Paul L. Caron

Tuesday, March 21, 2006

WSJ Tax Articles

Several interesting tax articles in today's Wall Street Journal:

Two and a half years ago, Public Interest Watch, a self-described watchdog of nonprofit groups, wrote to the IRS urging the agency to audit Greenpeace and accusing the environmental group of money laundering and other crimes. Last September, the IRS began a months-long audit of the U.S. arm of Greenpeace, known for steering its boats in the way of whaling ships and oil tankers. This month, Greenpeace says, it received notice from the IRS that the group "continues to qualify for exemption from federal income tax" as a nonprofit entity. Greenpeace says an IRS auditor told it that the PIW letter triggered the audit. The IRS won't say how it decided to audit Greenpeace. What is clear is where PIW has gotten a lot of its funding: Exxon Mobil Corp., the giant oil company that has long been a target of Greenpeace protests. "I believe organizations should be scrutinized and audited, but I just don't believe you should get targeted because ... you're a critic of Exxon Mobil," said John Passacantando, executive director of Greenpeace USA, the U.S. affiliate of Amsterdam-based Greenpeace International.

For nearly three years, Nina Olson tried to get her bosses at the IRS to change an antifraud program that withheld thousands of tax refunds without notifying the suspected scofflaws. Tired of being rebuffed, Ms. Olson, the National Taxpayer Advocate, launched an attack. In January, she released internal IRS documents showing that, in more than 65% of the cases she investigated, the agency ultimately determined the suspicions were unfounded and coughed up the refunds. Faced with the wrath of lawmakers and IRS critics, IRS Commissioner Mark Everson ordered a review of the program and promised to let taxpayers know when their refunds were frozen. "Before going public, I had a lot of sleepless nights," Ms. Olson says now. "I didn't like embarrassing the IRS, but I didn't really have a choice. I had a moment of, 'What's going to happen to me after this comes out?'"

By any standard, Ms. Olson, who is 52 years old, has a tough job. As the taxpayer advocate, one of her tasks is to tell Mr. Everson what he's doing wrong -- and to take action if, in her view, injustices against taxpayers aren't resolved fairly and quickly. It makes for a delicate and sometimes rocky relationship. Generally, the two meet once a month and discuss problems. "It is really just a nutty position," she says. "You get to say to the boss, 'This is good, but...' " Mr. Everson says there's "undoubtedly a certain amount of tension in the relationship." But he adds, "I don't think that there is an undue amount of tension." The IRS has many people looking over its shoulder: the Treasury Department's Inspector General, an oversight board, Congress, and the Government Accountability Office. But only Ms. Olson is the designated "voice" of the taxpayer within the IRS. Congress created the position in 1998, when the IRS was under criticism for being unyielding and heavy-handed with taxpayers. Ms. Olson was appointed in 2001.

A variety of companies are trying to get their hands on your tax refund before you do, and state law-enforcement officials are cracking down on some of the practices. As the April tax-filing deadline approaches, businesses from tax-preparation firms to auto dealerships are offering consumers the opportunity to put their expected refund checks to work weeks before the IRS sends them out -- often by loaning them the expected amount for a high fee. Dozens of retailers, including Olive Garden restaurants and AMC move theaters, have begun offering gift cards in exchange for tax refunds to people who file using TurboTax, the popular tax-preparation software. H&R Block Inc. recently launched savings accounts for customers to channel their tax refunds. And hundreds of car dealerships will prepare your taxes if your refund is applied toward a down payment on a car.

But now, state officials are clamping down on some of these programs, claiming they saddle low and moderate-income families, recent college graduates and others with high fees. Last year about three of every four tax filers received a refund, according to the IRS. Those refunds totaled nearly $218 billion, or about $2,171 per household.

News | Permalink

TrackBack URL for this entry:

Listed below are links to weblogs that reference WSJ Tax Articles: