Tag: IRS

Better IRS service is forcing an earlier debt deadline

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That means there is less uncertainty about how much money will come in — there isn’t a huge lump of tax payments still waiting to be tallied, like there was last year, when many didn’t get deposited until May or later. Most of the tax payments Treasury is going to receive have now already been collected, the Congressional Budget Office says.
“As a result, we anticipate that the IRS will process relatively few additional payments in May,” the nonpartisan agency says.
“That, in combination with the less-than-expected receipts through April, means that the Treasury’s extraordinary measures will be exhausted sooner than we previously projected.”
CBO and Treasury said Monday that they expect lawmakers to have to act by early June. In a letter to lawmakers, Treasury Secretary Janet Yellen said the deadline could come as soon as June 1, though she said it’s also possible the deadline will end up being “a number of weeks later than these estimates.”
That has caught lawmakers off guard, with many expecting the deadline to land in late July.
President Joe Biden is slated to meet with congressional leaders next week. House Republicans have passed an increase tied to a host of budget cuts, something that is a nonstarter for Democrats. Lawmakers will likely have to pass a short-term extension to buy themselves more time to negotiate.
The deadline for action turns heavily on tax revenues, which are volatile. And a big reason for the new “X-date” is capital gains receipts, which have plummeted in the wake of last year’s downdraft on Wall Street.
But the timing of how quickly the IRS can turn around people’s returns matters too, and this was the first tax season since Democrats pushed through a one-time cash infusion for the agency that was six times its annual budget. As part of an overhaul of the agency, the administration is emphasizing improved customer service, in part by hiring thousands of new workers.

People who expect to receive tax refunds tend to file early because they want their money. There’s usually a lull in the middle of tax season before a rush at the very end that’s comprised disproportionately of people who owe (some tax veterans refer to the filing season as having “Batman ears”).
It’s not uncommon for wealthy people who owe to not only file very late in the tax season but also do it on paper, rather than electronically, because that takes the IRS longer to process, which means the taxpayers’ money can sit in an account longer collecting interest.
This time last year, when the agency was facing a queue of 5.2 million returns, the tax payments that came with them often wouldn’t get deposited in federal coffers for some time after Tax Day.
This year, through April 21, the IRS says it has processed 98.1 percent of the 134,649,000 returns it has received. That leaves 2.45 million awaiting action.
The total number of returns the IRS has received so far this year is down by 1.3 percent or about 1.8 million filings compared to last year.
That could partly be because the department gave people in California and other states hit by natural disasters until October to file. It’s unknown how many are taking advantage of that extension.
But there are lots of wealthy people in California, in particular, and there is a financial incentive for those who owe to delay paying as long as possible — which could be another reason why the debt deadline is coming faster than lawmakers anticipated.
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( With inputs from : www.politico.com )

May 3, 2023
IRS releases plan to spend $80 billion windfall — with critical details missing

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But the vaguely worded report, which was delivered more than a month later than the deadline Treasury Secretary Janet Yellen set, answered few of the questions that lawmakers have been lobbing at Yellen and IRS officials for months about specific budget forecasts and department hiring.
The IRS, which counted around 78,700 employees in 2021, says in the report that it plans to bring on nearly 30,000 new employees by the end of fiscal year 2025. That would include 8,782 hires in enforcement and 13,883 in taxpayer services and surely offset some attrition in the agency’s ranks from retirements.
The agency intends to spend $2.8 billion of the funding in 2023 and $5.4 billion in 2024 and, over a 10-year period, allot a hefty sum of $41.7 billion alone to scrutinizing the most sophisticated, high-income taxpayers.
However, the IRS did not provide essential information sought by lawmakers on the Senate Finance and House Ways and Means committees, such as how many employees the agency would like to hire long term for enforcement; how exactly the IRS will comply with a pledge by Yellen not to increase audits on those making less than $400,000; and what the agency forecasts to spend on operations, enforcement and customer service from fiscal years 2025 through 2031.
Treasury Deputy Secretary Wally Adeyemo defended the limited budget forecast in a call with reporters Thursday, saying technology advancements such as digital scanning of paper returns and automated phone services will improve agency productivity. That creates uncertainty around how many employees the IRS will ultimately need to hire, Adeyemo said.
“I hope that we can get better at forecasting, but I just think it’s good management and leadership practice” to refrain from projecting beyond fiscal year 2024, Werfel added.
Still, those omissions could be no coincidence with Republicans primed to pounce on any details of the IRS’ bulked-up enforcement. When Treasury first asked for new money for the IRS, the department specified exactly how many workers the IRS would hire to crack down on tax cheats: 86,852.
Republicans have been using that figure ever since as grist for attack ads on Democrats.

