Paul L. Caron

Monday, November 27, 2023

WSJ: Does The IRS Have Authority To Circumvent Congressional Tax Policy With Tax Cuts By Administrative Fiat?

Wall Street Journal, IRS Delays Tax Deadlines Set by Congress. It Could Cost $8 Billion.:

IRS Logo (2023)Congress set strict enforcement deadlines when it created new tax requirements for e-commerce platforms, older 401(k) savers and cryptocurrency brokers.

The Internal Revenue Service has now postponed them all for two years—which could cost the Treasury more than $8 billion. ...

The IRS decisions help the affected taxpayers avoid burdensome requirements. Millions of people selling goods on eBay or reselling tickets on StubHub won’t get confusing tax forms in January. High-income workers age 50 and up can still make their full retirement contributions in pretax dollars next year instead of posttax accounts. And crypto brokers don’t yet have to report transactions that could lead to eight billion information returns going to the IRS each year.

At least in the short run, however, the tax agency’s moves frustrate lawmakers’ attempts to raise revenue and plug gaps in tax compliance.

They are symptomatic of a phenomenon in which administrations of both parties take action without the oversight or cost analysis required by legislation. The tax delays aren’t as headline-grabbing as President Biden’s student-loan relief or former President Donald Trump’s border-wall construction. But they allow the IRS to deliver what are, in a sense, tax breaks without congressional approval.

The IRS, like every administrative agency, exercises discretion as it interprets sometimes vague laws. It tries to balance helping taxpayers meet their obligations with strictly enforcing the law. This year alone, the IRS gave Californians seven extra months to pay their 2022 taxes after natural disasters. Separately, it prevailed over a taxpayer who filed a Tax Court petition 11 seconds too late.

In a statement justifying the recent series of rule delays, the IRS pointed to a tax code section that gives the commissioner the power to “administer, manage, conduct, direct, and supervise the execution and application” of tax laws.

“The IRS has used its authority over the years to delay implementation of complex laws in the interest of good tax administration,” the statement said.

Some lawmakers say the tax agency can’t change deadlines that Congress wrote into law.

“The IRS is completely out of control and must be held accountable as they continue to make up the law as they go,” said Rep. Carol Miller (R., W.Va.), a Ways and Means Committee member who has been pushing to repeal the online seller law. “The Biden administration must be reminded that Congress writes the laws; they are the ones who must correctly implement them.”

Fred Goldberg, a former IRS commissioner, said officials have a responsibility to look holistically at making the tax system run as smoothly as possible.

“My starting assumption is that the IRS does what the statute says, read literally. It’s a big barrier to get over. But they can and should get over it,” he said, endorsing occasional relief such as the delays the IRS has recently allowed. “It’s common sense, and it’s not willy-nilly and it’s not mere personal preference.” ...

“There are times where arguably this kind of discretion of agencies to not enforce the law kind of does get us to the place where a well-functioning Congress would have gotten us anyway,” said Brian Galle, a tax law professor at Georgetown University.

And when the IRS moves on its own, there is generally no legal recourse. Taxpayers can challenge IRS actions when they are individually harmed, but they typically can’t sue over taxpayer-friendly rules.

As taxpayers, all we can do is complain,” Galle said.

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