Thursday, June 9, 2011
The American Recovery and Reinvestment Act of 2009 (Recovery Act) provides individuals with a Qualified Motor Vehicle (QMV) deduction, which is an additional deduction for State sales tax and excise tax on the purchase of certain motor vehicles. The amount of the QMV deduction reduces an individual’s taxable income and taxes owed. The QMV deduction is phased out for individuals with a modified AGI between $125,000 and $135,000 for single individuals and between $250,000 and $260,000 for married individuals filing a joint tax return. Individuals with modified adjusted gross income equal to or above the phase-out amounts are not eligible for the QMV deduction. Figure 1 shows the number of individuals claiming the QMV deduction by schedule type and the amounts allowed through November 12, 2010.
Figure 1: QMV Deductions for Tax Year 2009
Total QMV Deductions
The IRS cannot verify whether individuals claiming a QMV deduction are entitled to the deduction at the time their tax returns are processed. The reason is that individuals do not have to provide any third-party documentation to support that they actually purchased a qualified motor vehicle and, if a qualified vehicle was purchased, the amount paid in sales and excise taxes. Based on our review of a statistically valid sample of 150 individuals allowed a QMV deduction of less than the amount the IRS considers excessive, it appears that some individuals may have erroneously been allowed QMV deductions for vehicles that were not purchased.
In addition, the process to identify potentially erroneous QMV deductions is not effective. The IRS failed to identify 4,257 individuals claiming what the IRS defines as an excessive QMV deduction during tax return processing so it could hold and prevent the possible issuance of erroneous tax refunds. These individuals claimed a total of more than $151.1 million in QMV deductions. TIGTA also identified 473 cases for which information that the IRS maintains identifies the individuals as ineligible to claim about $1.02 million in QMV deductions they were allowed. These individuals were in prison, deceased, or underage.
Wednesday, June 8, 2011
- Energy Tax Policy: Issues in the 112th Congress (R41769)
- International Corporate Tax Rate Comparisons and Policy Implications (R41743)
- Reducing the Budget Deficit: Tax Policy Options (R41641)
- Should the United States Levy a Value-Added Tax for Deficit Reduction? (R41602)
Friday, June 3, 2011
My testimony today will cover (1) when IRS detects identity theft-based refund and employment fraud, (2) the steps IRS has taken to resolve, detect, and prevent innocent taxpayers’ identity theft-related problems, (3) constraints that hinder IRS’s ability to address these issues, and (4) the potential for more rigorous screening to prevent refund or employment fraud now and in the future. ...
The number of tax-related identity theft incidents (primarily refund or employment fraud attempts) identified by IRS has grown:
- 51,702 incidents in 2008
- 169,087 incidents in 2009
- 248,357 incidents in 2010.
- Fox News, IRS Chief Apologizes for Employees' Rudeness
- The Hill, GAO: Taxpayer Identity Theft on the Rise
- Network World, Does the IRS Need More Options to Fight Identity Theft?
- New York Times, From the IRS, a Rare Return: an Apology
- Wall Street Journal, IRS Chief Warns Lawmakers on Identity Theft
- Wall Street Journal, IRS Experienced 'Significant Increase' In Identity Theft Issues
Thursday, June 2, 2011
The hearing will inquire about the potential benefits to companies and workers of lowering marginal tax rates on business income, and the trade-offs that such companies might be willing to make given current fiscal constraints. The hearing also will examine major elements of business and corporate taxation in anticipation of future efforts to evaluate policy options that might encourage job creation in the United States.
Here is the list of witnesses with links to their testimony:
- Ashby T. Corum (Partner, KPMG)
- Walter J. Galvin (Vice Chairman, Emerson Electric Co.)
- Judy L. Brown (Executive Vice President & CFO, Perrigo Company)
- James H. Zrust (Vice President, Tax, The Boeing Company)
- James Misplon (Vice President, Tax, Sears Holdings Management Corp.)
- Mark Stutman (National Managing Partner of Tax Services, Grant Thornton)
In coinnection with the hearing, the Joint Committee on Taxation released Present Law and Background Relating to Selected Business Income Tax Provisions (JCX-34-11):
This document ... describes present Federal income tax rules applicable to businesses with respect to capital expenditures, capital cost recovery, other types of cost recovery, tax accounting methods, general business credits, the corporate alternative minimum tax, and differences between tax accounting and financial accounting for selected items of expense of businesses.
- Bloomberg, Boeing, Emerson Executives Press Congress to Lower Tax Rates
- Wall Street Journal, Companies Willing To Give Up Tax Breaks For Lower Top Rate
It gives me great pleasure to submit this Semiannual Report to Congress summarizing the accomplishments of the TIGTA for the reporting period of October 1, 2010 through March 31, 2011. This report highlights the most notable audits, investigations, and inspections and evaluations performed by TIGTA as we have continued to work diligently to provide oversight of the IRS and protect the integrity of the Federal system of tax administration.
During this reporting period, TIGTA’s combined audit and investigative efforts has recovered, protected, and identified monetary benefits totaling $2.08 billion. Our Office of Audit has completed 33 audits and the Office of Investigations has closed 1,823 investigations over the past six months. In this time of continuing economic challenge, all Americans are being asked to do more with less. American citizens and their Government must work smarter, harder, and better, with fewer resources and greater purpose. Against this backdrop, TIGTA must redouble its efforts to promote economy, efficiency, and integrity in the administration of the Internal Revenue laws. We have never felt the need for greater commitment to our oversight of the IRS, nor has it ever been more important to improve compliance and reduce the Tax Gap – the $345 billion difference between what taxpayers owe and what they pay timely. Underreporting of taxes constitutes over 70% of the Tax Gap.