Democrats have fired back that the agency has been starved of resources to fairly enforce the tax code — with audit rates for millionaires and corporations falling by 77 percent and 44 percent, respectively, from 2010 to 2017 — and that much of the new hiring is needed to replace the two-thirds of the IRS workforce that will be eligible to retire in the next six years.
Here’s a look at what the report says about key elements of the IRS strategy:
ENFORCEMENT
The agency says it wants to leverage data analytics and technology to audit complex tax returns and plans on hiring the first waves of specialists focused on big companies, partnerships and high-income individuals in fiscal year 2023. The IRS will increase enforcement activities on cryptocurrencies and in areas where audits have declined significantly over the years, such as in estate, gift and employment taxation.
That will involve increasing staff in the Office of Chief Counsel, the legal adviser to the IRS based at the Treasury Department, to help litigate cases and issue clear guidance on tax laws. The agency insists ramped-up enforcement will apply to only those making more than $400,000.
“People who get W-2s or Social Security payments or have a small business should not be worried about some new wave of IRS audits. We’re taking that off the table,” Werfel said.
In a nod to lawmakers’ concerns about a Stanford study published earlier this year finding that Black taxpayers are three to five times more likely to be audited by the IRS, the agency also said it will create a team in fiscal year 2024 to look at whether enforcement activities disproportionately burden certain groups and address any disparities in tax administration according to gender, race and age.
CUSTOMER SERVICE
The IRS wants to create online business accounts where taxpayers can let the agency know what communication methods they prefer — whether digital, phone or in-person — and hire more representatives to operate the phone lines and staff Taxpayer Assistance Centers.
Under the modernized system, the IRS said taxpayers will be able to access their entire account history, including notices and returns; make payments; and get status updates for their filings, all online. They would also receive personalized alerts from the IRS to better understand their tax obligations and eligibility for credits and deductions.
The IRS launched a new tool this filing season that allowed taxpayers to respond to the nine most common notices online, and the agency plans to add 72 more notices online by the end of fiscal year 2024.
“For many, letters from the IRS in the mail could be a thing of the past. For the first time, the IRS will help taxpayers identify potential mistakes before filing,” Werfel said.
The agency says it wants to make it easier for employees to review tax returns by implementing full digital scanning of paper forms — which National Taxpayer Advocate Erin Collins has called the “kryptonite” that jammed up the IRS during the pandemic — in the next five years and make that data easily accessible to employees in a centralized case management system.
TECHNOLOGY
The IRS is looking to replace old programming language in its aging computer systems and consolidate information on the cloud while improving cybersecurity to protect taxpayer privacy. Machine learning could be used to extract data and do advanced analytics on complex tax returns, the agency says.
PERSONNEL
The agency insists its hiring successes will not only depend on the prospects of higher pay for specialized employees, but also a cultural shift that gets workers excited about the IRS’s mission. It will prioritize recruiting from diverse and underrepresented talent pools and streamline the hiring process, which frequently gets bogged down in bureaucratic hurdles and discourages candidates from joining the IRS.
The agency will consider allowing employees to work from more locations around the U.S. to attract top-tier talent and employ gig workers on an as-needed basis. The IRS adds that it wants its employees to become far more data-savvy.
Brian Faler contributed to this report.
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( With inputs from : www.politico.com )

April 6, 2023
Credit Suisse hid $700M from IRS, Senate investigators say

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Based on information requests from the committee, the bank identified 23 undeclared accounts belonging to ultra-wealthy U.S. citizens with more than $20 million at the bank. The Senate report noted that more concealed accounts could be uncovered as the bank’s review continues.
“At the center of this investigation are greedy Swiss bankers and catnapping government regulators, and the result appears to be a massive, ongoing conspiracy to help ultra-wealthy U.S. citizens to evade taxes and rip off their fellow Americans,” committee Chair Ron Wyden (D-Ore.) said.
The bank had paid $2.6 billion under the 2014 plea agreement with Justice.
“Credit Suisse got a discount on the penalty it faced in 2014 for enabling tax evasion because bank executives swore up and down they’d get out of the business of defrauding the United States,” he added. “This investigation shows Credit Suisse did not make good on that promise, and the bank’s pending acquisition does not wipe the slate clean.”
The revelations pose potentially significant problems for Credit Suisse, which reached an agreement on March 19 to be bought and have its legal liabilities assumed by domestic Swiss rival UBS.
The massive merger of the financial institutions was hastened by Swiss authorities and regulators, who feared that collapse of Credit Suisse, which sustained billions of dollars of losses in 2021 and faced several scandals, could send shockwaves through the global financial system.
As part of its investigation, the committee also found that Credit Suisse abetted U.S. businessman Dan Horsky, a dual citizen who admitted to concealing $220 million from the U.S. government in 2016 in one of the largest criminal tax evasion cases in American history.
Credit Suisse bankers were aware of Horsky’s American citizenship and worked with him to obscure the ownership of his accounts from the IRS, the report said.

