With the peak hurricane season in September, the Internal Revenue Service reminds taxpayers to protect their tax and financial records.

Between 1851 and 2024, there have been 1,062 hurricanes in the Atlantic Ocean. September is the peak month with 425 hurricanes. During this time, there have been 169 major hurricanes (category 3, 4 or 5) and 63 hurricanes made landfall in the United States.

This September could be another busy season for hurricane watchers. The Caribbean water temperatures are 85 to 90 degrees Fahrenheit and favorable to the development of tropical storms and hurricanes. With this warmer water, there is greater hurricane intensity. The strongest September hurricanes were the Galveston Hurricane in the year 1900 and Hurricane Carla in 1961.

September is designated as National Preparedness Month. All individuals should use this time, before the natural disaster season, to protect important tax and financial information. The IRS offers several helpful tips to protect personal, financial and tax information. Additional information is also available on IRS.gov or FEMA.gov.

1. Protect Important Documents —Original documents may include tax returns, Social Security cards, marriage certificates, birth certificates and deeds to property. These should be secured in a waterproof container in a safe location. You should also make copies of important documents and keep them in a safe deposit box or send them to a trusted person in a different location.
2. Record of Valuables — With the ease of taking pictures on your cellphone, you should maintain photos of your high-value items. These photos or videos will be important if you lose the items in a natural disaster. These photos can help support your claims for tax benefits or insurance claims. The IRS also offers Publication 584, Casualty, Disaster, and Theft Loss Workbook. This will be very helpful to you if you have a loss due to a natural disaster.
3. Rebuild Your Records — After any hurricane, you may have a challenge in reconstructing or rebuilding your records. These records could be essential for receiving a federal grant or an insurance company payment. If you can accurately estimate your loss through records, the insurance adjuster will be able to justify the payments. The IRS has a Reconstructing Records webpage on IRS.gov that may be helpful.
4. Employer Fiduciary Bond — If you are an employer, you may have difficulties if your payroll service provider experiences a natural disaster. Your payroll service provider is obligated to make timely federal tax payments. There should be a fiduciary bond that protects you as an employer if your payroll service provider is in a natural disaster and defaults.
5. IRS Tax Relief — If FEMA declares your area a federal disaster zone, the IRS frequently postpones tax filing and payment deadlines. If you are within the disaster area, you will not need to contact the IRS. The IRS automatically identifies taxpayers with a business or personal address in the covered disaster area. If you reside outside the covered disaster area but have been impacted by the disaster, you may call 866-562-5227 to determine whether you qualify for relief.

Editor's Note: September is a prime time for hurricanes. These IRS guidelines are very helpful to make sure you are prepared for a natural disaster. Your preparations now may be essential for receiving a prompt government grant or insurance payment later.

IRS Collects $1.3 Billion in Overdue Taxes

The Internal Revenue Service (IRS) reported that as of September 6 it has collected approximately $1.3 billion in overdue taxes from upper-income taxpayers. IRS officials note they have been successful in using additional funding from the Inflation Reduction Act (IRA) to obtain overdue tax payments from individuals.

The IRS identified 125,000 people with incomes of $400,000 or more per year who have not filed a tax return during the past several years. The IRS contacted taxpayers to remind them to file tax returns and pay taxes. The IRS reported collecting $172 million from these individuals.

A second program identified 1,600 millionaires who have $250,000 or more in tax debt. The IRS has now been able to receive payments from nearly 1,300 of those millionaires. These payments equal approximately $1.1 billion.

Treasury Secretary Janet Yellen was pleased with this result. She stated, "This is just a first milestone, and we look forward to more progress ahead."

Senior Treasury Department officials note there will be an additional recovery of several hundred million tax dollars from the 1,600 individuals. The IRS is increasing enforcement efforts throughout 2024 on affluent taxpayers. They also have detailed audits underway with 80 complex partnerships. These extensive audits include multiple hedge funds and law firms.

The IRS reports it has spent $5.7 billion of the $57.8 billion in additional funding. While a portion of this has been allocated toward the enforcement effort, the funding is also used to provide additional taxpayer services.

The IRS emphasizes that individuals who file are required to report IRS Forms W-2 and 1099s. The IRS had received copies of these forms and discovered individuals with taxable income were failing to file their returns. Many of these individuals had incomes over $400,000 and some had incomes over $1 million. IRS Commissioner Danny Werfel explained it takes extra staffing to resolve the issues with non-filing taxpayers.

Editor’s Note: Commissioner Werfel reminded taxpayers there are a number of potential consequences when they have a substantial income and do not file a tax return. These consequences range from IRS penalties to potential criminal prosecutions.

IRS Warning on Fall Football Sports Betting

On September 5, 2024, the Internal Revenue Service (IRS) published a notice to taxpayers that urged them to "play by the rules when it comes to sports betting."

The IRS release stated, "The 2024-2025 football season is here, and fans are betting on NFL and college football more than ever. With nearly 50% of Americans having bet on sports at some point in time, IRS Criminal Investigation (IRS-CI) reminds U.S. taxpayers to wager safely and legally this football season."

The American Gaming Association reports a dramatic increase in sports betting in 2023. Nearly 68 million Americans placed bets of over $23 million on the last Super Bowl. Illegal sports betting is estimated to be more than $700 million per year. During the past four years, IRS-CI investigated 151 taxpayers involved in illegal gambling which resulted in 71 individuals sentenced to an average prison term of two years. The estimated total betting amount involved was over $178 million.

IRS Criminal Investigation Chief Guy Ficco noted, "Sports betting has grown exponentially in the past five years and is more common than ever. While online gambling is easily accessible, it is not always legal. As this year’s football season kicks off, IRS-CI special agents are continuing to monitor trends and are using our expertise to root out criminal activity related to illegal gambling like money laundering and tax evasion.”

IRS-CI highlighted the efforts by their special agents to uncover $17 million in funds that an interpreter stole from a leading Major League Baseball (MLB) player. The interpreter had engaged in illegal gambling for multiple years. The MLB player allowed the interpreter to have the password to his bank account. The interpreter was able to sign in to the bank account and change all the security protocols. The registered email address and the telephone number on the account were changed to that of the interpreter. When large financial transfers were requested, bank employees followed their standard procedure and called the listed phone number. However, the interpreter claimed to be the MLB player, tricked the bank staff and stole $17 million.

Another IRS-CI prosecution involved individuals in Ohio who operated several illegal gambling businesses. These businesses made millions of dollars that were not reported on income tax returns. The two ringleaders were sentenced to 21 years and nine years in prison, respectively. They also were ordered to pay the IRS millions of dollars in restitution.

IRS-CI reminds all individuals who are engaging in sports betting activities that winnings must be reported on your annual tax return. Individuals should keep detailed records to show all bets placed, winnings received and losses incurred. Sports bettors are encouraged to consult qualified tax professionals or go to IRS.gov for guidance on gambling income.

Editor’s Note: IRS-CI is tasked by the government to investigate tax fraud and other violations. The IRS-CI has 20 field offices in the United States and reports a 90% federal conviction rate on their cases.

Applicable Federal Rate of 4.8% for September: Rev. Rul. 2024-17; 2024-36 IRB 1 (15 August 2024)

The IRS has announced the Applicable Federal Rate (AFR) for September of 2024. The AFR under Sec. 7520 for the month of September is 4.8%. The rates for August of 5.2% or July of 5.4% 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.”