Sunday, April 30, 2017
Jane G. Gravelle (Congressional Research Service), The “Better Way” House Tax Plan: An Economic Analysis (R44823) (Apr. 25, 2017):
On June 24, 2016, House Speaker Paul Ryan released the Better Way Tax Reform Task Force Blueprint, which provides a revision of federal income taxes. For the individual income tax, the plan would broaden the base, lower the rates (with a top rate of 33%), and alter some of the elements related to family size and structure by eliminating personal exemptions, allowing a larger standard deduction, and adding a dependent credit. For business income, the current income tax would be replaced by a cash-flow tax rebated on exports and imposed on imports, with a top rate of 20% for corporations and 25% for individuals. The cash-flow tax would be border-adjusted (imports taxed and exports excluded), making domestic consumption the tax base. The system would also move to a territorial tax in which foreign source income (except for easily abused income) would not be taxed. In addition, the proposal would repeal estate and gift taxes. Although the Affordable Care Act (ACA) taxes are not repealed in the Better Way tax reform proposal, ACA taxes are repealed in the Healthcare Task Force proposals.
April 30, 2017 in Congressional News, Gov't Reports, Tax | Permalink
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Thursday, April 6, 2017
The Treasury Inspector General for Tax Administration yesterday released Criminal Investigation Enforced Structuring Laws Primarily Against Legal Source Funds and Compromised the Rights of Some Indiviuals and Businesses:
The Currency and Foreign Transactions Reporting Act of 1970, referred to as the Bank Secrecy Act, requires U.S. financial institutions to file reports of currency transactions exceeding $10,000. ... In October 2014, a new policy was instituted by IRS Criminal Investigation (CI) that it would no longer pursue the seizure and forfeiture of funds related to legal source structuring. In the same month the policy changed, the New York Times reported that CI had been seizing funds in structuring investigations without filing a criminal complaint. Property owners were left to prove their innocence, and many gave up trying. This audit was initiated to evaluate the IRS’s use of seizures against property owners suspected of structuring transactions to avoid Bank Secrecy Act reporting requirements.
Most of the seizures for structuring violations involved legal source funds from businesses. While current law does not require that the funds have an illegal source (e.g., money laundering or criminal activity other than alleged.
Washington Post, The IRS Took Millions From Innocent People Because of How They Managed Their Bank Accounts, Inspector General Finds:
The IRS pursued hundreds of cases from 2012 to 2015 on suspicion of structuring, but with no indications of connections to any criminal activity. Simply depositing cash in sums of less than $10,000 was all that it took to arouse agents' suspicions, leading to the eventual seizure and forfeiture of millions of dollars in cash from people not otherwise suspected of criminal activity.
April 6, 2017 in Gov't Reports, IRS News, Tax | Permalink
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Wednesday, February 1, 2017
Joint Committee on Taxation, Estimates of Federal Tax Expenditures for Fiscal Years 2016-2020 (JCX-3-17):
Tax expenditure analysis can help both policymakers and the public to understand the actual size of government, the uses to which government resources are put, and the tax and economic policy consequences that follow from the implicit or explicit choices made in fashioning legislation. This report on tax expenditures for fiscal years 2016-2020 is prepared by the staff of the Joint Committee on Taxation (“Joint Committee staff”) for the House Committee on Ways and Means and the Senate Committee on Finance. The report also is submitted to the House and Senate Committees on the Budget.
As in the case of earlier reports, the estimates of tax expenditures in this report were prepared in consultation with the staff of the Office of Tax Analysis in the Department of the Treasury (“the Treasury”). The Treasury published its estimates of tax expenditures for fiscal years 2015-2025 in the Administration's budgetary statement of February 9, 2016. The lists of tax expenditures in this Joint Committee staff report and the Administration's budgetary statement overlap considerably; the differences are discussed in Part I of this report under the heading “Comparisons with Treasury.”
February 1, 2017 in Congressional News, Gov't Reports, Tax | Permalink
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Wednesday, November 30, 2016
The Congressional Budget Office and Joint Committee Taxation have released Factors Affecting Revenue Estimates of Tax Compliance Proposals (CBO Working Paper 2016-05; JTX-90-16):
This paper examines various factors that affect estimates made by the Congressional Budget Office and the staff of the Joint Committee on Taxation of the budgetary savings from tax compliance proposals. Affecting the current law baseline, against which proposed changes are measured, are the size of the tax gap and the amount of Internal Revenue Service (IRS) resources. Other considerations that affect the revenue estimates for either appropriation proposals or changes to the tax code include the distinction between detection and deterrence, the budget scorekeeping guidelines, and the constraints faced by the IRS when trying to obtain a higher return on investment from new initiatives than from the activities allowed under current law. In addition to those common considerations, there are factors unique to proposals to increase funding and to those that would expand the IRS’s enforcement tools allowed under the tax code. Those unique factors are illustrated by two examples—first, the Administration’s proposal to increase funding for IRS enforcement actions that was included in its fiscal year 2016 budget submission and second, legislation enacted in 2016 to reduce identity fraud in the tax system.
November 30, 2016 in Congressional News, Gov't Reports, IRS News | Permalink
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Friday, November 18, 2016
Saturday, September 24, 2016
Wall Street Journal, The White House Says Its Policies Slashed the Income Gap:
One of the big criticisms of the current economic expansion—and also the one that ran from 2001 through 2007—is that most of the gains accrued to the best off, unleashing a populist groundswell in the presidential election campaign.
The White House lays out the case in a new report that the Obama administration’s policies have done more than any administration in the last half-century to reduce inequality [The Economic Record of the Obama Administration: Progress Reducing Inequality] ...
The upshot is these changes in tax and health-care policy will increase the share of after-tax income by the poorest fifth of households by 0.6 percentage point while reducing the share of the wealthiest 1% of households by 1.2 percentage points.
