Tag: irs

The IRS already has all your income tax data – so why do Americans still have to file their taxes?

Doing taxes in the U.S. is notoriously complicated and costly. And it gets even worse when there are delays and backlogs, making it especially hard to reach the Internal Revenue Service for assistance.

But to me this raises an important question: Why should taxpayers have to navigate the tedious, costly tax filing system at all?

The case for a ‘simple return’

In 1985, President Ronald Reagan promised a “return-free” tax system in which half of all Americans would never fill out a tax return again. Under the framework, taxpayers with simple returns would automatically receive a refund or a letter detailing any tax owed. Taxpayers with more complicated returns would use the system in place today.

In 2006, President Barack Obama’s chief economist, Austan Goolsbee, suggested a “simple return,” in which taxpayers would receive already completed tax forms for their review or correction. Goolsbee estimated his system would save taxpayers more than US billion a year in tax preparation fees.

Though never implemented, the two proposals illustrate what we all know: No one enjoys filling out tax forms.

So why do we have to?

As an expert on the U.S. tax system, I see America’s costly and time-consuming tax reporting system as a consequence of its relationship with the commercial tax preparation industry, which lobbies Congress to maintain the status quo.

A costly and time-consuming system

Return-free filing is not difficult.

At least 30 countries permit return-free filing, including Denmark, Sweden, Spain and the United Kingdom.

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Nearly Half Of IRS Audits Target Poorest Taxpayers, Report Finds

Nearly half of all IRS audits in 2021 targeted the nation’s poorest taxpayers, according to a new study.

A report released by the Transactional Records Access Clearinghouse (TRAC) on Tuesday said that about 307,000 of the nearly 660,000 audits conducted by the IRS in 2021 were among taxpayers who claimed the Earned Income Tax Credit intended for those making the lowest incomes in the nation, those earning less than $25,000 in total gross receipts.

The poorest families in the study were audited at five times the rate of other Americans.

“Even taxpayers with total positive income from $200,000 to $1,000,000 had only 1/3 the odds of audit compared with these lowest-income wage earners: 4.5 out of every 1,000 compared to 13.0 out of every 1,000 of lowest-income earners,” the study noted.

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IRS To Require Facial Recognition To View Tax Returns

The US Internal Revenue Service (IRS) has partnered with a Virginia-based private identification firm which requires a facial recognition selfie among other things, in order to create or access online accounts with the agency.

According to KrebsonSecurity, the IRS announced that by the summer of 2022, the only way to log into irs.gov will be through ID.me. Founded by former Army Rangers in 2010, the McLean-based company has evolved to providing online ID verification services which several states are using to help reduce unemployment and pandemic-assistance fraud. The company claims to have 64 million users.

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IRS Watching Your $600+ Payments To Venmo, PayPal, Others

President Joe Biden and Democrats in Congress passed a new rule that requires payment companies and cash applications such as Venmo and PayPal to report $600 or more of payments to the Internal Revenue Services.

The law was included in the Democrats’ $1.9 trillion American Rescue Plan Act, which was passed with only Democratic votes through budget reconciliation to avoid the Senate filibuster. The new rule took effect at the beginning of this month.

The requirement covers payments received for good and services. The rule would apply to payment services like PayPal, Venmo, Zelle, Cash App and others.

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Stole something? IRS says stolen property and bribes must be reported as income

Did you steal a car in 2021? How about taking a bribe? If you did, the IRS says to make sure you report it on your taxes.  

Those provisions went viral Monday following a tweet alerting taxpayers to those somewhat surprising requirements to note the value of your ill gotten gains. 

“Tax szn is around the corner,” read the tweet from @litcapital. “Remember to report your income from illegal activities and stolen property to the IRS.”

The requirements can be found at IRS.gov amid other missives to report income earned from jobs in the gig economy and what to do about taxable alimony payments. 

“If you steal property, you must report its fair market value in your income in the year you steal it unless you return it to its rightful owner in the same year,” read the provision for stolen property.’

What if you’re dealing drugs or caught up in other crimes?

In that case, the IRS publication says jot your earnings on line 8z, Schedule 1 of your 1040 form, “or on schedule C … if from your self-employment activity.”

And don’t forget to report any bribes or kickbacks you took in the course of doing business.

The kickbacks also go on Schedule 1 or Schedule C, while the IRS says bribes should simply be included in your income. 

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Biden Wants To Empower the IRS Despite Its Track Record of Trampling Rights and Undermining Privacy

President Joe Biden’s plan to beef up IRS enforcement and snoop on Americans’ bank accounts will require hiring more than 80,000 additional tax cops—expanding a federal bureaucracy with a long track record of flouting due process and undermining privacy.

As part of Biden’s “Build Back Better” plan, the IRS would get $80 billion in additional funding over the next 10 years. The bulk of those new funds, nearly $45 billion, would be directed toward enforcement actions with the goal of doubling the number of annual audits of small businesses. By comparison, the bill spends a relatively meager $1.93 billion on improving taxpayer services, including education and filing assistance.

In short, for every new dollar the IRS will spend helping Americans understand the endlessly complicated federal tax code, the agency will spend roughly $23 new dollars on enforcing those same rules.

Everyone should pay the taxes they owe, of course, but the IRS’ track record suggests that more enforcement will also mean more trampling of Americans’ due process rights.

“It’s a systematic practice at the IRS to violate due process and to abuse taxpayers,” says Isabelle Morales, a policy specialist for Americans for Tax Reform, a conservative nonprofit that opposes tax increases. Biden is proposing to boost funding “for an agency that needs reform,” Morales tells Reason, “and that will only lead to us fueling their bad practices.”

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