Friday, May 27, 2011
Tuesday, May 24, 2011
At least 3,700 Recovery Act contract and grant recipients—including prime recipients, subrecipients, and vendors—are estimated to owe more than $750 million in known unpaid federal taxes as of September 30, 2009, and received over $24 billion in Recovery Act funds. This represented nearly 5% of the approximately 80,000 contractors and grant recipients in the data from www.Recovery.gov as of July 2010 that GAO reviewed.
- Accounting Today
- Associated Press
- The Hill
- USA Today
- Wall Street Journal
- Washington Post
Friday, May 13, 2011
Each year, the CBO issues baseline projections of federal spending and revenues for the following 10 years. Those projections are not intended as a forecast of future outcomes; rather, they are estimates of spending and revenues under the laws that are in effect at that time and are designed to provide a benchmark against which to measure future policy changes.
In January 2001, CBO’s baseline projections showed a cumulative surplus of $5.6 trillion for the 2002-2011 period. The actual results have differed from those projections because of subsequent policy changes, economic developments that differed from CBO’s forecast, and other factors. As a result, the federal government actually ran deficits from 2002 through 2010 and will incur a deficit in 2011 as well. The cumulative deficit over the 10-year period will amount to $6.2 trillion, CBO estimates—a swing of $11.8 trillion from the January 2001 projections.
The table below summarizes the differences between CBO’s baseline projections in January 2001 and the actual or currently projected results for each of the years over the 2002-2011 period.
Thursday, May 5, 2011
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 2010. This document sets forth the report of the IRS.
The report reveals that the IRS made 7.1 billion disclosures of tax return information to federal and state agencies. Here are the Top 5 recipients of taxpayer information:
- States: 4.2 billion disclosures
- Congressional Committees: 1.5 billion disclosures
- Bureau of Census: 1.3 billion disclosures
- Medicare Premium Subsidy Adjustment: 39.0 million disclosures
- Child Support Enforcement Agencies: 13.6 million disclosures
Tuesday, April 19, 2011
Federal agencies reported an estimated $125.4 billion in improper payments for fiscal year 2010. The $125.4 billion estimate of improper payments federal agencies reported in fiscal year 2010 was attributable to over 70 programs spread among 20 agencies. Federal agencies’ fiscal year 2010 estimated improper payment amount is an increase of $16.2 billion from federal agencies’ prior year reported estimate of $109.2 billion.
The report named the Earned Income Tax Credit as the federal government program with the fourth highest amount of overpayments in FY 2010 (after Medicare, Medicare, and Unemployment Insurance) -- $16.9 billion, a 37.6% increase over FY 2009. The report lists as the primary causes of the improper EITC payments: "High turnover of eligible claimants, confusion among eligible claimants, complexity of the law, structure of the program, unscrupulous return preparers, and fraud."
Tuesday, April 12, 2011
State issued passports to about 16 million individuals during fiscal year 2008; of these, over 224,000 individuals (over 1%) owed over $5.8 billion in unpaid federal taxes as of September 30, 2008. State is not authorized to restrict the issuance of passports to individuals because they owe federal taxes. In addition, federal law does not permit IRS to disclose taxpayer information, including unpaid federal taxes, to State officials unless the taxpayer consents. In contrast, federal law permits certain restrictions on the issuance of passports to individuals, such as individuals owing child support debts over $2,500. For 2008, the estimated amount of unpaid federal taxes is likely understated because it excludes individuals who have not filed tax returns or underreported income. In addition, according to State officials, State cannot compel a passport applicant to provide a Social Security Number (SSN). As a result, State’s records sometimes did not contain a valid SSN, which is necessary to match passport data to IRS data. Also, the number of passport holders and dollars owed only includes 1 year of passports that were issued, substantially understating the total tax debt for all passport holders.
Friday, April 1, 2011
- 2011 Tax Filing: IRS Dealt with Challenges to Date but Needs Additional Authority to Verify Compliance (GAO-11-481)
- Tax Preparer Regulation: IRS Needs a Documented Framework to Achieve Goal of Improving Taxpayer Compliance (GAO-11-336)
Friday, March 25, 2011
The CBO this week released a report that said taxing people based on how many miles they drive is a possible option for raising new revenues and that these taxes could be used to offset the costs of highway maintenance at a time when federal funds are short.
The report discussed the proposal in great detail, including the development of technology that would allow total vehicle miles traveled (VMT) to be tracked, reported and taxed, as well as the pros and cons of mandating the installation of this technology in all vehicles.
Wednesday, March 16, 2011
Although IRS made progress in correcting previously reported information security weaknesses, control weaknesses over key financial and tax processing systems continue to jeopardize the confidentiality, integrity, and availability of financial and sensitive taxpayer information. Specifically, IRS did not consistently implement controls that were intended to prevent, limit, and detect unauthorized access to its financial systems and information. For example, the agency did not sufficiently (1) restrict users’ access to databases to only the access needed to perform their jobs; (2) secure the system it uses to support and manage its computer access request, approval, and review processes; (3) update database software residing on servers that support its general ledger system; and (4) enable certain auditing features on databases supporting several key systems. In addition, 65 of 88—about 74%—of previously reported weaknesses remain unresolved or unmitigated.