Taken together, the administration says that it has done more to redistribute wealth to the bottom 99% of families through tax-code changes than any administration since at least 1960. The share of after-tax income from the poorest fifth of households fell by nearly 25% from 1979 to 2007, and the White House says its tax and health-care changes have reversed one-third of that decline.
September 24, 2016 in Gov't Reports, Tax | Permalink
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Wednesday, September 14, 2016
Wednesday, September 7, 2016
Government Accountability Office, Treasury and OMB Need to Reevaluate Long-standing Exemptions of Tax Regulations and Guidance (GAO- 16-720):
The Internal Revenue Service (IRS) uses a variety of documents to communicate its interpretation of tax laws to the public, but only considers Internal Revenue Bulletin (IRB) guidance to be authoritative. IRS information published outside of the IRB can help taxpayers understand tax laws and make informed decisions, but does not always include information clarifying the limitations of its use. IRS has detailed procedures for identifying, prioritizing, and issuing new guidance. However, it lacks procedures for documenting the decision about what type of guidance to issue.
Hierarchy of Authority for IRS Guidance and Other Information Sources
September 7, 2016 in Gov't Reports, IRS News, Tax | Permalink
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Friday, July 8, 2016
The Treasury Inspector General for Tax Administration has released Access to Government Facilities and Computers Is Not Always Removed When Employees Separate (2016-10-038):
During Fiscal Year 2014, more than 4,100 full-time, permanent employees separated from the IRS, including 186 who separated during a pending disciplinary case (including criminal misconduct). It is important for the IRS to recover security items, such as Government identification, to prevent former employees from unauthorized entry to IRS facilities and workspaces, accessing IRS computers and taxpayer information, or potentially misrepresenting themselves to taxpayers. ...
Based on a random sample of Fiscal Year 2014 employee separations, TIGTA estimates that the IRS could not verify that all security items were recovered for more than 2,700 (66 percent) of the more than 4,100 employee separations. TIGTA also reviewed a judgmental sample of 10 employees who separated during a pending disciplinary case. The IRS could not verify the recovery of the security items for six of these employees and could not provide evidence that these cases were referred to the TIGTA Office of Investigations as required. When the IRS did not collect security items, some were later used to enter IRS buildings.
July 8, 2016 in Gov't Reports, IRS News, Tax | Permalink
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Tuesday, July 5, 2016
Government Accountability Office, Refundable Tax Credits: Comprehensive Compliance Strategy and Expanded Use of Data Could Strengthen IRS's Efforts to Address Noncompliance (GAO- 16-475):
The Earned Income Tax Credit (EITC), the Additional Child Tax Credit (ACTC), and the American Opportunity Tax Credit (AOTC) provide tax benefits to millions of taxpayers—many of whom are low-income—who are working, raising children, or pursuing higher education. These credits are refundable in that, in addition to offsetting tax liability, any excess credit over the tax liability is refunded to the taxpayer. In 2013, the most recent year available, taxpayers claimed $68.1 billion of the EITC, $55.1 billion of the CTC/ACTC, and $17.8 billion of the AOTC.
Eligibility rules for refundable tax credits (RTCs) contribute to compliance burden for taxpayers and administrative costs for the Internal Revenue Service (IRS). These rules are often complex because they must address complicated family relationships and residency arrangements to determine who is a qualifying child. Compliance with the rules is also difficult for IRS to verify due to the lack of available third party data. The relatively high overclaim error rates for these credits (as shown below) are a result, in part, of this complexity. The average dollar amounts overclaimed per year for 2009 to 2011, the most recent years available, are $18.1 billion for the EITC, $6.4 billion for the CTC/ACTC, and $5.0 billion for the AOTC.
July 5, 2016 in Congressional News, Gov't Reports, Tax | Permalink
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Friday, June 10, 2016
Congressional Budget Office, The Distribution of Household Income and Federal Taxes, 2013:
In 2013, according to the Congressional Budget Office’s estimates, average household market income— a comprehensive income measure that consists of labor income, business income, capital income (including capital gains), and retirement income—was approximately $86,000. Government transfers, which include benefits from programs such as Social Security, Medicare, and unemployment insurance, averaged approximately $14,000 per household. The sum of those two amounts, which equals before-tax income, was about $100,000, on average. In this report, CBO analyzed the distribution of four types of federal taxes: individual income taxes, payroll (or social insurance) taxes, corporate income taxes, and excise taxes. Taken together, those taxes amounted to about $20,000 per household, on average, in 2013.1 Thus, average after-tax income—which equals market income plus government transfers minus federal taxes— was about $80,000, and the average federal tax rate (federal taxes divided by before-tax income) was about 20 percent.
June 10, 2016 in Congressional News, Gov't Reports, Tax | Permalink
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Friday, May 27, 2016
Government Accountability Office, Federal Agencies Need to Address Aging Legacy Systems (GAO- 16-696T):
Federal legacy IT investments are becoming increasingly obsolete: many use outdated software languages and hardware parts that are unsupported. Agencies reported using several systems that have components that are, in some cases, at least 50 years old. For example, ... the Department of the Treasury uses assembly language code—a computer language initially used in the 1950s and typically tied to the hardware for which it was developed. ... The following table provides examples of legacy systems across the federal government that agencies report are 30 years or older and use obsolete software or hardware, and identifies those that do not have specific plans with time frames to modernize or replace these investments.
May 27, 2016 in Gov't Reports, IRS News, Tax | Permalink
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Monday, May 2, 2016
Washington Times, Orrin Hatch Demands Secret Memo That’s Aided Obama Executive Actions:
President Obama’s unilateral pen-and-phone approach to governing has been aided by a decades-old secret memo that allows him to avoid economic scrutiny of some of the most intrusive rules and regulations his administration has issued, a top senator said Thursday.
Now Sen. Orrin G. Hatch, Utah Republican and chairman of the Finance Committee, has demanded Treasury Secretary Jacob Lew release the 1983 memorandum of understanding and defend the Reagan-era policy that has let Mr. Obama pursue changes on everything from corporate taxes to Obamacare without first giving a full heads-up to Congress.
May 2, 2016 in Gov't Reports, Tax | Permalink
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Wednesday, April 20, 2016
The Joint Committee on Taxation has released Disclosure Report for Public Inspection Pursuant to Internal Revenue Code Section 6103(p)(3)(C) for Calendar Year 2015 (JCX-32-16):
Section 6103(p)(3)(C) of the Internal Revenue Code provides that the Secretary of the Treasury shall, within 90 days after the close of each calendar year, furnish to the Joint Committee on Taxation for disclosure to the public a report which provides, with respect to each Federal agency and certain other entities, the number of: (1) requests for disclosure of returns and return information (as such terms are defined in section 6103(b)); (2) instances in which returns and return information were disclosed pursuant to such requests or otherwise; and (3) taxpayers whose returns, or return information with respect to whom, were disclosed pursuant to such requests. In addition, the report must describe the general purposes for which such requests were made
April 20, 2016 in Gov't Reports, Tax | Permalink
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Monday, April 18, 2016
Government Accountability Office, IRS Needs to Further Enhance Controls over Taxpayer and Financial Data (GAO-16-590T):
In March 2016 GAO reported that the Internal Revenue Service (IRS) had instituted numerous controls over key financial and tax processing systems; however, it had not always effectively implemented safeguards intended to properly restrict access to systems and information. In particular, while IRS had improved some of its access controls, weaknesses remained with identifying and authenticating users, authorizing users' level of rights and privileges, encrypting sensitive data, auditing and monitoring network activity, and physically securing its computing resources. These weaknesses were due in part to IRS's inconsistent implementation of its agency-wide security program, including not fully implementing GAO recommendations. The table below shows the status of prior and new GAO recommendations as of the end of its fiscal year (FY) 2015 audit of IRS's information security. GAO concluded that these weaknesses collectively constituted a significant deficiency for the purposes of financial reporting for fiscal year 2015. Until they are effectively mitigated, taxpayer and financial data will continue to be exposed to unnecessary risk.
April 18, 2016 in Gov't Reports, Tax | Permalink
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Friday, April 15, 2016
Government Accountability Office, Most Large Profitable U.S. Corporations Paid Tax but Effective Tax Rates Differed Significantly from the Statutory Rate (GAO-16-363):
In each year from 2006 to 2012, at least two-thirds of all active corporations had no federal income tax liability. Larger corporations were more likely to owe tax. Among large corporations (generally those with at least $10 million in assets) less than half—42.3 percent—paid no federal income tax in 2012. Of those large corporations whose financial statements reported a profit, 19.5 percent paid no federal income tax that year. Reasons why even profitable corporations may have paid no federal tax in a given year include the use of tax deductions for losses carried forward from prior years and tax incentives, such as depreciation allowances that are more generous in the federal tax code than those allowed for financial accounting purposes. Corporations that did have a federal corporate income tax liability for tax year 2012 owed $267.5 billion.
April 15, 2016 in Gov't Reports, IRS News, Tax | Permalink
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Tuesday, March 29, 2016
Government Accountability Office, IRS Needs to Further Improve Controls over Financial and Taxpayer Data (GAO-16-398) (Mar. 28, 2016):
The Internal Revenue Service (IRS) made progress in implementing information security controls; however, weaknesses in the controls limited their effectiveness in protecting the confidentiality, integrity, and availability of financial and sensitive taxpayer data. During fiscal year 2015, IRS continued to devote attention to securing its information systems that process sensitive taxpayer and financial information. Key among its actions were further restricting access privileges on key financial applications and continuing its migration to multifactor authentication across the agency. However, significant control deficiencies remained. For example, the agency had not always (1) implemented controls for identifying and authenticating users, such as applying proper password settings; (2) appropriately restricted access to servers; (3) ensured that sensitive user authentication data were encrypted; (4) audited and monitored systems to ensure compliance with agency policies; and (5) ensured access to restricted areas was appropriate. In addition, unpatched and outdated software exposed IRS to known vulnerabilities.
March 29, 2016 in Gov't Reports, Tax | Permalink
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Tuesday, March 22, 2016
The Subcommittee on Tax Policy of the House Ways & Mean Committee holds a hearing today on Fundamental Tax Reform Proposals:
Rep. Devin Nunes (R-CA), a member of the Ways and Means Committee, will testify in support of his bill, H.R. 4377, the American Business Competitiveness (ABC) Act of 2015. This proposal would tax a business based on its actual cash-flow instead of its income.
Rep. Michael Burgess (R-TX) will discuss the merits of his bill, H.R. 1040, the Flat Tax Act. This proposal gives businesses and individuals the choice to opt-in to a 17% flat tax and to be taxed on a cash-flow basis for business activities.
Rep. Robert Woodall (R-GA) will speak in support of his bill, H.R. 25, the FairTax Act of 2015. This proposal would repeal all federal income, payroll and withholding, and estate and gift taxes. The taxes would be replaced with a national sales tax on gross payments of taxable property or services.
In connection with the hearing, the Joint Committee on Taxation has released Background On Cash-Flow And Consumption-Based Approaches To Taxation (JCX 14-16):
March 22, 2016 in Congressional News, Gov't Reports, Tax | Permalink
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Thursday, January 21, 2016
Tim Dowd, Paul Landefeld & Anne Moore (Joint Committee on Taxation), Profit Shifting of U.S. Multinationals:
We analyze the profit shifting behavior of U.S. multinational firms using a unique panel data set of U.S. tax returns over the period 2002-2012. Prior research has found significant effects of tax rates in affiliate and parent countries on the profit shifting behavior of multinational entities, with semi-elasticities ranging from close to zero to well above one. We build on this prior work by allowing more heterogeneity in response across the distribution of tax rates and by including affiliates located in tax havens around the world. Our findings suggest that elasticities based on a log-linear specification may severely understate the sensitivity of profits to tax in low-tax jurisdictions while simultaneously overstating this elasticity in high-tax jurisdictions. Accounting for this type of nonlinearity appears crucial in considering how the global allocation of firm profits might change in response to tax rate changes.
January 21, 2016 in Gov't Reports, Scholarship, Tax | Permalink
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Friday, January 15, 2016
Government Accountability Office, Deteriorating Taxpayer Service Underscores Need for a Comprehensive Strategy and Process Efficiencies (GAO-16-151) (Jan 14, 2016):
The Internal Revenue Service (IRS) provided the lowest level of telephone service during fiscal year 2015 compared to prior years, with only 38 percent of callers who wanted to speak with an IRS assistor able to reach one. This lower level of service occurred despite lower demand from callers seeking live assistance, which has fallen by 6 percent since 2010 to about 51 million callers in 2015. Over the same period, average wait times have almost tripled to over 30 minutes. IRS also struggled to answer correspondence in a timely manner and assistors increasingly either failed to send required correspondence to taxpayers or included inaccurate information in correspondence sent. IRS has taken steps to remind assistors to send correspondence, but does not have adequate controls to ensure that they send accurate correspondence before closing cases. GAO also found that the Department of the Treasury (Treasury) does not include correspondence performance goals in its performance plan, and therefore, does not have a complete set of measures to assess performance. The decline in service has coincided with a 10 percent reduction in IRS's annual appropriations, as well as resource allocation decisions by IRS to meet statutory responsibilities, such as implementing tax law changes and supporting information technology infrastructure.
January 15, 2016 in Gov't Reports, IRS News, Tax | Permalink
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Wednesday, December 9, 2015
Joint Committee on Taxation, Estimates of Federal Tax Expenditures for Fiscal Years 2015-2019 (JCX-141-15):
Tax expenditure analysis can help both policymakers and the public to understand the actual size of government, the uses to which government resources are put, and the tax and economic policy consequences that follow from the implicit or explicit choices made in fashioning legislation. This report on tax expenditures for fiscal years 2015-2019 is prepared by the staff of the Joint Committee on Taxation (“Joint Committee staff”) for the House Committee on Ways and Means and the Senate Committee on Finance. The report also is submitted to the House and Senate Committees on the Budget.
As in the case of earlier reports, the estimates of tax expenditures in this report were prepared in consultation with the staff of the Office of Tax Analysis in the Department of the Treasury (“the Treasury”). The Treasury published its estimates of tax expenditures for fiscal years 2014-2024 in the Administration's budgetary statement of February 2, 2015. The lists of tax expenditures in this Joint Committee staff report and the Administration's budgetary statement overlap considerably; the differences are discussed in Part I of this report under the heading “Comparisons with Treasury.”
December 9, 2015 in Congressional News, Gov't Reports, Tax | Permalink
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Tuesday, December 1, 2015
Government Accountability Office, IRS Whistleblower Program: Billions Collected, but Timeliness and Communication Concerns May Discourage Whistleblowers (GAO-16-20):
The Internal Revenue Service (IRS) Whistleblower Office (WO) is responsible for processing thousands of tax whistleblower claims annually for two related whistleblower programs: for claims of $2 million or less, the 7623(a) program, and for claims over $2 million, the 7623(b) program. The whistleblower claim review process takes several years to complete, and GAO found that the WO is not using available capabilities to track and monitor key dates in its claim management system. Without available information on key dates related to award review and payments, the WO is unable to assess its performance against timeliness targets and risks unnecessarily delaying award payments.
December 1, 2015 in Gov't Reports, Tax | Permalink
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Tuesday, November 24, 2015
The Treasury Inspector General for Tax Administration has released Improvements Are Needed in Resource Allocation and Management Controls for Audits of High-Income Taxpayers (2015-30-078):
Given the IRS’s goal of providing higher audit coverage to high-income taxpayers and its reduced operating budget, it is that much more important that the IRS selects audits that have the highest compliance impact. However, it is not clear that the IRS audits the most productive high-income taxpayer cases or that it has a clear rationale for the inventory balance it has established among taxpayers at different TPI levels.
We conducted an analysis on Fiscal Year 2014 audit closures of high-income taxpayers comparing the number of audits to the number of tax returns filed in Calendar Year 2013 to evaluate the IRS’s audit coverage and audit productivity in the various TPI ranges. Figure 5 shows that the IRS is providing increased audit coverage as a percentage of each TPI range as the high-income taxpayers’ TPIs increase.
November 24, 2015 in Gov't Reports, IRS News, Tax | Permalink
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Tuesday, November 17, 2015
Government Accountability Office, IRS's Fiscal Years 2015 and 2014 Financial Statements (GAO-16-146):
In GAO’s opinion, the Internal Revenue Service’s (IRS) fiscal years 2015 and 2014 financial statements are fairly presented in all material respects. However, in GAO’s opinion, IRS did not maintain effective internal control over financial reporting as of September 30, 2015, because of a continuing material weakness in internal control over unpaid tax assessments. GAO’s tests of IRS’s compliance with selected provisions of applicable laws, regulations, contracts, and grant agreements detected no reportable instances of noncompliance in fiscal year 2015.
The material weakness in internal control over unpaid tax assessments was primarily caused by financial system limitations and errors in taxpayer accounts that rendered IRS’s systems unable to readily distinguish between taxes receivable, compliance assessments, and write-offs in order to properly classify these components for financial reporting purposes. These deficiencies necessitated the use of a compensating estimation process to determine the amount of taxes receivable, the most material asset on IRS’s balance sheet. Through this compensating process, IRS made over $9 billion in adjustments to the 2015 fiscal year-end gross taxes receivable balance produced by its financial systems. To address this material weakness, in fiscal year 2015, IRS took a significant step in developing a long-term corrective action plan. However, the plan does not include milestones or related dates for most of the actions, so it is unclear when IRS will fully address the issues that cause significant inaccuracies in the unpaid tax assessments information maintained in its accounting systems.
