There have been several interesting IRS-themed stories in the news this week.
For one, the IRS recently missed its deadline to appeal an adverse federal District Court decision that denied them the authority to regulate all tax preparers under the Registered Tax Return Preparer program. This is a big win for tax preparers specifically and a win for small businesses in general. Perhaps the IRS is going to turn to some kind of voluntary scheme instead.
And if you pay any attention at all to financial news, you wouldn’t have been able to avoid all the press about the IRS paying out something like $15 billion in improper claims for the Earned Income Tax Credit. Anything that shows how the IRS is wasting our tax dollars or is staffed with incompetent boobs is usually going to remain in the news a few days longer than necessary. However, this time it really is a big deal. The IRS admits that about 25% of all EITC payments are issued to people who should not qualify! What’s worse is the IRS has made little progress on fixing this over the past 4 years.
The last thing I noticed today is not something that everyone will find incredibly captivating, but it caught my eye. Anytime I see the words “compliance initiative program” it makes me uneasy. The IRS is going to begin a CIP that will last approximately 12 months and will focus on IRC Section 409A which governs deferred compensation plans. Thomas Scholz, an IRS executive speaking at an ABA meeting, indicated how many people would be selected for this audit program (less than 50), from what group of taxpayers they would be selected (from an existing pool of employment law cases), and how the IRS will begin the process (through document information requests). Although stated in off-the-record comments, the IRS revealed some specifics about this CIP that I would love to see them give in ordinary audit situations.