Tax Roundup, 5/9/14: Worst-ever edition. And: It’s Scandal Day 365!

May 9th, 2014 by Joe Kristan

I was grumpy yesterday when I noticed Tax Analysts correspondent @Meg_Shreve’s live-tweeting of a speech by Doug Shulman, the Worst IRS Commissioner Ever.  So I tweet-grumpted, adding “#worstcommissionerever (fixed)” to one of her posts — the “(fixed)” as a perhaps inadequate attempt to inform the Twitterverse that the tag was my addition, not hers (apologies to Meg Shreve).  That earned this response:

 

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Ah, where to begin?  How about with identity theft?  Doug Shulman took office with a reputation as an information systems maven.  He then presided over an historic IT debacle.  Tax refund fraud — fundamentally a systems failure —  has let two-bit grifters like Rashia Wilson steal tens of billions of dollars in fraudulent refunds over the years.

This problem has been ramping up for years, and only now, with Shulman gone, is the IRS beginning to take effective action to prevent it.  My wife can’t go shopping in Chicago without me getting a call from the credit card company warning me of a suspicious transaction, but Doug Shulman’s IRS could send 655 refunds to the same apartment in Lithuania without batting an eye.

Rashia says "thanks, Commissioner!"

Rashia says “thanks, Commissioner!”

While the theft of taxpayer billions is outrageous enough, the inept treatment of ID theft victims makes it even worse.  Only after Doug Shulman left did the IRS even begin to get this right.

The Worst Commissioner Ever was just too darned busy to stop ID theft.  He was busy trying to increase IRS power over preparers with a useless, expensive and unilateral preparer regulation regime.  He reversed the longstanding IRS position that the agency had no such regulatory power, only to be unceremoniously slapped down by the courts.   In the meantime, the prospect of the regulations drove thousands of preparers out of the business, increasing taxpayer costs and driving many taxpayers to self-prepare — and surely causing some to fall out of the system altogether.  The IRS wasted enormous resources on this futile power grab — resources that might have been better-devoted, to, oh, maybe the fight against identity theft.

 

He was also busy shooting jaywalkers.  International tax enforcement is considered Doug Shulman’s greatest success — but there was no reason the pursuit of wealthy international money-launderers had to also terrorize American expatriates whose offenses were to commit everyday personal finance.  Many folks have been hit with ridiculous penalties for not filing FBAR reports that they had no idea existed.  These folks are often people who married overseas or moved out of the U.S. as children, but were presumptively treated as international money-launderers when they tried to come into the system, and were hit with enormous penalties — often when little or no tax had been avoided.

It’s hard to imagine that an agency that can find ways to simply wave away the ACA employer mandate couldn’t find a way to allow expats and individuals without criminal intent to come into the international reporting system without risking financial disaster.  The states that allow non-resident non-filers to come in by paying five years of back taxes provide an obvious model.

 

Former IRS Commissioner Shulman, showing how big is legacy is.

Former IRS Commissioner Shulman, showing how big is legacy is.

Then there is the scandal.  When Tea Party groups complained about absurd and abusive IRS information requests, sympathetic Congresscritters asked Doug Shulman if the IRS was targeting Tea Party groups.  The Worst Commissioner Ever testified before Congress that the IRS was doing nothing of the sort:

“There’s absolutely no targeting. This is the kind of back and forth that happens to people” who apply for tax-exempt status, Shulman said.

That statement, of course, became inoperative when the Treasury Inspector General for Tax Administration reported that the IRS was, in fact, picking on the Tea Party groups.  Subsequent revelations have shown that it was exactly a partisan attempt to fight anti-administration groups.  So Doug Shulman either was too lazy and ineffective to know what his own agency was doing, or he knew, or he didn’t care.  He destroyed the credibility of the agency as a nonpartisan enclave of competent technicians.

Now the party controlling the House of Representatives is on notice that the agency wants to see it lose.  That agency can hardly expect generous appropriations as long as that perception remains (and the new Commissioner has done nothing reassuring on that score).   This will damage the agency’s effectiveness for years — all because The Worst Commissioner Ever was unwilling or unable to run a professional, non-partisan agency.

This is a record of administrative ineptitude and negligence that is unbeaten.  No IRS commissioner has so squandered agency resources and reputation.  If another Commissioner has even come close, I’d sure like to know who it was.

 

Meanwhile, the TaxProf has reached a milestone: The IRS Scandal, Day 365.  The biggest item in this edition is the report that the IRS had not destroyed Tea Party donor lists — after saying it had — and that the IRS has audited 10% of Tea Party donors.  This is a staggering audit rate, if true, and is a tremendous scandal in itself if the IRS doesn’t come up with a good explanation.

TaxGrrrl, House Finds Lerner, Central Figure In Tax Exempt Scandal, In Contempt Of Congress

 

20140509-2Jana Luttenegger, Deadline Approaching to Avoid Losing Tax Exempt Status (Davis Brown Tax Law Blog). Get those 990-series reports filed!

Trish McIntire, EFTPS – Inquiry PIN.  “The Inquiry PIN will allow taxpayers to check and make sure that their federal tax deposits have been made and catch a problem before it becomes a major issue.”  This should be used by all employers.

Peter Reilly, Former Tampa Bay Buccaneers Owner Scores Touchdown In Tax Court.  “It may seem odd to look at a case that ends up with a charitable deduction dis-allowance of nearly $4 million as a victory, but when you consider how taxpayers generally fare in easement cases it really is.”

Leslie Book, Tax Court Jurisdiction to Determine its Jurisdiction: Foreign Taxes and Credits (Procedurally Taxing)

Mindy Herzfeld, International Tax Trending (Tax Analysts Blog)

 

Richard Borean, Tax Freedom Day Arrives in Final Two States: Connecticut and New Jersey (Tax Policy Blog)

Howard Gleckman, Taxing Employer-Sponsored Insurance Would Hike Social Security Benefits But Boost Federal Coffers (TaxVox)

 

Kay Bell, IRS employee arrested after inadvertently following Obama daughters’ motorcade onto White House grounds.  Oops.

Tax Justice Blog, Déjà vu: Oklahoma Enacts Tax Cut Voters Don’t Want.  I’m not sure about the “don’t want” part.

Robert D. Flach has your Friday morning Buzz!

 

News from the Profession.  Deloitte CEO Prefers Traditional Photo Op Over Selfie  (Going Concern)

 

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