Wall Street Journal Op-Ed: Congress Gave $80 Billion to a Lawless IRS, by Travis Nix (J.D. 2023, Georgetown):
After nearly eight months of deliberation, the Internal Revenue Service has finally released a lightly detailed plan for how to spend the additional $80 billion Congress allotted in 2022. Taxpayers should be dubious of IRS promises to use this funding to ensure fairer and more lawful tax-code enforcement. The few details in the report’s vague language indicate that the IRS wants to use its newfound money to enforce sections of the tax code that courts struck down twice as unlawful last year. Congress should stop funding the illegal purposes at the IRS.
One of the few definite action items the IRS included in its 150-page report was an enforcement objective to levy tax penalties against taxpayers engaging in “listed transactions”: practices the service has labeled as prone to tax abuse. These currently consist of a series of 36 transactions that the IRS has simply published on its website and in taxpayer notices over the last two decades. The IRS enforces and cites these notices as having the force of law even though taxpayers had no opportunity to voice concerns about these rules. Because the notices didn’t undergo the proper review process to become regulations, they can’t legally be enforced and should be nonbinding. ...
None of the IRS rules on listed transactions have gone through notice and comment. Unless a taxpayer is willing to engage in an expensive court battle, the current regime allows the IRS to collect an easy $10,000 from simple disclosure mistakes, while taxpayers who did not report their listed transactions at all may go unnoticed. Taxpayer advocacy groups, such as the National Taxpayers Union, have argued that the notices give the IRS too much discretion in determining what an abusive tax practice is. The lack of notice and comments procedures isolates the IRS from democratic accountability.
Unless the IRS follows the proper procedures for its listed transaction regime, Congress needs to step in and prevent the IRS from spending taxpayer dollars harassing taxpayers with unlawful audits.
Wall Street Journal Editorial, Cooking the IRS Study Books:
The Internal Revenue Service isn’t saying how it will spend all of its new $80 billion windfall from Congress, but the political shenanigans over a proposed new IRS tax filing system aren’t cause for comfort. The agency is employing progressives to study how to make the tax collector the first and last arbiter of how much Americans owe.
Most of the $80 billion will go to turbocharging audits, but the Inflation Reduction Act also earmarked $15 million to study a bad idea. Progressives led by Sen. Elizabeth Warren want to create what they call a “free direct efile tax return system,” which would put the agency in charge of both calculating and auditing taxes. This would end America’s longtime voluntary system that lets taxpayers determine their tax, subject to IRS review. The law instructed the IRS to hire an “independent third party” to examine the idea.
The IRS has announced that its notion of a neutral investigator is New America, a left-leaning nonprofit whose top officials include Obama Administration alumni and a former aide to Hillary Clinton, and which is already on record praising the Warren plan. The IRS also tapped to work on the project Ariel Jurow Kleiman, a Loyola Law School professor, who wrote a paper calling on the IRS to adopt a Warren-like program, “one that includes the maximum amount of taxpayer information and requires the least amount of taxpayer input.” Why bother with the ruse of an “independent” study?