Friday, March 11, 2011
The CBO regularly issues a compendium of budget options to help inform federal lawmakers about the implications of possible policy choices. This volume—one of several reports that CBO produces regularly for the House and Senate Committees on the Budget—presents more than 100 options for altering federal spending and revenues. Nearly all of the options would reduce federal budget deficits. The report begins with an introductory chapter that describes the current budgetary picture and the uses and limitations of this volume. Chapters 2 and 3 present options that would reduce mandatory and discretionary spending, respectively. Chapter 4 contains options that would increase revenues from various kinds of taxes and fees.
Individual Income Tax Rates
Option 1 Increase Individual Income Tax Rates
Option 2 Raise Tax Rates on Capital Gains
Individual Income Tax Base
Option 3 Use an Alternative Measure of Inflation to Index Some Parameters of the Tax Code
Option 4 Gradually Eliminate the Mortgage Interest Deduction
Option 5 Limit or Eliminate the Deduction for State and Local Taxes
Option 6 Curtail the Deduction for Charitable Giving
Option 7 Limit the Tax Benefit of Itemized Deductions to 15 Percent
Option 8 Include Employer-Paid Premiums for Income Replacement Insurance in Employees' Taxable Income
Option 9 Include Investment Income from Life Insurance and Annuities in Taxable Income
Option 10 Tax Carried Interest as Ordinary Income
Option 11 Tax Social Security and Railroad Retirement Benefits in the Same Way That Distributions from Defined-Benefit Pensions Are Taxed
Option 12 Reduce Limits on Contributions to Retirement Plans
Option 13 Replace the Tax Exclusion for Interest Income on State and Local Bonds with a Direct Subsidy for the Issuer
Individual Income Tax Credits
Option 14 Modify or Eliminate the Child Tax Credit
Option 15 Eliminate Certain Tax Preferences for Education Expenses
Social Security Payroll Tax
Option 16 Increase the Maximum Taxable Earnings for the Social Security Payroll Tax
Option 17 Expand Social Security Coverage to Include Newly Hired State and
Local Government Employees
Corporate Income Tax Rates
Option 18 Increase Corporate Income Tax Rates by 1 Percentage Point
Option 19 Set the Corporate Income Tax Rate at 35 Percent for All Corporations
Taxation of Income from Businesses and Other Entities
Option 20 Repeal the "LIFO" and "Lower of Cost or Market" Inventory Accounting Methods
Option 21 End the Expensing of Exploration and Development Costs for Extractive Industries
Option 22 Extend the Period for Depreciating the Cost of Certain Investments
Option 23 Repeal the Deduction for Domestic Production Activities
Taxation of Income from Worldwide Business Activity
Option 24 Eliminate the Source-Rules Exception for Exports
Option 25 Tax the Worldwide Income of U.S. Corporations As It Is Earned
Option 26 Exempt Active Foreign Dividends from U.S. Taxation and Change the Tax Treatment of Overhead Expenses
Consumption Taxes and Excise Taxes
Option 27 Impose a 5 Percent Value-Added Tax
Option 28 Increase Excise Taxes on Motor Fuels by 25 Cents
Option 29 Increase All Taxes on Alcoholic Beverages to $16 per Proof Gallon
Health Care Provisions
Option 30 Accelerate and Modify the Excise Tax on High-Cost Health Care Coverage
Option 31 Increase the Payroll Tax Rate for Medicare Hospital Insurance by 1 Percentage Point
Option 32 Repeal the Individual Health Insurance Mandate
Other Taxes and Fees
Option 33 Impose a Fee on Large Financial Institutions
Option 34 Reinstate the Superfund Taxes
Option 35 Impose a Price on Emissions of Greenhouse Gases
Options That Would Increase the Deficit
Option A-1 Permanently Extend the Individual Income Tax Provisions of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010
Option A-2 Provide Relief from the Individual Alternative Minimum Tax
Option A-3 Modify Estate and Gift Taxes.
Tuesday, March 8, 2011
- Electronic Tax Return Filing: Improvements Can Be Made Before Mandate Becomes Fully Implemented (GAO-11-344) (Mar. 7, 2011)
- Illicit Tobacco: Various Schemes Are Used to Evade Taxes and Fees (GAO-11-313) (Mar. 7, 2011)
Thursday, February 10, 2011
The Treasury Inspector General for Tax Administration yesterday released Reduction Targets and Strategies Have Not Been Established to Reduce the Billions of Dollars in Improper Earned Income Tax Credit Payments Each Year (2011-40-023):
The GAO has listed the Earned Income Tax Credit (EITC) Program as having the second highest dollar amount of improper payments of all Federal programs. The IRS has made little improvement in reducing EITC improper payments since 2002 when it was first required to report estimates of these payments to Congress. The IRS continues to report that 23% - 28% of EITC payments are issued improperly each year. In Fiscal Year 2009, this equated to $11 billion to $13 billion in EITC improper payments.
- Accounting Today, IRS Can’t Stop Paying Billions in Bogus EITC Claims
- Associated Press, IRS Not Stopping Billions Improper Tax Credits
Thursday, February 3, 2011
Approximately $33 million in credits for plug-in electric and alternative-fueled vehicles credits were erroneously claimed by at least 12,920 taxpayers through July 24, 2010. ... That means about 20% of the $163.9 million in credits claimed by taxpayers from January 1, 2010 to July 24, 2010 for plug-in electric and alternative motor vehicle credits were claimed in error. In the course of its review, TIGTA also found that 1,719 of the 12,920 individuals also erroneously reduced the amount of Alternative Minimum Tax they owed by almost $5.3 million.