November 17, 2015 in Gov't Reports, IRS News, Tax | Permalink
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Saturday, October 3, 2015
The Treasury Inspector General for Tax Administration has released Fiscal Year 2015 Statutory Review of Compliance With the Freedom of Information Act (2015-30-084):
TIGTA is required to conduct periodic audits to determine whether the IRS properly denied written requests for taxpayer information pursuant to FOIA § 552(b)(7) and I.R.C. § 6103. The overall objectives of this audit were to determine whether the IRS improperly withheld information requested by taxpayers in writing, based on FOIA exemption (b)(3), in conjunction with I.R.C. § 6103, and/or FOIA exemption (b)(7) or by replying that responsive records were not available. Specifically, this included determining whether the IRS had adequate and effective policies and procedures to ensure that all of these requests were processed timely and that information was not improperly withheld. In addition, TIGTA determined whether IRS disclosure officers erroneously disclosed sensitive taxpayer information when responding to written FOIA, Privacy Act, or I.R.C. § 6103 information requests.
October 3, 2015 in Gov't Reports, IRS News, Tax | Permalink
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Tuesday, September 1, 2015
The Treasury Inspector General for Tax Administration today released Affordable Care Act: Interim Results of the Internal Revenue Service Verification of Premium Tax Credit Claims (2015-43-057):
The Affordable Care Act created the refundable Premium Tax Credit (PTC) to assist eligible taxpayers with paying their health insurance premiums. Individuals may elect to have the PTC paid directly to their health insurance provider as partial payment for their monthly premiums (referred to as the Advance Premium Tax Credit (APTC)) or receive the PTC as a lump sum credit on their annual Federal income tax return. According to the IRS, almost $11 billion in APTCs was paid to insurers in Fiscal Year 2014.
The Consolidated and Further Continuing Appropriations Act of 2015 requires a report no later than June 1, 2015, on the IRS’s reconciliation of APTCs paid to taxpayers and the Department of Health and Human Services use of IRS information to reduce fraud and overpayments. The objective of this review was to provide selected information related to the processing of PTC claims during the 2015 Filing Season. TIGTA plans to issue the final results of its analysis later in Calendar Year 2015.
September 1, 2015 in Gov't Reports, IRS News, Tax | Permalink
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Tuesday, August 11, 2015
Congressional Research Service, The Federal Tax Treatment of Married Same-Sex Couples (R43157) (July 30, 2015):
This report provides an overview of the federal tax treatment of same-sex married couples, with a focus on the federal income tax. Estate tax issues are also discussed. The administration of federal tax laws for married same-sex couples changed as a result of the U.S. Supreme Court ruling in United States v. Windsor in 2013, striking down Section 3 of the Defense of Marriage Act. The administration of federal tax laws was not affected by the June 26, 2015, ruling in Obergefell v. Hodges. Obergefell struck down state bans on same-sex marriage, holding that all states must both permit same-sex couples to marry in their states and recognize same-sex marriages that were formed in other states. While it did not change the administration of federal income tax laws, the Obergefell decision may affect the number of same-sex couples who decide to marry (and hence the number of federal and state tax returns filed by married couples). Analysis of changes to individuals’ state tax liabilities resulting from the Obergefell decision is beyond the scope of this report; however, state tax changes may ultimately affect federal tax liabilities for those couples who itemize deductions on their federal returns.
August 11, 2015 in Gov't Reports, Tax | Permalink
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Monday, July 6, 2015
Treasury Inspector General for Tax Administration Report of Investigation, Exempt Organization Data Loss and Potential Obstruction of Justice:
The investigation determined that there were six possible sources to examine in order to potentially recover the missing e-mails. These sources were LERNER's crashed hard drive, the backup or disaster recovery tapes, a decommissioned Microsoft (MS) Exchange 2003 e-mail server, the backup tapes for the decommissioned e-mail server, LERNER's BlackBerry, and loaner laptop computers that may have been assigned to her while her laptop was being repaired. An examination of four of these sources, the backup or disaster recovery tapes, the decommissioned Exchange 2003 e-mail server, LERNER's BlackBerry, and the loaner laptops produced e-mail that the IRS had not previously produced to Congress, DOJ or TIGTA. The investigation also determined that once it was discovered that there was a gap in the IRS' production of LERNER's e-mail, the IRS did not fully identify as a source or perform recovery attempts for e-mail on the following electronic media, all of which the IRS had in their possession: backup or disaster recovery tapes, the decommissioned Exchange 2003 e-mail server, the backup tapes for the decommissioned e-mail server or the loaner laptop computers. ...
The investigation also revealed that on or about March 4, 2014, one month after the IRS realized it was missing some of LERNER's e-mails, IRS employees in the IRS Enterprise Computing Center in Martinsburg, West Virginia (Martinsburg), magnetically erased 422 backup tapes that are believed to have contained LERNER's e-mails that were responsive to Congressional demands and subpoenas. However, the investigation did not uncover evidence that the IRS and its employees purposely erased the tapes in order to conceal responsive e-mails from the Congress, the DOJ and TIGTA.
The investigation revealed that the backup tapes were destroyed as a result of IRS management failing to ensure that a May 22, 2013, e-mail directive from the IRS Chief Technology Officer (CTO) concerning the preservation of electronic e-mail media was fully understood and followed by all of the IRS employees responsible for handling and disposing of e-mail bStephen MANNING, former IRS Deputy Chief Information Officer, Strategy and Modernization.ackup media. ...
