Programming note: The Tax Update will take Thursday and Friday off this week to tend to a family wedding. We’ll be back as usual Monday.
Maybe we shouldn’t be shooting jaywalkers? The IRS may be declaring a cease-fire in its long war on inadvertent foreign account violators. Tax Analysts reports ($link) that IRS Commissioner Koskinen told a tax conference that it will be modifying its Offshore Voluntary Compliance Initiative:
“We are well aware that there are many U.S. citizens who have resided abroad for many years, perhaps even the vast majority of their lives,” Koskinen told a luncheon audience at the 2014 OECD International Tax Conference in Washington. “We have been considering whether these individuals should have an opportunity to come into compliance that doesn’t involve the type of penalties that are appropriate for U.S.-resident taxpayers who were willfully hiding their investments overseas.”
Gee, you think so? You really think 25%-300% penalties might not be appropriate for the crime of committing personal finance while living abroad? What could possibly have given him that idea?
Koskinen also pointed to taxpayers residing in the United States with offshore accounts “whose prior noncompliance clearly did not constitute willful tax evasion but who, to date, have not had a clear way of coming into compliance that doesn’t involve the threat of substantial penalties.”
“We believe that re-striking this balance between enforcement and voluntary compliance is particularly important at this point in time, given that we are nearing July 1, the effective date of FATCA,” Koskinen said.
One of the things that made Doug Shulman the Worst Commissioner Ever was his brutal treatment of trivial inadvertent offshore paperwork filing violators. Hopefully his successor will make coming into compliance voluntarily a transparent, predictable process designed primarily to ensure future compliance. Something like state programs for non-resident non-filers, where taxpayers pay back taxes, if any, and interest for a limited number of open years would make sense People are understandably reluctant to come into compliance when it can mean financial ruin.
The IRS has not released any details of this kinder, gentler approach, so curb your enthusiasm for now.
Related: IRS Commissioner Koskinen Announces that Changes — Liberalizations — Are In the Offing for OVDP 2012 (Jack Townsend) “All in all, this is good news, at least from a hope perspective.”
Robert D Flach offers YET ANOTHER POST CALLING FOR A VOLUNTARY TAX PREPARER DESIGNATION. Robert makes his case for a “voluntary” designation for preparers who meet some standard.
Robert says something I agree with:
Having the IRS oversee the designation is not the best idea. I have suggested that the voluntary RTRP-like designation be administered by an independent industry-based organization like an American Institute of Registered Tax Return Preparers (see “It’s Time for Independent Certification for Tax Preparers“).
If the IRS has nothing to do with it, fine. If it does, it will inevitably do special favors for its “voluntary” friends and make like difficult for others.
Robert is a little like the Scarecrow in the Wizard of Oz, looking for a brain. The movie quickly makes clear that the Scarecrow already has a perfectly good brain; all he lacks is a diploma. Robert, a perfectly good (if old-fashioned) preparer, doesn’t need a diploma to save his clients from the Wicked Witch.
TaxGrrrl, After TIGTA Report, Expect More Tax Refund Delays, The IRS is encouraged to expand its refund offset programs.
Paul Neiffer, Portability Revisited. “With the “permanent” changes in the estate tax laws from about 2 years ago, we now have a permanent provision called portability. This allows for the unused portion of someone’s estate to be “ported” over to the surviving spouse to be used on their final estate tax return.”
TaxProf, The IRS Scandal, Day 391
Joseph Thorndike, Democrats Just Love Their Nanny-State Taxes (Tax Analysts Blog):
The Tax Foundation recently spotlighted a Democratic tax proposal that gives substance to the name-calling: the Stop Subsidizing Childhood Obesity Act, introduced last month by Sens. Tom Harkin, and Richard Blumenthal.
According to its champions, the act would protect children from the predations of junk food purveyors. In particular, it would deny manufacturers any sort of tax deduction “for advertising and marketing directed at children to promote the consumption of food of poor nutritional quality.” It would use the resulting revenue to help fund the Department of Agriculture’s Fresh Fruit and Vegetable Program.
That all sounds great. Except for the fact that it’s arbitrary, capricious, and an egregious misuse of tax policy.
The tax law – is there anything it can’t do?
Joseph adds, wisely:
Reasonable people can disagree about what qualifies as a loophole. But by almost any definition, the deduction for advertising junk food is not one.
Once you decide the tax law is a public policy Swiss Army Knife, there’s no logical place to stop.
Kay Bell, Calories or volume: Which is the better tax on sugary drinks? Neither. Some problems just aren’t tax problems.
David Brunori’s righteous anger at taxes on e-cigarettes is now freely available at Tax Analysts Blog: Taxing E-Cigarettes Seems Crazy. “Yet politicians routinely say that e-cigarettes will lead people to start smoking, or worse — use drugs! Are they daft?” No, just greedy.
Renu Zaretsky, In the Midwest, Across the Pacific, and Down Under. Tax Custs in Ohio and a rejected tax boost in Missouri are part of the TaxVox headline roundup today.
Tax Justice Blog, Will Anti-Tax Yogis Sink Tax-Reform in D.C.?. If that’s what it takes to get the pic-i-nic basket.
This will make the homecoming in 2042 a little less awkward. WMUR.com reports:
The woman who, along with her husband, held police at bay during a nine-month standoff in 2007 over tax evasion has apologized to the community.
Elaine Brown’s apology appeared in Plain Facts, a monthly publication written by Plainfield residents.
She said she and her husband Ed were trying to advance the “cause of justice.” She went on to say they “failed to take into account the impact we were having on others in the town. We failed to realize the fear, anxiety and impact we were causing these good people.
She was unable to apologize in person because she has been detained — until November 2042, according to the Bureau of Prisons inmate locator. She should be home in time to invite her neighbors to her 102nd birthday party.