According to TIGTA’s review, approximately 29 prisoners also received $49,926 in vehicle credits even though they were in prison all of Calendar Year 2009. The erroneous claims TIGTA identified resulted from inadequate IRS processes to ensure information reported by individuals claiming the credits met qualifying requirements for vehicle year, placed in-service date, and make and model. TIGTA’s review of electronically filed tax returns identified individuals who erroneously claimed the same vehicle for multiple plug-in electric and alternative motor vehicle credits or claimed an excessive number of vehicles for personal use credits. TIGTA also determined that the IRS cannot track and account for plug-in electric and alternative motor vehicle credits claimed by individuals on paper-filed tax returns because it has not established processes to capture this information from those returns.
Friday, January 21, 2011
This document ... provides a listing of Federal tax provisions (other than those providing time-limited transition relief after the repeal of an underlying rule) that are currently scheduled to expire in 2010-2020 (with references to the applicable section of the Internal Revenue Code of 1986 or other applicable law). Expiring Federal tax provisions providing temporary disaster relief are separately listed in Part II of the document.
For purposes of compiling this list, the staff of the Joint Committee on Taxation considers a provision to be expiring if, at a statutorily specified date, the provision expires completely or reverts to the law in effect before the present-law version of the provision. Certain provisions terminate on dates that refer to a taxpayer’s taxable year and not a calendar year. For these provisions, the expiration dates listed in this document apply with respect to calendar year taxpayers. The expiration dates of such provisions may differ, however, with respect to fiscal year taxpayers or taxpayers with short taxable years.
Tuesday, December 28, 2010
The Government Accountability Office has released A Citizen's Guide to the 2010 Financial Report of the U.S. Government (268 pages):
For FY 2010, the Government Accountability Office (GAO) issued a disclaimer of audit opinion on the accrual-based Governmentwide financial statements for the fourteenth consecutive year.
Accounting Today, GAO Sees Problems in Government’s Financial Management:
The U.S. Government Accountability Office said it could not render an opinion on the 2010 consolidated financial statements of the federal government, because of widespread material internal control weaknesses, significant uncertainties, and other limitations. ...
The main obstacles to a GAO opinion were: (1) serious financial management problems at the Department of Defense that made its financial statements unauditable, (2) the federal government’s inability to adequately account for and reconcile intragovernmental activity and balances between federal agencies, and (3) the federal government’s ineffective process for preparing the consolidated financial statements.
In addition, the GAO said last week it was unable to render an opinion on the 2010 Statement of Social Insurance because of significant uncertainties, primarily related to the achievement of projected reductions in Medicare cost growth. ...
“Given the federal government’s fiscal challenges, it’s imperative that Congress, the administration, and federal managers have reliable, useful, and timely financial and performance information,” [Acting Comptroller General Gene] Dodaro said. “Improved accuracy and transparency in financial reporting are urgently needed.”
(Hat Tip: InstaPundit.)
Wednesday, December 22, 2010
Part I of this report contains a discussion of the concept of tax expenditures. Part II is a discussion of the measurement of tax expenditures. Estimates of tax expenditures for fiscal years 20102014 are presented in Table 1 in Part III. Table 2 shows the distribution of tax returns by income class, and Table 3 presents distributions of selected individual tax expenditures by income class.
Update: From Richard Kaplan (Illinois):
The Joint Committee on Taxation’s Tax Expenditures Report does not consider any of the tax extensions and other changes enacted by the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act, Pub. L. No. 111-312, as signed by President Obama on December 17. Because every tax expenditure provision is reduced to a number using applicable income tax rates, virtually every number for 2011 and 2012 (as well as the resulting five-year totals) is seriously overstated.
Wednesday, December 1, 2010
Tuesday, November 30, 2010
Center on Budget and Policy Priorities, New CBO Report Finds up to 3.6 Million People Owe Their Jobs to the Recovery Act:
Among ARRA’s most effective provisions for saving and creating jobs, according to CBO’s estimates, are direct purchases of goods and services by the federal government, transfer payments to states (such as extra Medicaid funding), and transfer payments to individuals (such as increased food stamp benefits and additional weeks of unemployment benefits). CBO’s estimates indicate that tax cuts are less effective job producers, and tax cuts for higher-income people and corporations have very low bang for the buck.
Individuals who fail to file required returns or underreport their income can create unfair burdens on honest taxpayers and diminish the public’s respect for the tax system. While currency reports may be commonly associated with money laundering, TIGTA identified a number of individuals who have enough cash to engage in currency transactions totaling at least $20,000, but did not file tax returns even though they appeared to have a filing requirement.
A number of other individuals engaged in similar currency transactions filed tax returns, but reported income that does not appear sufficient to cover their basic living expenses.
Wednesday, November 24, 2010
[T]he number of FBAR-related examinations increased 96 percent (from 334 to 656) from Fiscal Year (FY) 2004 to FY 2009. In addition, the number of FBAR penalty assessments grew from $4.2 million to $20.5 million, an increase of 388 % over the same period, while FBAR penalty collections grew from $1.8 million to $9.8 million, an increase of 444%. The IRS, in collaboration with the Department of the Treasury’s Financial Crimes Enforcement Network, has also revised the FBAR form and instructions and conducted education and outreach efforts on the filing of FBARs.
Friday, November 19, 2010
Information reporting is a powerful tool for encouraging voluntary compliance by payees and helping IRS detect underreported income. Also, information reporting may sometimes reduce taxpayers’ costs of preparing their tax returns, although by how much is not known. IRS estimated that $68 billion of the annual $345 billion gross tax gap for 2001, the most current available estimate, was caused by sole proprietors underreporting their net business income. A key reason for this noncompliance was that sole proprietors were not subject to tax withholding and only a portion of their net business income was reported to IRS by third parties. The benefits from information reporting are affected by payers’ compliance with reporting requirements and IRS’s ability to use the information in its process that matches third-party data with tax returns. ...