When interviewed, [Terence MILHOLLAND, IRS Chief Technology Office] was asked if he knew that e-mail backup tapes from a decommissioned e-mail server had been degaussed in March 2014, MILHOLLAND stated that he was not aware of this, and he advised that he was "blown away" at the revelation. He further stated that IRS IT senior management was ultimately responsible. MILHOLLAND also stated that his May 2013 e-mail directive would have applied to preserving the NCFB backup tapes and that the organization that sent them to be destroyed would also be responsible for their destruction.
- Press Release From Elijah E. Cummings (Ranking Member, House Committee on Oversight and Government Reform), New IRS Inspector General Report Finds No Evidence That Lerner Intentionally Crashed Computer or Concealed Emails From Investigators
- Bayou Buzz, IT Boss ‘Blown Away’ That IRS Backup Tapes in Lerner Case Erased, Watchdog Says
- The Blaze, IT Boss at IRS ‘Blown Away’ After Learning What Happened to Backup Tapes Likely Containing Lerner Emails: Report
- Fox News, IT Boss ‘Blown Away’ That IRS Backup Tapes in Lerner Case Erased, Watchdog Says
- Philadelphia Inquirer, Report: IRS E-mails Not Intentionally Erased
- Power Line, Extending Alinsky Rule 6
- U.S. News & World Report, Internal Report Finds No Evidence IRS Employees Told to Destroy Information
July 6, 2015 in Congressional News, Gov't Reports, IRS News, IRS Scandal, Tax | Permalink
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Thursday, June 18, 2015
Washington Examiner, Watchdog: IRS Cuts Had Minimal Impact on Tax Collections:
The government watchdog released a report Wednesday indicating that the ability of the IRS to collect taxes hasn't been hurt too dramatically by sharp budget cuts the agency has seen since 2010.
The Treasury Inspector General for Tax Administration's report said tax collection has softened somewhat, but data in the report shows that revenues haven't fallen that far in some cases, and that some revenues have increased over the last few years. ...
[T]he report showed that ACS collections were $3.2 billion in 2010, when there were 2,817 ACS workers, and $3.1 billion in 2014, when there were 2,234 ACS workers. The report admitted that's "slightly less" in collections after a more than 20 percent cut to the workforce. While collections fell to $2.8 billion in 2012, collections have actually been rising since then, and have been nearly flat over the entire period, even as the number of workers have fallen.
June 18, 2015 in Gov't Reports, IRS News, Tax | Permalink
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Wednesday, June 10, 2015
The Treasury Inspector General for Tax Administration yesterday released Affordable Care Act: Assessment of Internal Revenue Service Preparation for Processing Premium Tax Credit Claims (2015-43-043):
The Patient Protection and Affordable Care Act created a refundable tax credit, referred to as the Premium Tax Credit (PTC), to assist individuals with the cost of their health insurance premiums. Individuals may elect to receive the PTC in advance as partial payment for their monthly premiums (referred to as the Advance Premium Tax Credit (APTC)) or receive the PTC as a lump sum credit on their annual Federal income tax return. Beginning in January 2015, individuals are required to reconcile the APTC and can claim additional PTC on their annual tax return beginning with Tax Year 2014. ...
The overall objective of this review was to assess the status of the IRS’s preparations for verifying the accuracy of PTC claims during the 2015 Filing Season. ...
In response to the delays in receiving required Exchange Periodic Data submissions, the IRS developed contingency plans in an effort to improve its ability to ensure the accuracy of PTC claims. However, without the required enrollment data from the Exchanges, the IRS will be unable to ensure that all taxpayers claiming the PTC bought insurance through an Exchange as required.
June 10, 2015 in Gov't Reports, IRS News, Tax | Permalink
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Monday, June 8, 2015
The Joint Committee on Taxation has released Disclosure Report for Public Inspection Pursuant to Internal Revenue Code Section 6103(p)(3)(C) for Calendar Year 2014 (JCX-89-15):
Section 6103(p)(3)(C) provides that the Secretary of the Treasury shall, within 90 days after the close of each calendar year, furnish to the Joint Committee on Taxation for disclosure to the public a report which provides, with respect to each Federal agency and certain other entities, the number of: (1) requests for disclosure of returns and return information (as such terms are defined in § 6103(b)); (2) instances in which returns and return information were disclosed pursuant to such requests or otherwise; and (3) taxpayers whose returns, or return information with respect to whom, were disclosed pursuant to such requests. In addition, the report must describe the general purposes for which such requests were made.
Pursuant to § 6103(p)(3)(C), the IRS prepared a disclosure report for public inspection covering calendar year 2014. ... This document sets forth the report of the IRS, verbatim.
June 8, 2015 in Gov't Reports, IRS News, Tax | Permalink
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Wednesday, March 18, 2015
Government Accountability Office, Government-Wide Estimates and Use of Death Data to Help Prevent Payments to Deceased Individuals (GAO-15-482T):
Government-wide, improper payment estimates totaled $124.7 billion in fiscal year 2014, a significant increase of approximately $19 billion from the prior year’s estimate of $105.8 billion. The estimated improper payments for fiscal year 2014 were attributable to 124 programs spread among 22 agencies.
The increase in the 2014 estimate is attributed primarily to increased error rates in three major programs: the Department of Health and Human Services’ (HHS) Medicare Fee-for-Service and Medicaid programs, and the Department of the Treasury’s Earned Income Tax Credit program. These three programs accounted for $80.9 billion in improper payment estimates, or approximately 65 percent of the government-wide total for fiscal year 2014. Further, the increases in improper payment estimates for these three programs were approximately $16 billion, or 85 percent of the increase in the government-wide improper payment estimate for fiscal year 2014.
The EITC's 27.2% error rate is far greater than any of the listed government programs.
March 18, 2015 in Gov't Reports, IRS News, Tax | Permalink
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Monday, March 2, 2015
The Joint Committee on Taxation has released Fairness and Tax Policy (JCX-48-15):
The Senate Committee on Finance has scheduled a public hearing on March 3, 2015, titled “Fairness in Taxation.” This document ... describes concepts of tax equity and provides data related to the current and historical distribution of income and taxes. ...
