Posts Tagged ‘ITINs’

Tax Roundup, 11/30/2012: IRS makes life difficult for ID-theft victims and Americans abroad, but they make compliance hard for foreigners too!

Friday, November 30th, 2012 by Joe Kristan

When your identity is stolen, the IRS will be happy to bounce you around the bureacracy.  The Taxpayer Advocate testified yesterday at a House hearing on identity theft.  The IRS, which does a bang-up job of rapidly mailing fraudulent refunds, is less streamlined when it comes to helping taxpayers whose identities are stolen:

“Yet today the IRS is moving backward toward a decentralized approach, creating specialized identity theft units within 21 separate functional areas,” Olson told the House Oversight and Government Reform Subcommittee on Government Organization, Efficiency and Financial Management. “If, as seems likely, the IRS reduces the role of the IPSU and directs taxpayers to deal directly with the 21 specialized units, I am deeply concerned that we will revert to back where we were in 2008, with large numbers of taxpayers that have cross-functional issues unable to get their problems resolved without multiple contacts with multiple functions, and that would in my opinion be a disaster for the victims.”

She says that the IRS will have to choose between fast refunds and stopping fraud:

Specifically, we may need to ask all taxpayers to wait longer to receive their tax refunds, or we may need to increase IRS staffing significantly. Under current circumstances, I have come to the conclusion that it is simply not possible for the IRS both to process legitimate returns rapidly and to combat refund fraud effectively at the same time.

So it’s too much to ask for the IRS to make better use of existing resources by not wasting them on the futile and expensive return preparer registration program — a program unwisely supported by the Taxpayer Advocate.


IRS makes doing business in the U.S. even more of a hassle for foreigners.  The IRS and Congress are doing their best to make it impossible for Americans to do business abroad with FATCA and the offshore compliance jihad.  Now they are doing a bit of the same for foreigners trying to do business here with new rules for International Tax Identifiction Numbers (ITINs).

ITINs are needed when foreigners invest in US real property or other assets where a US tax identification number is needed.  U.S. taxpayers just use their Social Security numbers.  The process is a hassle, with exacting documentation requirements that often require applicants to send passports to the IRS for extended periods while the IRS processes the paperwork.

While the new rules provide more options for applying for the paperwork, they now make the ITINs expire after five years, requiring taxpayers to repeat the whole process to stay in tax compliance.  This hassle isn’t just an issue for offshore taxpayers; it also makes compliance more difficult for U.S. taxpayers with offshore investors.  Just another little effort by the IRS does to make staying legal as difficult as possible.

Related: Trish McIntire,  Finalized ITIN Rules

 

The injunction didn’t go through, so on to the indictment.  A few years ago the IRS tried to close down the practice of a St. Louis-area tax preparer after making spectacular allegations of malfeasance.  The effort ended in a settlement that looked much like a victory for the preparer.  The IRS apparently didn’t take that well.  Stltoday.com reports:

Frank L. “Tiger” Zerjav, Jr., 39, of Wildwood, has been indicted for allegedly submitting four years of false tax returns and trying to dodge $182,000 in taxes, the U.S. Attorney’s office said Thursday.

Zerjav was indicted on four charges of federal income tax evasion for the returns covering 2001-2004. He also faces an obstruction of justice charge for allegedly producing altered computerized accounting records after receiving a grand jury subpoena.

They couldn’t put Mr. Zerjav out of business through civil procedures.  A tax fraud conviction would do the trick.  They’ll need to make a much more convincing showing than they apparently were able to do on the injuction effort.   This does remind us that if you get on the bad side of the IRS, your own filings had better be squeaky clean.

 

Better this fiscal cliff than the next, bigger one?  Bring On the Fiscal Cliff! (Megan McArdle):

Unless something changes, we’re headed toward one of two uncomfortable places. Either we veer over the fiscal cliff and the economy crashes—or we keep going down the road we’ve been taking for more than a decade, delaying hard choices while assuring voters that no really hard choices need to be made. That road probably ends in an even nastier smashup.

So how are Iowa’s congresscritters dealing with this nasty reality?  “Senator Harkin says the “fiscal cliff” doesn’t exist.” (Radio Iowa)

Howard Gleckman,   What to Read While Hanging Out at the Fiscal Cliff (TaxVox)

Richard Morrison,   The Tax Rate Paid by the Top 1% Is Double the National Average (Tax Policy Blog)

Martin Sullivan,  How To Limit the Deduction for State and Local Taxes (Tax.com)

Jim Maule, Tax Rates and Deduction Caps

 

Jack Townsend,   Major CA2 Decision on E&Y Tax Shelter Convictions.  Two E&Y guys go free.

Jana LutteneggerTax Implications of Holiday Bonuses (Davis Brown Tax Law Blog)  Don’t think that Wal-mart gift card for the employees is tax-free.

Kay Bell,  Lottery dreams and tax realities

The Critical Question:   How Much Tax Would You Owe On A $550 Million Powerball Jackpot? (Janet Novack)

Brian Strahle,   DC Combined Reporting and the Real Estate Investment Industry:  Unintended Consequences?

Tax Trials,  Michigan Court of Appeals Rejects IBM’s MTC Election

 

Robert D. Flach, at his “The Tax Professional” blog, is not thrilled with the “due dilegence” requirements for returns with the Earned Income Tax Credit:

I just posted about the fact “that the IRS is getting more out of hand with its ‘due diligence’ requirements for tax preparers who are claiming the Earned Income Tax Credit for clients” here in “WE ARE NOW NOT ONLY TAX PREPARERS, BUT SOCIAL WORKERS AS WELL!”, which was a response to Trish McIntire’s post “EITC Checklist Expanded” at OUR TAXING TIMES.

At the seminar we reviewed in detail the new Part IV “Due Dilligence Requirements” on Pages 3 and 4 of the form.  In my opinion the new hoops that we are required to jump through are TOTALLY RIDICULOUS!

Like with the preparer regulations, honest preparers are saddled with rules they don’t need in response to tax cheaters who will ignore the rules anyway.

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