This testimony summarizes recent GAO reports and provides information on (1) benefits of the current requirements in terms of improved compliance by taxpayers and reduced taxpayer recordkeeping, (2) costs to the third-party businesses of the current 1099-MISC reporting requirement, and (3) options for mitigating the reporting burden for third-party businesses. GAO has not assessed the expansion of 1099-MISC reporting to payments for goods.
Current 1099-MISC requirements impose costs on the third parties required to file them. The magnitude of these costs is not easily estimated because payers generally do not track these costs separate from other accounting costs. In nongeneralizable case studies conducted in 2007 with four payers and five vendors that file information returns on behalf of their clients, GAO was told that existing information return costs were relatively low. One small business employing under five people told GAO of possibly spending 3 to 5 hours per year filing Form 1099 information returns manually, using an accounting package to gather the information. Two vendors reported prices for preparing and filing Forms 1099 of about $10 per form for 5 forms to about $2 per form for 100 forms, with one charging about $0.80 per form for 100,000 forms.
At yesterday's hearing, Winslow Sargeant, Chief Counsel for Advocacy U.S. Small Business Administration, testified on the regulatory and administrative burdens on small businesses and endorsed the repeal of the ObamaCare's 1099 reporting obligation:
Tuesday, November 2, 2010
The IRS was inconsistent in how it processed foreclosure cases and coordinated with local United States Attorneys' Offices (USAO). ...
When a taxpayer fails to pay taxes owed, the IRS may attach a claim to a taxpayer's real property -- a claim known as a Federal Tax Lien. The IRS files a Notice of Federal Tax Lien (NFTL) in appropriate local government offices, notifying interested parties that a lien exists on the property. When property has a Federal Tax Lien attached, the IRS may collect proceeds from a foreclosure sale to cover the taxes owed.
A foreclosure is either judicial or non-judicial. The USAO is responsible for protecting the Federal Government's interest in judicial foreclosure sales, while the IRS is responsible for protecting the Federal Government's interest in non-judicial foreclosure sales. Although the IRS does not have the primary responsibility to protect the Federal Government's interest in judicial foreclosure proceedings, it must coordinate such proceedings with the USAO.
TIGTA reviewed whether the IRS effectively and efficiently protects the Federal Government's interest during foreclosure proceedings when an NFTL has been filed. TIGTA found that the IRS could improve its coordination with the USAO for judicial foreclosures. TIGTA also found that the information the IRS provided to the public for submitting a timely notice of sale for non-judicial foreclosures was inconsistent with the Internal Revenue Code.
Saturday, October 30, 2010
In September, the CRS had estimated the cost of extending the Bush tax cuts as $2.8 trillion over ten years.
Tuesday, October 26, 2010
- Tax Debt Collection: IRS Could Improve Future Studies by Establishing Appropriate Guidance (GAO-10-963)
- Tax Gap: IRS Can Improve Efforts to Address Tax Evasion by Networks of Businesses and Related Entities (GAO-10-968)
Wednesday, October 13, 2010
- The Bush Tax Cuts and the Economy (R41393)
- The Economic Effects of Capital Gains Taxation (R40411)
- The OECD Initiative on Tax Havens (R40114)
- Tax Credit Bonds: Overview and Analysis (R40523)
- Tax Deductible Expenses: The BP Case (R41365)
- Tax Havens: International Tax Avoidance and Evasion (R40623)
- Tax Issues and the Gulf Oil Spill: Analysis of Payments and Tax Relief Policy Options (R41323)
Friday, October 1, 2010
- Expanded Information Reporting Could Help IRS Address Compliance Challenges with Forgiven Mortgage Debt (GAO-10-997)
- IRS Has Modernized Its Business Nonfiler Program but Could Benefit from More Evaluation and Use of Third-Party Data (GAO-10-950)
Tuesday, September 28, 2010
Median Household Income
- Real median household income in the United States fell between 2008 and 2009 — decreasing by 2.9 percent from $51,726 to $50,221.
- Between 2008 and 2009, real median household income decreased in 34 states and increased in one: North Dakota.
- Thirty-one states saw increases in both the number and percentage of people in poverty between 2008 and 2009.
- No state had a statistically significant decline in either the number in poverty or the poverty rate.
- Poverty: 2008 and 2009
- Household Income for States: 2008 and 2009
- Men’s and Women’s Earnings for States and Metropolitan Statistical Areas: 2009
Press and blogosphere coverage:
- The Atlantic, 4 Reasons Why the Income Gap Increased in 2009
- Bloomberg, Michigan, Florida Lead 34 States With Drop in Median Income, Census Says
- Huffington Post, Income Gap Widens: Census Finds Record Gap Between Rich And Poor
- New York Times, The Poorest States of America
- Time, Census: Record Gap Between Rich and Poor
- USA Today, U.S. Census Finds Record Income Gap Between Rich and Poor
- Washington Post, As 44 Million Americans Live in Poverty, a Crisis Grows
Friday, August 27, 2010
The discussion will include Board review of a report by the Tax Reform subcommittee. The report discusses a spectrum of reform ideas relating to tax simplification, enforcement of existing tax laws, and reform of the corporate tax system, without considering policies that would raise taxes on families making less than $250,000. The PERAB is not tasked with providing its own policy recommendations for the Administration and the final report will be an almanac of options from a broad range of viewpoints. The PERAB will vote on presenting the report as formal advice to the President.
