided the rest of the information in your reports is positive.

If you think your taxes may have impacted your credit, you can check your credit scores for free with the Credit Report Card.

Going Bankrupt Because of Taxes

If you simply can't pay, tax debt can force you into bankruptcy. You may have to file to get rid of other debts so you can pay your taxes, or you may have to file to discharge some or all of your tax debt. Either way, the bankruptcy will be a serious setback for your credit and will remain on your reports for seven years if you file a Chapter 13 case or ten years if you file under Chapter 7.

The reason you filed -- even if you believe the taxes were improper or unfair -- won't matter as far as your credit is concerned. All bankruptcies are treated the same when credit scores are calculated.

Identity Theft

If you file your tax return expecting a refund, but are told by the IRS that your refund has already been issued, you may discover that you are a victim of tax-related identity theft. It's a problem that's expected to reach $21 billion during the next five years and the IRS is not doing a lot at this point to protect taxpayers.

While the fact that you have been a victim of this type of fraud won't automatically affect your credit reports, you'll probably want to place a fraud alert or credit freeze on your credit reports. And that will make applying for credit or other services such as a cell phone, utilities or insurance, that much more of a hassle. According to Identity Theft 911, it can take you up to a year to get your refund. So if you were counting on that money to pay off holiday debt, think again.

[Note: Remember, we are all entitled to one free credit report -- though not credit scores -- each year from each of the three national credit reporting agencies at the AnnualCreditReport.com website. Second, Credit.com's free Credit Report Card provides access to two of your credit scores, and, because credit reports can be difficult to understand, it breaks down the information in your credit report in an easy-to-understand way, using letter grades.]

source: dailyfinance.com

Arum insists Pacquiao fulfilled duties with IRS

MANILA, Philippines – Boxing promoter Bob Arum insisted that his prized fighter Manny Pacquiao has already fulfilled his tax obligations in the United States, contrary to what has been claimed by the Bureau of Internal Revenue.

Arum said his outfit, Top Rank Inc., has already supplied every document the BIR needed to prove that the boxer has nothing or very little to settle with the local internal revenue service.

Top Rank is in charge of processing Pacquiao’s tax obligations with the US Internal Revenue Service.

“That stuff with the Philippines taxes is ridiculous. We've supplied them with all of our records showing that we've deducted and withheld 30% of Manny's purses and remitted it to the IRS. We have receipts from the IRS, everything,” Arum said in USA Today.

“Manny owes no tax or very little tax in the Philippines because he paid the taxes on his income that doesn't come from the United States. The U.S. and Philippines have a treaty where its people can't be double-taxed,” he added.

Arum blames Pacquiao’s tax woes to local politics.

“I wanna ask the BIR ...how many times have they asked for certification from the Internal Revenue Service (IRS)? Probably slim and far between. So what they're doing to Manny is absolutely outrageous and it's politics at its worst,” the promoter said in a separate interview with ABS-CBN North America’s Bev Llorente.

Arum, however, could not defend Pacquiao’s spending habits. In a separate article, the promoter said the boxer is being too generous with his money.

Arum hinted that the Filipino fighter might find himself in dire straits if he doesn’t to handle his riches well.

source: www.abs-cbnnews.com

Top Rank mails US tax returns to Pacquiao lawyers

LAS VEGAS, Nevada -- Boxing promotion company Top Rank Inc. has already mailed certified true copies of Filipino champ Manny Pacquiao's tax returns in the US to the fighting congressman's lawyers in the Philippines, its CEO Bob Arum said.

Top Rank's chief financial officer, Dave Lopez, also exclusively showed Pacquiao's tax returns to ABS-CBN North America Bureau in light of the boxer's tax problems with the Bureau of Internal Revenue (BIR) in the Philippines.

Arum, a former tax lawyer himself who used to work for the Department of Justice tax division in New York, said it was his job to take taxes religiously before he became a promoter.

Noting that there are many Filipinos working in the US who pay taxes and are also obligated to pay taxes in the Philippines, Arum said: “I wanna ask the BIR ...how many times have they asked for certification from the Internal Revenue Service (IRS)? Probably slim and far between. So what they're doing to Manny is absolutely outrageous and it's politics at its worst.”

Arum then invited BIR commissioner Kim Henares to send her agents from the Philippines to the United States to look and audit all of Pacquiao's earnings from Top Rank.

“Let them come to our office let them sit down and we will take them through every single wire transfer because I can represent here today that for all the time we promoted Manny 30 percent was taken out of any moneys paid to Manny and that includes not only his fights but also endorsements in the United States,” he said.

According to Arum, under US law, Top Rank promotions is required to pay the IRS funds withheld from fights and endorsements in the US, and copy-furnish those withholdings electronically to the BIR.