For 2015, the top 10 percent (in terms of income) of all tax returns receive 45 percent of all income and pay 82 percent of all income taxes. The top five percent of all tax returns receive 34 percent of all income and pay 71 percent of all income taxes. The top one percent of all tax returns receives 19 percent of all income and pay 49 percent of all income taxes.
March 2, 2015 in Congressional News, Gov't Reports, Tax | Permalink
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Friday, February 6, 2015
The Treasury Inspector General for Tax Administration yesterday released Additional Consideration of Prior Conduct and Performance Issues Is Needed When Hiring Former Employees (2015-10-006):
Between January 2010 and September 2013, IRS records show that the IRS hired more than 7,000 former employees (78 percent were temporary or seasonal positions). Most rehired employees do not have performance or conduct issues associated with prior IRS employment. However, TIGTA found that the IRS did hire hundreds of former employees with these types of issues. TIGTA reviewed a random sample from more than 300 employees with significant prior performance or conduct issues who were hired between January 2010 and July 2013 and determined that the IRS appropriately applied OPM suitability standards (e.g., determining whether applicants had prior criminal activity, material false statements, or illegal drug use).
However, TIGTA identified hundreds of former employees who were hired with prior substantiated conduct or performance issues. For example, 141 former employees with prior substantiated tax issues, including five who the IRS found had willfully failed to file their Federal tax returns, were hired. Other substantiated issues from previous IRS employment included unauthorized access to taxpayer information, leave abuse, falsification of official forms, unacceptable performance, misuse of IRS property, and off-duty misconduct.
February 6, 2015 in Gov't Reports, IRS News, Tax | Permalink
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Thursday, December 18, 2014
Government Accountability Office, Better Compliance Indicators and Data, and More Collaboration with State Regulators Would Strengthen Oversight of Charitable Organizations (GAO-15-164):
IRS oversight of charitable organizations helps to ensure they abide by the purposes that justify their tax exemption and protects the sector from potential abuses and loss of confidence by the donor community. In recent years, reductions in IRS's budget have raised concerns about the adequacy of IRS oversight.
GAO was asked to review IRS oversight of charitable organizations. In this report, GAO (1) describes the charitable organization sector, (2) describes IRS oversight activities, (3) determines how IRS assesses its oversight efforts, and (4) determines how IRS collaborates with state charity regulators and U.S. Attorneys to identify and prosecute organizations suspected of engaging in fraudulent (or other criminal) activity.
December 18, 2014 in Gov't Reports, Tax | Permalink
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Wednesday, December 10, 2014
Government Accountability Office, Improper Payments: Inspector General Reporting of Agency Compliance under the Improper Payments Elimination and Recovery Act (Dec. 9, 2014):
Improper payments—such as duplicate or erroneous payments, payments to ineligible recipients, or payments for ineligible services—have been a long-standing challenge of the federal government and have annually totaled billions of dollars. For fiscal year 2013, federal agencies reported an estimated $105.8 billion in improper payments, a decrease of $1.3 billion from the prior year revised estimate of $107.1 billion. Based on our review of Office of Management and Budget (OMB) data, the $105.8 billion estimate was attributable to 84 programs across 18 agencies (see enc. I). Fiscal year 2013 marked the 10th year of implementation of the Improper Payments Information Act of 2002 (IPIA), Five programs accounted for approximately $82.9 billion, or 78 percent of the total improper payments estimate in fiscal year 2013 (see enc. II for a list of the five programs with the largest estimates for fiscal years 2011 through 2013).
December 10, 2014 in Gov't Reports, IRS News, Tax | Permalink
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The Treasury Inspector General for Tax Administration yesterday released Existing Compliance Processes Will Not Reduce the Billions of Dollars in Improper Earned Income Tax Credit and Additional Child Tax Credit Payments (2014-40-093):
The Earned Income Tax Credit (EITC) and Additional Child Tax Credit (ACTC) are refundable credits designed to help low-income individuals reduce their tax burden. The IRS estimated that it paid $63 billion in refundable EITCs and $26.6 billion in refundable ACTCs for Tax Year 2012. The IRS also estimated that 24 percent of all EITC payments made in Fiscal Year 2013, or $14.5 billion, were paid in error. ...
The IRS has continually rated the risk of improper ACTC payments as low. However, TIGTA’s assessment of the potential for ACTC improper payments indicates the ACTC improper payment rate is similar to that of the EITC. Using IRS data, TIGTA estimates the potential ACTC improper payment rate for Fiscal Year 2013 is between 25.2 percent and 30.5 percent, with potential ACTC improper payments totaling between $5.9 billion and $7.1 billion. In addition, IRS enforcement data show the root causes of improper ACTC payments are similar to those of the EITC.
New York Times, Billions in Child Tax Credits Were Invalid, U.S. Audit Finds
December 10, 2014 in Gov't Reports, IRS News, Tax | Permalink
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Tuesday, December 9, 2014
Senator Tom Coburn (R-OK) today released Tax Decoder:
This report, Tax Decoder, is intended to decode the tax code for every taxpayer. It reveals more than 165 tax expenditures costing over $900 billion this year and more than $5 trillion over the next five years.
It is nearly impossible to know who is benefiting from the tax code because it lacks any real transparency or accountability. This is not unintentional. The Senate Finance Committee recently rejected an amendment that would have required the recipients of some tax credits to be publicly listed in the USAspending.gov website.10 The recipients of these tax breaks know who they are, so it seems reasonable for those who are paying the taxes to provide the benefits should know as well.
Tax Decoder attempts to provide a detailed and comprehensive overview of the code for all taxpayers. It includes the background, cost, and primary beneficiaries of each provision along with specific examples of some of the recipients of certain tax breaks. It covers well known tax provisions as well as others that are more obscure. ...