Wednesday, August 25, 2010
This report presents the result of our review of the filing compliance of Section 527 political organizations. ... The IRS has taken significant actions to improve its ability to identify political organizations that do not timely notify the IRS of their existence or timely submit reports of their contributions and expenditures. However, the IRS has not fully addressed noncompliance among political organizations. For example, one out of every four Political Organization Report of Contributions and Expenditures (Form 8872) that we reviewed had incomplete or missing contributor or recipient information. While some of these filings may later be deemed acceptable, we determined the IRS is not reviewing these filings to determine if they are complete or if penalties should be assessed. Also, the IRS is not always issuing notices at the appropriate time that include all information needed by political organizations to become compliant. Lastly, the IRS is not following up on information it has requested from political organizations to verify compliance. ...
Although the EO function has taken action to identify noncompliant political organizations, we believe EO function management should focus on addressing noncompliance through increased enforcement actions. The assessment of taxes and penalties for incomplete filings, when appropriate, could lead to increased accountability and disclosure by political organizations. Improvement in the notice process could also assist political organizations in complying with their responsibilities.
Monday, August 23, 2010
Procurements that are both awarded and planned by the IRS as part of the American Recovery and Reinvestment Act of 2009 may be at risk due to inadequate oversight. ... The IRS received $203 million as part of the Recovery Act to reprogram its computer systems and to update tax forms, publications and customer services. As of April 2010, the IRS had initiated or was in the process of initiating 26 procurement actions on Recovery Act program initiatives with a total contract value of $81.9 million. Despite the influx of Recovery Act money, the IRS has not completed steps to improve contract oversight by its Contracting Officers' Technical Representatives, who administer the technical aspects of government contracts following their award.
Tuesday, August 17, 2010
This document ... provides a description and analysis of the tax provisions that are included in the President’s fiscal year 2011 budget proposal, as submitted to the Congress on February 1, 2010. The document generally follows the order in which the provisions are set forth in the table providing estimates of the revenue effects of the revenue proposals contained in the President’s budget proposals. For each provision, there is a description of present law and the proposal (including effective date), a reference to relevant prior budget proposals or recent legislative action, and an analysis of policy issues related to the proposal.
Thursday, August 12, 2010
Among the expiring Bush tax cut provisions is a lower 15% rate for long-term capital gains and dividends, with a 0% rate for taxpayers with ordinary tax rates of 15% or less. With no change, capital gains tax rates will revert to a top rate of 20% (10% for those with a 0% rate). Dividends will be taxed at ordinary rates. For FY2010 (for example), Treasury has projected revenue gains from these provisions to be $16 billion for capital gains and $30 billion for dividends.
President Obama has proposed to retain the 15% and 0% rates for lower- and middle-income taxpayers, but to tax both dividends and capital gains at 20% for married couples with income of $250,000 or more and single taxpayers with income of $200,000 or more. Because the increase in dividend tax rates was limited, about 80% of the projected $15 billion gain from this revision (for FY2019) is estimated to be from capital gains tax increases.
Compared with most other tax provisions, the potential revenue gain scored for an increase in capital gains taxes is strongly affected by behavioral responses assumed by the Joint Committee on Taxation (JCT) and the Treasury Department. The analysis in this study suggests that the Administration’s projections and those of the JCT, absent a change in their realizations response, may likely understate revenue gains from allowing lower capital gains tax rates to expire.
Realizations responses were first added to revenue projections by the revenue estimating agencies (Joint Committee on Taxation and the Treasury) at the end of the 1980s, in the midst of a contentious debate. The larger the absolute value of the elasticity (the percentage change in realizations divided by the percentage change in taxes) the smaller the revenue gain, and with elasticities larger than one in absolute value, a loss would occur. Estimated elasticities in the literature prior to 1990 ranged from 0.3 to almost 3.8, leaving limited guidance for revenue estimating agencies. JCT used an elasticity of 0.76, whereas Treasury used an elasticity of one.
Concerns were raised at that time that there were serious problems with this evidence. Perhaps the most significant concern was that the larger results from studies of individuals reflected a timing or transitory response (high income taxpayers with variable income chose to realize gains during times that tax rates were temporarily low). This transitory response is not appropriate for assessing a permanent change.
Evidence and studies since that time suggest that the permanent elasticity is considerably lower than what appeared to be the case in 1990. The surge in realizations in 1986 as a capital gains tax rate increase was preannounced provided compelling evidence of the importance of a transitory response. A study of the limits of realizations (which cannot exceed accruals in the long run) suggested the elasticity could be no more than 0.5. And a number of new econometric studies, using new techniques to isolate the permanent response, suggested elasticities of around 0.5 or less. The JCT appears to maintain their original assumption, while the Treasury response has been reduced to be similar to JCT’s.
Although projected revenues for FY2019 would be smaller than that estimated in January 2010 by the Administration, due to the Medicare tax, the revenue gain from allowing the capital gains tax to rise could be up to twice as much as that projected by the JCT for FY2019 if the smaller responses estimated in more recent studies were applied. It is reasonable to expect revenue gains of $28 billion, rather than the $13 billion likely to be projected by JCT if they maintain their current realizations response assumptions, and the gain is unlikely to be less than $18 billion.
Wednesday, August 11, 2010
Tuesday, August 10, 2010
Under § 6041, persons engaged in a trade or business who make payments totaling at least $600 to another person in a single year are required to file an information return (typically a Form 1099) with the IRS and to provide the payee with a copy. For payments made after December 31, 2011, § 9006 of P.L. 111- 148, the Patient Protection and Affordable Care Act (PPACA), expanded the information reporting requirements contained in I.R.C. § 6041. Under the amended provision, most payments to corporations will no longer be exempt from reporting and the types of payments that can trigger the reporting requirement will include gross proceeds and amounts received by a payee in consideration for property.
