IRS “Fresh Start” Program

On February 24, 2011, the IRS announced they would be rolling out a series of changes to current collection procedures that would prove to the world that they are just a bunch of softies.  Ok, they didn’t go that far.  But they did say that they would be filing fewer liens, simplifying the procedure for removal of a lien, and streamlining the Offer in Compromise program for certain taxpayers.

Here we are in June and there are still more questions than answers.  For example, the IRS claims that the new dollar threshold for filing a federal tax lien is now $10,000 instead of $5,000, but liens may be filed on balances less than $10,000 when circumstances warrant.  What circumstances might warrant a deviation from this new rule?  We don’t know.  The IRS also claims that they will be expanding the Streamlined Offer in Compromise process.  What are the details of this procedure?  And does it really benefit the taxpayer?  From what I have seen, “streamlining” a procedure can be a double-edged sword.  On one hand, the process is shortened so the taxpayer finds tax relief sooner if the offer is accepted.  On the other hand, if streamlining skips important steps or moves the process along so quickly that it prejudices the taxpayer, then only the government benefits.

IRS Employees in Need of IRS Tax Relief

IRS Employees in Need of IRS Tax Relief ?

According to the Treasury Inspector General for Tax Administration (TIGTA), for years 2004 to 2008, the Internal Revenue Service (IRS) identified that it had an average of 8,788 employees per year who were not complying with U.S. tax laws. Of the 43,941 IRS employees not in compliance with U.S. tax laws over the five-year period, 34,095 of them failed to pay taxes owed, failed to pay on-time, or failed to timely file their tax return. In a report released by the TIGTA issued May 5, 2011, and released on June 21, 2011, an additional 133 IRS employees previously undiscovered by the IRS were not in compliance with tax laws. The TIGTA findings were made during an audit of the Employee Tax Compliance Program that is supposedly designed to ensure that IRS employees are held to a high standard of compliance with the tax laws. The bottom line is that the unforgiving Revenue Officer knocking on your door may be issuing along with that  bank levy or wage garnishment, a dose of “do as I say, not as I do.”

So-Cal Pilot School Case

The owners of a Southern California test pilot school pleaded guilty to filing a false 2008 tax return. They transferred money from their corporation to several offshore accounts, then deducted the transfers from their corporate and individual income tax returns. Then they failed to report the interest on the foreign accounts. Maybe it goes without saying, but this is not allowed. Now they will have to pay upwards of $2 million in penalties on top of their $710,000 tax bill. I think its safe to say that their options for tax relief are limited at this point. If they don’t have the cash to pay it all at once, that’s going to be one big installment payment!

SSN Randomization

Your social security number (SSN) is actually made up of three different numbers: the 3-digit area number, 2-digit group number, and 4-digit serial number. This is the way its been done since social security numbers first started being assigned back in 1936. But later this month the Social Security Administration (SSA) is going to begin assigning numbers randomly. This will make additional numbers available that are currently restricted due to the area number. Basically, it will take longer for the SSA to run out of numbers. Also, the randomization method of SSN assignment is supposed to better protect the integrity of the numbers. Bad guys won’t be able to figure out the first 3 digits based on state. Even after this change, the SSA will still not be using 000, 666, or 900-999.

ETAAC Pushing IRS to Increase E-filing Numbers

Yesterday the Electronic Tax Administration Advisory Committee (ETACC) released its yearly report to Congress.  This 14-member committee was created in 1998 and submits annual progress reports to Congress each June.  The ETACC report is always near the top of my summer reading list.  But I have been known start at the bottom of my list and work my way up.

One of the key topics that this committee reports on is the IRS’ 80% electronic filing goal.  ETAAC believes there are four main areas that the IRS needs to focus on in order to achieve this goal.

  1. Continue to encourage/require tax preparers to file electronically. In the 2012 tax season, tax preparers who file 11 or more returns will be required to e-file.
  2. Reduce the number of e-file rejects (current rejection rate is 15-20%).
  3. Increase the number of e-filed returns prepared at home (i.e., some people use filing software, but then print and mail the return).
  4. Continue to encourage those who prepare their returns manually to step over into the information age.  One way the IRS is doing this is by ceasing the practice of automatically sending paper forms to taxpayers.


The IRS Makes McDonald's-Like Claim

The June 9th IRS headline read “One Billion Served: IRS E-File Passes Major Milestone” (see news release IR-2011-64).  The IRS has tallied the number of tax returns filed electronically since the e-file program began back in 1986, and the number has recently crept above one billion, including a whopping 100 million during the 2011 filing season.  These days nearly 80% of all taxpayers file their returns electronically.  If you employ a tax preparer to file your taxes, your tax preparer may be required to e-file, depending on the number of returns he/she files.  This has definitely contributed to the success of the program.

According to the IRS, e-filing benefits both the taxpayers and the government.  Taxpayers get faster refunds and more accurate returns, and the government spends less money processing them; according to the IRS, up to 20 times less.  Cheaper and quicker – maybe the IRS is following in the footsteps of McDonald’s.  Now if they could only process a return in the amount of time it takes to build a Big Mac.  Then they they’d really have something.