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( With inputs from : www.politico.com )

March 29, 2023
Biden’s nominee for IRS chief confirmed by Senate

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Republicans, meanwhile, have promised to grill Werfel on everything from what they view as the agency’s excessive funding to the leak of confidential taxpayer information.
Senate Finance Committee Ron Wyden (D-Ore.) said in a floor speech Wednesday that Werfel can handle the crosswinds, given his stint as acting commissioner of the IRS in 2013 after the resignation of his predecessor over allegations that the agency unfairly targeted conservative organizations who were seeking tax-exempt status.
“For Mr. Werfel to get bipartisan support to lead the IRS at a time when a lot of Republicans would happily mothball the entire agency is a testament to his fairness, his ability to work with both sides and his undeniable qualification for this role,” said Wyden.
Werfel, whom Biden plucked from a top job at Boston Consulting Group, had stints at the White House Office of Management and Budget and the Justice Department under Republican and Democratic administrations.
His overriding order of business at the IRS will be managing how the unprecedented $80 billion influx is spent. Treasury Secretary Janet Yellen had promised to deliver a blueprint for the spending by February, but missed the deadline.
In addition to playing defense with Republicans, lawmakers also want to see improved customer service — an abysmal 250 million of 282 million calls to the taxpayer help line went unanswered in 2021 — and upgrades to the computer systems that lawmakers from both sides consider woefully outdated.
IRS employees have also traditionally had to manually enter information from paper returns number by number, a labor-intensive process that severely bogged down the agency during the pandemic and that Treasury hopes to now fix with new digital scanning technologies.
Republicans, however, say the administration’s true intent is to unleash an army of auditors on middle-class taxpayers and small businesses, with Finance Committee ranking member Mike Crapo (R-Idaho) saying Wednesday that achieving the agency’s collection targets will be impossible without violating Yellen’s pledge to not increase audits on those making less than $400,000.

Werfel managed to alleviate at least some of those concerns for the Republicans who voted for him: Sens. Bill Cassidy of Louisiana, Susan Collins of Maine, Chuck Grassley of Iowa, Lisa Murkowski of Alaska, Thom Tillis of North Carolina and Todd Young of Indiana.
“Danny Werfel showed an openness to different ways to update IRS processes. This is long overdue,” said Cassidy on why he voted for Biden’s pick.
Young added that former Indiana Governor Mitch Daniels, who led the OMB under George W. Bush while Werfel was climbing the ranks there, attested to the Biden nominee’s competency and non-partisan nature.
Still, Werfel’s bona fides didn’t prove enough to sway most of the GOP conference, with several indicating their no votes were cast out of general frustration with the tax policy charted by Biden and Yellen.
Those skeptical Republicans got an unexpected boost from Sen. Joe Manchin (D-W.Va.), who voted against Werfel amid a fierce battle over the administration’s handling of some provisions in the Inflation Reduction Act enacted last year, including those that require components of batteries for electric vehicles to be made in the United States and the opening of new oil leases in the Gulf of Mexico.
“I hope they come to their senses and do what the bill says that should be done,” said Manchin, who nonetheless called Werfel “supremely qualified.”
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( With inputs from : www.politico.com )

March 9, 2023
Manchin to oppose Biden’s nominee to head IRS

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Manchin’s move also comes as he faces the prospect of a tough reelection race next year in his Republican-leaning state. He has not said whether he’ll run for another term.
Manchin’s opposition is unlikely endanger Werfel’s nomination, which appears assured. Werfel won bipartisan support on the chamber’s Finance Committee, with three Republicans there backing him. The Senate is expected to vote on Werfel’s confirmation Wednesday evening.
“At every turn, this administration has ignored congressional intent when implementing the Inflation Reduction Act,” Manchin said, referring to the law that includes the tax incentives. “First and foremost, the IRA is an energy security bill with clear and direct guidelines to ensure we are able to onshore our supply and manufacturing chains.”
“But instead of adhering to Congressional intent and prioritizing our nation’s energy and national security, the Treasury Department has pandered to automakers and progressive extreme groups and continued to sacrifice the national security of the United States.”
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( With inputs from : www.politico.com )

March 8, 2023