A payer’s failure to file a timely and accurate information return with the IRS can result in monetary fines; criminal sanctions may be applicable where such failure is willful. Payers may also be penalized for failing to provide a timely and accurate copy of an information return to their payees.
In the 111th Congress, several bills and amendments have been introduced that would repeal the modifications made to I.R.C. § 6041 by PPACA § 9006. Both versions of the Small Business Paperwork Mandate Elimination Act, S. 3578 and H.R. 5141, would repeal PPACA § 9006 entirely. Similar provisions have also been proposed in Senate amendments to H.R. 5297 and in § 1 of H.R. 5982.
Legislation has also been proposed to require landlords to file information returns for payments made with respect to their rental properties and to increase the penalties for failing to file an information return. The House passed such a provision in H.R. 4849. A provision with similar language was passed by the Senate in its consideration of a different bill, H.R. 4213. However, this language was ultimately struck by a House amendment in the nature of a substitute while resolving differences with the Senate.
Friday, July 23, 2010
The IRS must take additional steps to ensure that accuracy-related penalties are appropriately considered when assessing correspondence audits. ...
A TIGTA review of 229 correspondence audits closed in Fiscal Year 2008 found that 211 (92%) of the audits were not considered and assessed in accordance with IRS procedures for accuracy-related penalties. ... Appropriately assessing this penalty would have resulted in estimated increased revenues of $3.5 million.
Wednesday, July 21, 2010
Legislation has been introduced in the House and is being discussed in the Senate that would provide tax relief to the Gulf Coast oil spill victims. The Oil Spill Tax Relief Act of 2010 (H.R. 5598) would require that any compensation provided by BP to an oil spill victim be treated as a qualified disaster payment, and thereby excluded from gross income for tax purposes. The Gulf Coast Access to Savings Act of 2010 (H.R. 5602) would allow for enhanced access to retirement savings. The Gulf Oil Spill Recovery Act of 2010 (H.R. 5699) would make various tax relief measures available to businesses and individuals. Senate discussions include proposals similar to what has been introduced in the House, as well as a tax holiday for tourism-related activities.
Monday, July 19, 2010
The IRS's Modernized E-file (MeF) system did not process electronically filed individual tax returns as effectively as it should have during the 2010 filing season. ... The estimated $574 million MeF system is replacing the IRS's current tax-return filing technology with a modernized, Internet-based electronic filing platform. ... The MeF project development team did not adequately manage the MeF Release 6.1 testing prior to deployment, TIGTA found. IRS's test report showed all requirements were tested and passed; however, TIGTA auditors found supporting test documents showed that many of the requirements were not tested, many more failed the tests, and no indication was provided to show the defects were corrected. Subsequently, the MeF system rejected 23% of the 127,105 individual tax returns that were e-filed during the system's initial three weeks of operation. TIGTA also found that the IRS has not addressed many of the security vulnerabilities with the MeF system identified in a December 2009 TIGTA report.
TIGTA recommended that the IRS: ensure that project releases are deployed only after verifying that all system requirements have been tested, consider lessons learned from prior deployment experiences in planning future releases, and ensure that the MeF team enter and track all MeF system security weaknesses in IRS control systems.
Friday, July 16, 2010
The federal government loses both individual and corporate income tax revenue from the shifting of profits and income into low-tax countries, often referred to as tax havens. The revenue losses from this tax avoidance and evasion are difficult to estimate, but some have suggested that the annual cost of offshore tax abuses may be around $100 billion per year. International tax avoidance can arise from large multinational corporations who shift profits into low-tax foreign subsidiaries or wealthy individual investors who set up secret bank accounts in tax haven countries.
The Treasury Department's Alcohol and Tobacco Trade and Tax Bureau has released its Fiscal Year 2009 Annual Report, detailing a 41% increase (to $20.6 billion) in the amount of "sin taxes" on alcohol, tobacco, firearms, and ammunition collected by the federal government. Most of the $6 billion revenue increase resulted from the higher tobacco taxes included in the Children's Health Insurance Reauthorization Act of 2009. Firearms and ammunition excise tax collection rose 45%, the largest annual increase in the agency's history. Reuters explains the surge in firearms and ammunition excise taxes in FY 2009:
A Gallup Poll conducted in early October 2009 said one possible explanation for the surge in gun and ammunition sales could be that more than 50% of the Americans who owned guns and some 41% of all Americans believed that President Obama would "attempt to ban the sale of guns in the United States while he is president."
Data from the first six months of FY 2010 report a 56.5% increase (to $12.1 billion) in the amount of sin taxes. Most of the increase again was the result of the higher tobacco taxes. Firearms and ammunition excise taxes fell 8.4%.
Thursday, July 8, 2010
- Forbes, Will Bad History Repeat With Congress And The IRS?
