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Thursday June 20, 2024

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Many Taxpayers Benefit From "Where's My Refund?"

The latest Internal Revenue Service (IRS) Tax Time Guide highlights the popular use by taxpayers of the "Where’s My Refund?" tool. Tax-filing is in high gear and the IRS issues millions of tax refunds each week. Taxpayers are flocking to the IRS website to use the "Where’s My Refund?" tool.

This tool has three main sections. First, a taxpayer can confirm that his or her return has been received. The second stage is for the IRS to approve the return. The third step is for a tax refund to be issued, if applicable.

Millions of taxpayers anticipate receiving a refund. With the additional funding provided by the Inflation Reduction Act, the IRS has provided several enhancements to the "Where’s My Refund?" tool. The updated version now will explain the refund status in plain language. It is also available on smartphones with the IRS2Go app. In some cases, the tool will indicate if a taxpayer should contact the IRS to provide additional information.

To use the "Where’s My Refund?" tool, the first step is to enter a Social Security number or Individual Taxpayer Identification number, filing status and the exact dollar amount of the expected refund. The refund status is normally available within one day after e-filing a tax return or within four weeks after mailing in a paper return. The IRS updates the "Where’s My Refund?" tool each night.

There are several factors that may delay a refund. If a tax return has errors or requires additional review or forms, it may be delayed. Some taxpayers are delayed because they have not correctly calculated the Earned Income Tax Credit (EITC) or the Additional Child Tax Credit (ACTC).

The IRS is available to assist with questions on refunds if a return has been filed electronically and 21 days have passed. If the return was mailed, the IRS will respond to inquiries after six weeks.

The IRS reminds taxpayers there is extensive information available on Assistance can be found for the following scenarios: selecting a qualified tax preparer, using the IRS Free File to complete a return or using the Interactive Tax Assistant to answer questions. An excellent source for filing information include IRS videos that may be found online.

The IRS encourages taxpayers to file electronically. Most electronic filers will receive a refund within 21 days. Income tax returns for this filing season are due by Monday, April 15, 2024.

Church Must Pay Income Tax For Pastors

In Society of Apostolic Church Ministries et al. v. United States; No. 3:21-cv-08277, the District Court determined the entity was a nominee of taxpayers Elizabeth and Fredric Gardner. Therefore, the levy on the church funds to pay their income taxes was appropriate.

Elizabeth Gardner acquired property in Apache Knolls, Arizona and transferred it to a corporation sole with the name Bethel Aram Ministries (BAM). The BAM property was subsequently transferred to the Society of Apostolic Church Ministries (SACM). The SACM claimed to operate Messiah's Remnant Church. Elizabeth and Fredric Gardner reside in a parsonage on church property and have taken Vows of Poverty.

The primary source of income for SACM is a membership fee paid by "fellow pastors" and donations. The fellow pastors pay a fee to SACM which maintains State of Montana corporation sole registrations.

The Tax Court and 9th Circuit previously determined that BAM and SACM were not an active church, did not have a congregation and the payments received are taxable income for the Gardners. See Gardner v. Comm’r of Internal Revenue, 845 F.3d 971, 973 (9th Cir. 2017). The Court determined the Gardners had unreported income for 2002, 2003 and 2004. It also held they are liable for self-employment tax because they have not applied for exemption using IRS Form 4361, Application for Exemption From Self-Employment Tax for Use by Ministers, Members of Religious Orders and Christian Science Practitioners."

In 2021, the IRS levied $73,340.37 from the SACM bank account. The IRS reported the Gardners owed taxes, interest and penalties of over $800,000. The taxpayers filed suit against the IRS and requested a ruling for wrongful levy and to quiet title. The IRS sought summary judgment related to the wrongful levy claims.

The primary issue for determining whether SACM is a nominee of the Gardners is based on principles set forth in Towe Antique Ford v. IRS, 791 F.Supp. 1450, 1454 (D. Mon. 1992). The basic factors are the nominee paid no or inadequate consideration, the property was placed in the name of the nominee in anticipation of potential liabilities, there is a close relationship between the taxpayer and the nominee, the taxpayers did not record the conveyance of property to the nominee, the transferor retained possession and the transferor enjoys the benefits of the property.

The "deed chain" for the property shows that there was no consideration for the transfer of the real estate to BAM or to SACM. Essentially, the "church has functioned the same since its initial inception, and all iterations have been governed by Elizabeth Gardner as a corporation sole."

