Refundable credits are vulnerable to fraud, and IRS can’t recover the fraudulent payments. The Treasury Inspector General for Tax Administration discovers the obvious, reports Accounting Today (my emphasis):
A new report released Monday by the Treasury Inspector General for Tax Administration on refundable tax credits found that they are highly vulnerable to fraud. Refundable tax credits such as the EITC, the Additional Child Tax Credit, the First-Time Homebuyer Credit, and the American Opportunity Tax Credit for education also provide valuable tax breaks for low-income taxpayers and the middle class.
I call foul. To say the “First-Time Homebuyer Credit” provides “valuable benefits for low-income taxpayers and the middle class” is lazy and dishonest propaganda. That’s just the Accounting Today reporter’s assertion, and it appears nowhere in the TIGTA report. The credit poured money into a declining housing market with little effect, other than blowing $30 billion. The policy behind the other credits is at best arguable, and the benefits aren’t clearly “valuable” to taxpayers as a whole.
TIGTA initiated its audit to determine the effectiveness of efforts by the IRS to recover refundable credits disallowed during post-refund examinations and to consider options the IRS could implement to decrease the issuance of erroneous refundable credits.
“Because of the susceptibility of these credits to fraud, and the low success rates in recovering erroneous credits once refunds have been issued, the IRS should take every reasonable step possible to identify potentially questionable credits and validate those credits before associated refunds are issued,” said TIGTA Inspector General J. Russell George in a statement.
So Doug Shulman’s IRS isn’t taking every reasonable step to keep from sending cash to thieves? He’s been too busy terrorizing innocents abroad and setting up a vast, expensive and useless preparer regulation bureaucracy, apparently.
Attorney: West Des Moines firm’s outstanding liabilities to be paid soon (Des Moines Register). The payroll service provider facing large bills for not remitting client payroll taxes timely says they will make good on them:
A West Des Moines human resources provider has paid its 2012 tax liabilities and has the funds necessary to pay off more than $4.8 million liabilities within the next three months, an attorney for the businessman said today
The Internal Revenue Service since 2006 has issued at least 15 tax liens against John Vratsinas and his collection of companies, InFocus Partners, Iowa Construction Logistics and ICL Staffing, according to court documents.
That’s good news for clients who might otherwise have to pay their payroll taxes twice, first to the payroll company and then to the IRS. The taxman wants its payroll taxes, even when the payroll company already has received them. Of course payroll providers shouldn’t fall behind on payroll taxes in the first place. A wise employer will enroll in EFTPS and go online to monitor that the taxes are being paid, even when they outsource the job.
Also from the West Des Moines Patch: Attorney for West Des Moines Payroll Outsourcer Says 2012 Taxes Paid
Related Tax Update coverage here.
The TaxProf mentions an academic paper “Ranking State Tax Systems: Progressivity, Adequacy, Efficiency.” From the abstract:
A good tax system must raise sufficient revenue – and do so fairly, efficiently, transparently, and coherently. How do the tax systems of the states stack up in terms of fairness, adequacy, and neutrality? To answer this question, we assess each state’s relative performance in terms of progressivity, growth, and administrative and economic efficiency.
Iowa rates 32nd by their measure. I think “progressivity” is a poor tool for measuring state tax systems.”Progressivity” is just a weasel-way of saying “high rates,” which create distortions and inefficiency, like in Iowa, while punishing pass-through businesses. Any measure that rates the horrendous New York tax system as #1 is absurd.
Russ Fox, Bad States for Gamblers
Patrick Temple-West, Essential reading: Democrats threaten payroll tax cut consensus, and more (Tax Break)
Trish McIntire, Tax Backup. Maintain your records.
William Perez, IRA Contribution Limits for 2013
Brutal Assault on Reason Watch:
TaxGrrrl, Final Presidential Debate – Live Blog
Anthony Nitti, Clearing Up Confusion Created By The Debates: President Obama’s Tax Proposal And The Fate Of The Small Business Owner. Anthony unfortunately repeats the pointless fact that increasing the Obama plan only affects “2.5 of small business owners.” That’s true when you rate your Shacklee-selling neighbor the same as a business with dozens or even hundreds of employees.
As the Tax Foundation notes, the Obama plan affects a much higher percentage of pass-through income, a more important measure than the number of Schedule C 1040s. Anthony dismisses this as just a concern of hedge-funds and private equity millionaires. My pass-through clients would disagree.
The Critical Question: So Jason … How’s that Guidebook About Same-Sex Marriage and Taxes Coming? (Jason Dinesen)
So the dog can do this, but I can’t? Man cited for backyard squirrel hunt (KCCI.com)
Tags: TaxProf, Kay Bell, Russ Fox, Janet Novack, William Perez, Instapundit, TaxGrrrl, EFTPS, Shulman, Trish McIntire, TIGTA, First-time Homebuyer Credit, Peter Reilly, Jason Dinesen, Anthony Nitti, Patrick Temple-West