- Tax Lawyer's Blog, Taxpayer Advocate Nina Olson Concerned that Burden of New 1099 Reporting Will Exceed Benefits
- USA Today, Small Businesses, Charities Face More Reporting Rules
- Wall Street Journal, U.S. Business Faces Burden From New IRS Rules—Report
- Wall Street Journal Blog, Taxpayer Advocate Warns on New IRS Duties
- Washington Post, Health Care Law May Pose Challenges for IRS, Taxpayers
- WebCPA, Taxpayer Advocate Concerned about 1099 Reporting
Thursday, July 1, 2010
IRS has made progress in improving its internal controls and financial management since its first financial statement audit in 1992, as evidenced by 10 consecutive years of clean audit opinions on its financial statements, the resolution of several material internal control weaknesses, and actions resulting in the closure of over 250 financial management recommendations. This progress has been the result of hard work throughout IRS and sustained commitment at the top levels of the agency. However, IRS still faces significant financial management challenges in (1) resolving its remaining material weaknesses in internal control, (2) developing outcome-oriented performance metrics, and (3) correcting numerous other internal control issues, especially those relating to safeguarding tax receipts and taxpayer information. At the beginning of GAO’s audit of IRS’s fiscal year 2009 financial statements, 62 financial management–related recommendations from prior audits remained open because IRS had not fully addressed the issues that gave rise to them. During the fiscal year 2009 financial audit, IRS took actions that GAO considered sufficient to close 18 recommendations. At the same time, GAO identified additional internal control issues resulting in 41 new recommendations. In total, 85 recommendations remain open.
Thursday, May 27, 2010
RRA 98 was broadly scoped legislation intended to transform the IRS into a modern financial services organization. It called for reform of virtually every aspect of the IRS, including its reorganization from a geographically based organization to one that was focused primarily on providing taxpayers with customer service similar to that available from many private sector financial institutions, including electronic access to customer accounts.
TIGTA reviewed the IRS’s implementation of the major tax provisions of the law. This review included extensive research of: the law, relevant IRS Internal Revenue Manuals, the IRS Intranet website, prior reports by TIGTA and other relevant organizations including the Government Accountability Office. It further reviewed IRS strategy and policy, processes and procedures, information technology and employee/human capital to gauge IRS’s success at implementing the law.
"While the IRS has made significant strides in transforming into a modern financial services organization, our review found that major challenges remain," said J. Russell George, Treasury Inspector General for Tax Administration. "Much of this reform effort remains a work in progress," he added.
As part of the transformation process, the IRS created a new mission statement focusing on taxpayer service and adopted the new organizational performance measures of business results, customer satisfaction, and employee satisfaction. The IRS further implemented safeguards to ensure that enforcement statistics would no longer be used as a basis for employee evaluations, and engaged in efforts to modernize its computer technology and its business systems. Expanded electronic filing, creation of an extensive Web site (www.IRS.gov), and installation of a state-of-the-art telephone routing system to more effectively and efficiently answer taxpayer calls were all part of this transformation. In addition, 71 taxpayer protections and rights required by the RRA 98 were engineered into operational processes and procedures
TIGTA’s review found that additional work is needed to complete IRS’s Business Systems Modernization effort. In addition, human capital management challenges remain, including replacement of an aging workforce, measurement of training effectiveness, and implementation of a performance-based pay system.
Wednesday, May 26, 2010
- Tax Options for Financing Health Care Reform (R40648)
- The Role of Federal Gasoline Excise Taxes in Public Policy (R40808)
- Dependent Care: Current Tax Benefits and Legislative Issues (RS21466)
Monday, May 24, 2010
Taxing Arizona: IRS Refuses TIGTA's Recommendation That it Verify Citizenship of 200,000 e-File Providers
The primary means by which the IRS regulates electronic filing (e-file) Providers are the application screening process and the monitoring program. ... Inadequate screening and monitoring increases the risk to both the taxpaying public and the Federal Government for potential losses associated with unscrupulous e‑file Providers.
The IRS has improved its screening of individuals and organizations applying to become electronic filing (e-file) providers, but it needs to monitor them more carefully, according to a new report publicly released today by TIGTA.
The IRS’s electronic filing (e-file) program enables taxpayers to send their returns to the IRS in an electronic format via an authorized e-file provider. The primary means by which the IRS regulates e-file providers is by screening applicants and monitoring compliance with program requirements. As of June 21, 2009, there were 207,419 Electronic Return Originators (EROs) who e-filed about 61 million (66 percent) of the approximately 92 million e-filed tax returns accepted in 2009. EROs originate the electronic submission of income tax returns to the IRS that are either prepared by the ERO or received from a taxpayer.
TIGTA evaluated whether the IRS effectively screens and monitors of e-file providers. To become an e-file provider, an applicant must meet required screening and verification checks. Applicants must be U.S. citizens or legal aliens and at least 21 years of age. An applicant who is not an attorney, Certified Public Accountant, or an enrolled agent must supply a fingerprint card, which is used to conduct a criminal background check.
While the IRS has an effective process for ensuring applicants meet age requirements and have no tax compliance issues, TIGTA found that the IRS is not consistently verifying that new applicants are U.S. citizens or legal aliens authorized to work in the United States. ...
TIGTA made six recommendations to the IRS, including that it ensure that citizenship ... status [is] verified for all e-file program applicants. ... The IRS agreed with all but one of TIGTA’s six recommendations. It disagreed with TIGTA’s recommendation that it verify citizenship because concerns that pending legislation mandating e-file for most return preparers will require the IRS to modify current citizenship rules. TIGTA said the IRS should continue to ensure that all U.S. based e-file Providers should have a valid Social Security Number and pass a citizenship test.
Saturday, May 15, 2010
For tax year 2007, nonresident alien individuals filed about 634,000 Forms 1040NR, the U.S. Nonresident Alien Income Tax Return. IRS has not developed estimates for the extent of nonresident alien tax noncompliance because it often lacks information to distinguish between nonresident aliens and other filers, and examinations can be costly and difficult since many nonresident aliens would depart the country before IRS could examine their returns.
See WebCPA, IRS to Improve Nonresident Alien Tax Compliance.