December 9, 2014 in Congressional News, Gov't Reports, Tax | Permalink
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Thursday, December 4, 2014
Congressional Research Service: Federal Proposals to Tax Marijuana: An Economic Analysis, by Jane G. Gravelle & Sean Lowry (R43785) (Nov. 13, 2014):
The combination of state policy and general public opinion favoring the legalizing of marijuana has led some in Congress to advocate for legalization and taxation of marijuana at the federal level. The Marijuana Tax Equity Act of 2013 (H.R. 501) would impose a federal excise tax of 50% on the producer and importer price of marijuana. The National Commission on Federal Marijuana Policy Act of 2013 (H.R. 1635) proposes establishing a National Commission on Federal Marijuana Policy that would review the potential revenue generated by taxing marijuana, among other things.
This report focuses solely on issues surrounding a potential federal marijuana tax. First, it provides a brief overview of marijuana production. Second, it presents possible justifications for taxes and, in some cases, estimates the level of tax suggested by that rationale. Third, it analyzes possible marijuana tax designs. The report also discusses various tax administration and enforcement issues, such as labeling and tracking.
December 4, 2014 in Congressional News, Gov't Reports, Tax | Permalink
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Friday, November 21, 2014
Congressional Budget Office, Options for Reducing the Deficit: 2015 to 2024:
This document provides estimates of the budgetary savings from 79 options that would decrease federal spending or increase federal revenues over the next decade.
36 of these 79 options are tax increases:
Individual Income Tax Rates
1. Increase Individual Income Tax Rates
2. Implement a New Minimum Tax on Adjusted Gross Income
3. Raise the Tax Rates on Long-Term Capital Gains and Dividends by 2 Percentage Points
November 21, 2014 in Congressional News, Gov't Reports, Tax | Permalink
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Thursday, November 20, 2014
Following up on my previous posts:
GAO, IRS Could Bolster Enforcement on Multimillion Dollar Accounts, but More Direction from Congress Is Needed (GAO-15-16):
For tax year 2011 (the most recent year available), an estimated 43 million taxpayers had individual retirement accounts (IRA) with a total reported fair market value (FMV) of $5.2 trillion. As shown in the table below, few taxpayers had aggregated balances exceeding $5 million as of 2011. Generally, taxpayers with IRA balances greater than $5 million tend to have adjusted gross incomes greater than $200,000, be joint filers, and are age 65 or older. Large individual and employer contributions sustained over decades and rolled over from an employer plan would be necessary to accumulate an IRA balance of more than $5 million. There is no total statutory limit on IRA accumulations or rollovers from employer defined contribution plans.
Estimated Taxpayers with Individual Retirement Accounts (IRA) by Size of IRA Balance, Tax Year 2011
A small number of taxpayers has accumulated larger IRA balances, likely by investing in assets unavailable to most investors—initially valued very low and offering disproportionately high potential investment returns if successful. Individuals who invest in these assets using certain types of IRAs can escape taxation on investment gains. For example, founders of companies who use IRAs to invest in nonpublicly traded shares of their newly formed companies can realize many millions of dollars in tax-favored gains on their investment if the company is successful. With no total limit on IRA accumulations, the government forgoes millions in tax revenue. The accumulation of these large IRA balances by a small number of investors stands in contrast to Congress's aim to prevent the tax-favored accumulation of balances exceeding what is needed for retirement.
(Hat Tip: Greg McNeal.)
November 20, 2014 in Gov't Reports, IRS News, Tax | Permalink
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Thursday, November 13, 2014
Government Accountability Office, IRS's Fiscal Years 2014 and 2013 Financial Statements (GAO-15-173):
In GAO's opinion, the Internal Revenue Service's (IRS) fiscal years 2014 and 2013 financial statements are fairly presented in all material respects. However, in GAO's opinion, IRS did not maintain effective internal control over financial reporting as of September 30, 2014, because of a continuing material weakness in internal control over unpaid tax assessments. ...
During fiscal year 2014, IRS continued to make important progress in addressing deficiencies in internal control over its financial reporting systems. However, GAO identified new and continuing deficiencies in internal control over information security, including missing security updates, insufficient monitoring of financial reporting systems and mainframe security, and ineffective maintenance of key application security, that constituted a significant deficiency in IRS's internal control over financial reporting systems. Until IRS fully addresses existing control deficiencies over its financial reporting systems, there is an increased risk that its financial and taxpayer data will remain vulnerable to inappropriate and undetected use, modification, or disclosure.
November 13, 2014 in Gov't Reports, IRS News, Tax | Permalink
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Thursday, November 6, 2014
Thursday, October 23, 2014
The Treasury Inspector General for Tax Administration yesterday released Improvements Are Needed to Ensure That Procedures Are Followed During Partnership Audits Subject to the Tax Equity and Fiscal Responsibility Act of 1982 (2014-30-082):
This audit was initiated to determine whether audits of partnerships subject to the TEFRA are initiated in accordance with applicable statutory and administrative procedures. ... TIGTA reviewed a statistically valid sample of 35 partnership audits subject to the TEFRA that were closed during Fiscal Year 2012 and identified 22 audits that were not conducted in accordance with one or more applicable TEFRA procedures. Specifically, TIGTA found that: (1) minimum tests were not always documented to determine whether TEFRA procedures should have been used to examine the partnership return; (2) necessary checks were not always documented to ensure that the Tax Matters Partner was qualified to represent the partnership; (3) some Forms 2848, Power of Attorney and Declaration of Representative, did not contain the required information that allows disclosure of tax return information; and (4) some Letters 1787, Notice of Beginning of Administrative Proceeding, were not issued timely. When the sample results are projected to the population of 2,698 TEFRA audits closed during Fiscal Year 2012, TIGTA estimates that approximately 1,696 TEFRA audits were not conducted in accordance with one or more applicable TEFRA procedures.
October 23, 2014 in Gov't Reports, IRS News, Tax | Permalink
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