Priorities. While allowing billions of false refunds to go to two-bit grifters via ID-theft refund fraud, the IRS also manages to not correctly follow up on billions of unpaid assessed taxes, according to a new report by the Treasury Inspector General for Tax Administration. “Of a stratified sample of 250 cases reviewed, there was no evidence that employees completed all of the required research steps for 57 percent of the cases prior to their closing.”
How much money was potentially involved? A chart from the report:
This is what happens when the tax law is treated as the Swiss Army Knife of public policy, rather than as a simple tax collection and enforcement mechanism. It doesn’t help when successive commissioners are more concerned with expanding the agency’s power and suppressing political opponents than with collecting revenue and properly issuing refunds.
The TaxProf has more.
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TaxGrrrl, How To Get Away With Tax Fraud. No, she hasn’t gone over to the dark side. She is outlining some rookie mistakes made by a Ms. Jackson, who tried to cash a $94 million tax refund check she received. Revenue agents were waiting for her at the grocery store where she tried to cash the check:
Among the basic mistakes TaxGrrrl points out is this:
Unless you are due a lot of refundable tax credits (more on that later), you’ll want to make sure that your math makes sense. I didn’t see Jackson’s tax return. And I’m not licensed in Georgia. But even I can figure from peeking at the Georgia Department of Revenue’s web site that the highest income tax rate for individuals is 6%. To have paid in $94 million of tax, the amount of her refund claim, you’d have to have earned about $1.56 billion in income – in one year (assuming no carry forward or carry back). That kind of money should have landed Jackson on the newly released Forbes’ 400 Richest Americans list. Spoiler alert: she’s not on the list.
And no, it doesn’t appear that she sandbagged a little too much on her estimated tax payments. Another basic mistake: real tax thieves prefer direct deposit. But, as a man once said to police here in Des Moines, “You don’t spend your days chasing geniuses, do you?’
Peter Reilly, New York Springs Sales Tax Trap On Passive LLC Members. Apparently New York is holding LLC members personally liable for sales taxes owed by the LLC. If the Empire State wants businesses and investors to stay far away, this is a pretty good step. Oddly, S corporation owners don’t have this problem.
Carl Smith discusses The Congressman James Traficant Memorial Code Section at Procedurally Taxing. Well, if it’s like most code sections, it will outlast all of us.
J.D. Tuccille, Yet More IRS Employees Busted for Stealing Taxpayers’ Identities (Reason.com):
Have I mentioned that people signing for health coverage under the Affordable Care Act are supposed to update the government on any major life changes, including marriage status, employment, finances…? Oh wait, yes I have.
I wonder if that information will be better protected.
Remain calm, all is well.
Andrew Lundeen, Kyle Pomerleau, Estonia has the Most Competitive Tax System in the OECD. (Tax Policy Blog). The posts tells of a fascinating feature of the Estonian tax law:
Additionally, Estonia only taxes distributed profits and at a 21 percent tax rate. This means that if a business in Estonia earns $100 and pays that $100 to its shareholders, the business would be required to pay a tax of $21 on the distributed profit. Instead, if that business decides to reinvest that $100, the business would not have to pay tax on that $100.
Compare that to the U.S., where the corporations pay tax on income when it is earned, and potentially another tax if earnings are not distributed. Still another tax is paid when the earnings are distributed; in Estonia, there is no second tax.
If you were designing a tax system to actually make sense, it would look a lot more like the Estonian setup than the U.S. income tax. You also wouldn’t have the inversion problem people fret about so.
Martin Sullivan, Can Congress Pass Tax Reform That Would Stop Inversions? (Tax Analysts Blog). “Right now the U.S. tax system favors foreign owned corporations over U.S. owned corporations.
Donald Marron, The $300 billion question: How should we budget for federal lending? (TaxVox)
TaxProf, The IRS Scandal, Day 509
Liz Malm, Businesses Paid Nearly $671 Billion in State and Local Taxes Last Year (Tax Policy Blog)
Career Corner. Let’s Waste Some Chargeable Hours Comparing Chargeable Hour Goals (Adrienne Gonzalez, Going Concern)