However, he said the BIR does not accept this information by this procedure and is demanding a certified true copy obtained from the IRS.

Arum insisted that Top Rank has provided all the necessary and pertinent papers as well as receipts to prove that Pacquiao has paid taxes in the US.

But he remains hopeful that the bell will ring soon to bring an end to Pacquiao's current tax bout.

source: www.abs-cbnnews.com

Arum: Pacquiao's tax documents coming soon

MANILA, Philippines – Fighting congressman Manny “Pacman” Pacquiao will submit the necessary documents proving he paid taxes to the Internal Revenue Service (IRS) for his bouts in the United States, his promoter, Top Rank chief executive Bob Arum, said on Wednesday.

In a statement, Arum said Top Rank has the “deposit confirmations for each payment” that they have gone to the IRS in Pacquiao’s behalf.

“Top Rank has done the same for all U.S. endorsements it has facilitated on Manny’s behalf,” he added.

Arum said Top Rank has submitted copies of the electronic funds transfer (EFT) deposit acknowledgements to the Bureau of Internal Revenue as proof of payment.

"The BIR received the documents, but directed Manny to obtain ‘certified’ directly from the IRS itself,” he said.

“As I am sure people appreciate, obtaining certified copies of documents from the IRS takes time. Manny made the formal request to the IRS, and we have every expectation that necessary documents will be furnished to the BIR very soon,” he stressed.

According to the IRS website, getting an exact copy of a previously filed and processed tax return requires completing a form and mailing it to the IRS.

“If you need an exact copy of a previously filed and processed tax return and all attachments (including Form W-2), you should complete Form 4506 (PDF), Request for Copy of Tax Return, and mail it to the address listed in the instructions, along with a $50.00 fee (fee change effective 10/1/2013) for each tax return requested. The check or money order for the fee should be made payable to the ‘United States Treasury,’ also enter your SSN or EIN and ‘Form 4506 request’ on your check or money order. Copies are generally available for returns filed in the current and past six years. Copies of jointly filed tax returns may be requested by either spouse and only one signature is required. Allow 60 calendar days to receive your copies,” the IRS website said.

Arum’s statement comes after Pacquiao claimed on Tuesday that his bank accounts in the Philippines have been garnished over allegations of unpaid taxes from his fights in the United States from 2008 to 2009.

Pacquiao appeared on television yesterday appealing to the BIR regarding his case, saying he was financially paralyzed and unable to help the victims of Super Typhoon Yolanda in the Visayas as he had promised.

BIR Commissioner Kim Henares countered by saying that only P1.1 million of Pacquiao’s money has been seized. Moreover, she said the bureau has been asking Pacquiao for a copy of his tax return filed before the IRS since 2010.

“Since 2010, pinapa-explain namin sa kanya kasi dapat nire-report niya ‘yung total na kinita niya. Dapat ipakita rin niya ‘yung total na binayad niya sa Amerika na buwis. Dalawang taon kami nag-antay, hindi siya makapagpakita ng mga dokumento na ‘yan,” Henares said.

Pacquiao’s announcement came two days after his morale-boosting victory over Brandon “Bam Bam” Rios in Macau, his first boxing win since November 2011.

According to Arum, for each of Pacquiao’s fights that occurred in the United States, including those in 2008 and 2009, Top Rank "withheld 30% of Manny’s purses and paid those monies directly to the IRS" via EFT. -- With a report from Agence France-Presse and Jon Carlos Rodriguez, ABS-CBNnews.com

source: www.abs-cbnnews.com

US seeks $670,000 in taxes from Yankees owner

NEW YORK—The U.S. government has sued New York Yankees co-owner Hal Steinbrenner and his wife to seek more than $670,000—an amount it said was erroneously refunded to the baseball team based on a late refund claim for the 2001 tax year.

The suit filed by the Internal Revenue Service in U.S. District Court in Tampa, Florida, on Tuesday stems from a time when the Yankees and the New Jersey Nets professional basketball team formed a joint venture called YankeeNets.

Hal Steinbrenner is listed as a general partner of the Yankees along with his siblings, who inherited the team when their father and longtime owner George Steinbrenner died in 2010. Hal Steinbrenner's wife Christina Steinbrenner is not listed among the team's executives.

In August 2009, the defendants filed an amended tax return for the 2001 tax year, resulting in a refund of $670,493.78, the suit said. But the return was filed more than six months after the deadline, resulting in an erroneous refund, the suit said.

"Hal Steinbrenner's representatives had no knowledge of the lawsuit and had received no prior notices regarding this matter from the IRS or any other governmental agency. We are reviewing and have no comment," Alice McGillion, a spokeswoman for the Yankees, said in a statement. — Reuters

source:gmanetwork.com