The Gardners have essentially retained possession and control and enjoyed the benefits of the property. They paid legal fees from the checking account of SACM for proceedings related to the IRS garnishment of their income. Finally, they exercised active or substantial control over the property.

Because the Court determined that SACM is the Gardners’ nominee, the levy by the IRS was lawful and summary judgment was granted to the IRS on that claim.

IRS Targets High-Income Non-Filers

On February 29, 2024, the Internal Revenue Service (IRS) announced a new program to "improve tax compliance and ensure fairness" by targeting 125,000 high-income taxpayers who failed to file returns since 2017.

The IRS determined that over 25,000 individuals with incomes of $1 million or more and over 100,000 individuals with incomes between $400,000 and $1 million did not file returns during the 2017 to 2021 filing periods. This is based upon third-party information received by the IRS. This frequently is based on Forms W-2 or 1099 information sent by employers, banks and other financial services companies to the IRS.

IRS Commissioner Danny Werfel stated, "At this time of year when millions of hard-working people are doing the right thing paying their taxes, we cannot tolerate those with higher incomes failing to do a basic civic duty of filing a tax return. The IRS is taking this step to address this most basic form of non-compliance, which includes many who are engaged in tax evasion."

The IRS plans to send 20,000 to 40,000 letters each week. The letters will be sent initially to those with the highest reported incomes. Because some non-filers have not filed for multiple years, the actual number of taxpayers will be less than the total number of notices.

Commissioner Werfel emphasized that anyone receiving an IRS notice should take immediate action. They should contact a trusted tax professional and prepare their late tax returns. A failure-to-file penalty of 5% of the amount owed every month up to 25% of a tax bill may be applicable.

The IRS has received third-party information that indicates these taxpayers may have up to $100 billion in unreported income. While many of the taxpayers also qualify for deductions, the IRS expects to recover hundreds of millions of dollars in unpaid taxes.

Commissioner Werfel continued, "If someone has not filed a tax return for previous years, this is the time to review their situation and make it right. For those who owe, the risk will just grow over time as will the potential for penalties and interest."

The IRS has embarked on a significant effort to ensure compliance for high-income individuals, large partnerships and corporations. The funding from the Inflation Reduction Act is being used to encourage tax compliance.

The current effort to recover taxes from 1,600 millionaires has produced over $500 million in revenue. The IRS is also auditing over 75 large partnerships using artificial intelligence (AI).

If the taxpayers do not respond to the initial IRS letter, they will receive additional notices. Some taxpayers may eventually face audits and even criminal prosecution.

The IRS may also prepare a Substitute for Return (SFR). If the IRS prepares a substitute tax return for an individual, it will send a Notice of Deficiency with a proposed tax assessment. The taxpayer will have 90 days to file a past due tax return or a petition in Tax Court.

The IRS substitute return will frequently not take advantage of all applicable exemptions, credits and deductions. Because the taxpayer has greater information about exemptions, credits and deductions, he or she should promptly file the tax return with the correct figures. If the taxpayer does not file a corrected return, the IRS may then levy on the taxpayer’s bank or financial accounts.

Applicable Federal Rate of 5.0% for March -- Rev. Rul. 2024-4; 2024-9 IRB 1 (14 February 2024)

The IRS has announced the Applicable Federal Rate (AFR) for March of 2024. The AFR under Sec. 7520 for the month of March is 5.0%. The rates for February of 4.8% or January of 5.2% also may be used. The highest AFR is beneficial for charitable deductions of remainder interests. The lowest AFR is best for lead trusts and life estate reserved agreements. With a gift annuity, if the annuitant desires greater tax-free payments the lowest AFR is preferable. During 2024, pooled income funds in existence less than three tax years must use a 3.8% deemed rate of return. Charitable gift receipts should state, “No goods or services were provided in exchange for this gift and the nonprofit has exclusive legal control over the gift property

Published March 1, 2024
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Kelli Kotowski

Assistant Vice President, Gift Planning
The Ohio University Foundation
P.O. Box 869
Athens, OH 45701
[email protected]
740-597-1819 office
740-707-3100 cell
740-593-1432 fax

Tim J. Gartland

Director, Gift Planning
The Ohio University Foundation
P.O. Box 869
Athens, OH 45701
[email protected]
740-593-2235 office
480-297-3032 cell
740-593-1432 fax