Tax Roundup, 1/31/14: Earned Income Tax Credit Awareness Day party edition! And: e-filing begins.

January 31st, 2014 by Joe Kristan


EITC error chart
Yes, for those of you not already taking the day off to observe it, today is Earned Income Tax Credit Awareness Day!  Let’s celebrate with a true story of EITC awareness.

Cedar Rapids tax preparer Demetries Johnson displayed her awareness of the credit in a big way:

Defendant DEMETRIES JOHNSON notified some taxpayers seeking her services that she could obtain larger tax refunds than they would otherwise receive.  To obtain refunds, defendant DEMETRIES JOHNSON would knowingly report false information on taxpayers returns. The claims made in the tax returns were false, fictitious, and fraudulent in that the claims for refunds, for example: 1) falsely reported income when little or no income was earned, thereby substantially and materially overstating taxpayers’ income in a manner that made the taxpayer appear eligible for a refund by virtue of the EITC; and 2) falsely included a child or children on taxpayers’ returns who did not in fact qualify under the EITC.  Through submission of these false claims, defendant DEMETRIES JOHNSON increased payments made by the Internal Revenue Service to the taxpayers or to bank accounts controlled by the defendant.

Her awareness ended up earning a two-year prison sentence after she pleaded guilty to tax charges.  Her keen level of awareness isn’t uncommon; a recent Treasury Inspector General analysis showed that 21-25% of the $13 billion of the credit issued annually is claimed “in error.”  No small amount of those errors are deliberate.

Those who scam the system are especially aware that the credit is “refundable.”  If you claim more credit than you owe in taxes, the IRS will send you a check for the excess.  Like all refundable credits, it attracts fraudsters.

Come to think of it, maybe “awareness” isn’t the real problem with the Earned Income Credit.

 

Flickr image courtesy Shock264 under Creative Commons license

Flickr image courtesy Shock264 under Creative Commons license

When you buy a round, it’s always popular Wind industry fears slowdown as Congress considers future of popular tax credit  (Des Moines Register).  The recipients of wind subsidies delivered through the tax law are annoyed that there is a delay in getting their free stuff.

The headline says the wind turbine subsidy is “popular,” but nothing in the article backs that up, or even repeats the claim.  I suppose it’s as popular with the Warren Buffet-controlled utility that is a big recipient of the credit as the Earned Income Tax Credit was with Demetries Johnson’s clients.

 

Lois Lerner, ex-IRS, ex-FEC

Lois Lerner, ex-IRS, ex-FEC

TaxProf, The IRS Scandal, Day 267.  He highlights today’s Peggy Noonan piece:

 Meanwhile, back in America, conservatives targeted and harassed by the Internal Revenue Service still await answers on their years-long requests for tax exempt status. When news of the IRS targeting broke last spring, agency officials lied about it, and one took the Fifth. The president said he was outraged, had no idea, read about it in the papers, boy was he going to get to the bottom of it. An investigation was announced but somehow never quite materialized. Victims of the targeting waited to be contacted by the FBI to be asked about their experience. Now the Justice Department has made clear its investigation won’t be spearheaded by the FBI but by a department lawyer who is a campaign contributor to the president and the Democratic Party. Sometimes you feel they are just laughing at you, and going too far.

For a case where a key figure promptly hid behind the Fifth Amendment, the FBI was sure quick to conclude there was no crime.

 

William Gale, Benjamin Harris, David John, State of the Union Speech Promotes New Retirement Savings Vehicles (TaxVox):

 Similar to the R-Bond discussed in a recent AARP Public Policy Institute paper written by William Gale, David John and Spencer Smith, MyRA would allow individuals to save in a government bond account similar to the one offered as an option to federal employees through the Thrift Savings Plan. The details are unclear (there’s a WhiteHouse fact sheet here), but MyRA would allow new savers and those with small balances to accumulate retirement savings without either having to pay administrative charges or face market risk.

Just inflation and government policy risk.

 

20130916-1TaxGrrrl, IRS Officially Opens Tax Season Today, Begins Processing Returns and Refunds

William Perez, IRS’s Electronic Filing Systems Opens January 31

Kay Bell, Are you ready to e-file your federal tax return? Here’s how.

Trish McIntire, IRS Notice Prevention

 

Fear the Family (and other related parties).  My new post at IowaBiz.com, the Des Moines Business Record Business Professionals Blog.

 

Kyle Pomerleau notes A Few Contradictions in President Obama’s State of the Union Address (Tax Policy Blog)

Keith Fogg, Does Treasury’s Policy Restraining Referrals to Low Income Tax Clinics Harm Individuals and the Tax System? (Procedurally Taxing)

Robert D. Flach serves up his last Buzz for awhile as he begins his tax season hiatus.  It’s his 43rd tax season.  If I hit my 43d tax season, it will be in my 68th year.  I admire Robert’s endurance, but I have no plans to match it.

 

haroldDirector of Chartered firm among 13 charged over £2.5m film tax fraud (ifaonline.co.uk).  I think film tax credits are the bait car of tax incentives.

Useless tool.   Treasury Nominee Dynan Calls Home Buyer Tax Credit ‘Useful Tool’ (Tax Analysts, $link).  Not only should her nomination be rejected on the basis of her approval of the failed and fraud-ridden credit, she should be presumed self-disqualified from any public position ever.

While I think the court decision ending tax-free treatment for cash parsonage allowances is likely to stand, not everyone agrees.  Zelinsky: The First Amendment and the § 107 Parsonage Allowance (TaxProf)

 

Tax Trials continues its “Famous Fridays” series with Pete Rose, Gambling Winnings Are Income Too.

News from the Profession: PwC Doing Its Part to Keep Dog Tails Wagging in Northeast Ohio (Going Concern)

 

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