Posts Tagged ‘Internal Revenue Service’

Revenue Ruling 2015-13: 2016 Tax Deadline will be April 18 for Most Taxpayers

Wednesday, June 3rd, 2015

The Internal Revenue Service today issued guidance regarding the filing deadline for individual tax returns next year. The guidance clarifies the effect Emancipation Day and Patriots’ Day have on the filing deadline for individuals filing their returns in April 2016.

In most years, the filing deadline is April 15. In some years, the District of Columbia’s observation of Emancipation Day can affect the nation’s filing deadline (District of Columbia holidays impact tax deadlines in the same way that federal holidays do). Because Emancipation Day falls on Saturday, April 16, in 2016 it will be observed on Friday, April 15, which pushes the tax filing deadline to the next business day – Monday, April 18, 2016. Although most individual taxpayers will have until April 18, 2016 to file and pay their taxes, Patriots’ Day will be observed next year on Monday, April 18 in Maine and Massachusetts. This means individual taxpayers in Maine and Massachusetts will have until April 19, 2016 to file and pay their taxes.

Revenue Ruling 2015-13 will be published in Internal Revenue Bulletin 2015-22 on June 1, 2015.

Phishing Remains on the IRS “Dirty Dozen” List of Tax Scams for the 2015 Filing Season

Monday, January 26th, 2015

Originally Published in IRS.GOV

WASHINGTON — The Internal Revenue Service today warned taxpayers to watch out for fake emails or websites looking to steal personal information. These “phishing” schemes continue to be on the annual IRS list of “Dirty Dozen” tax scams for the 2015 filing season.

“The IRS won’t send you an email about a bill or refund out of the blue. Don’t click on one claiming to be from the IRS that takes you by surprise,” said IRS Commissioner John Koskinen. “I urge taxpayers to be wary of clicking on strange emails and websites. They may be scams to steal your personal information.”

Compiled annually, the “Dirty Dozen” lists a variety of common scams that taxpayers may encounter anytime but many of these schemes peak during filing season as people prepare their returns or find people to help with their taxes.

Illegal scams can lead to significant penalties and interest and possible criminal prosecution. IRS Criminal Investigation works closely with the Department of Justice (DOJ) to shutdown scams and prosecute the criminals behind them.

Stop and Think before Clicking

Phishing is a scam typically carried out with the help of unsolicited email or a fake website that poses as a legitimate site to lure in potential victims and prompt them to provide valuable personal and financial information. Armed with this information, a criminal can commit identity theft or financial theft.

If you receive an unsolicited email that appears to be from either the IRS or an organization closely linked to the IRS, such as the Electronic Federal Tax Payment System (EFTPS), report it by sending it to phishing@irs.gov.

It is important to keep in mind the IRS generally does not initiate contact with taxpayers by email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels. The IRS has information online that can help you protect yourself from email scams.

IRS Made Errors on 24% of EITC Payments

Thursday, January 8th, 2015

Originally Published in ACCOUNTINGTODAY.COM

Even though the Internal Revenue Service has reported an overall decline in the improper payment rate for the Earned Income Tax Credit since fiscal year 2003, the amount of payments made in error has increased from $10.5 billion in fiscal year 2003 to $14.5 billion in fiscal year 2013, according to a new government report.

The IRS’s fiscal year 2013 EITC improper payment report to the Treasury Inspector General for Tax Administration estimates that in fiscal year 2013, EITC claims totaled approximately $60 billion, while 24 percent of the EITC payments were paid in error, according to a report released Wednesday by TIGTA.

An earlier TIGTA report last month had reported on the IRS’s high error rate and improper payment amounts for the EITC, along with the Additional Child Tax Credit (see IRS Urged to Crack Down on Improper EITC and ACTC Payments). Using IRS data, TIGTA estimated that the potential ACTC improper payment rate for fiscal year 2013 was between 25.2 percent and 30.5 percent, with potential ACTC improper payments totaling between $5.9 billion and $7.1 billion.

The new report focused on the IRS’s compliance with Executive Order 13520, Reducing Improper Payments and Eliminating Waste in Federal Programs, which requires TIGTA to assess the IRS’s compliance with the order on an annual basis. Executive Order 13520 aimed to increase federal agencies’ accountability for reducing improper payments while continuing to ensure that their programs serve and provide access to their intended beneficiaries. In the new report, TIGTA acknowledged that the IRS has taken steps to ensure access and participation by eligible individuals. The IRS estimates that the participation rate for individuals who are eligible to receive the EITC was nearly 80 percent for tax year 2010.

However, TIGTA pointed out that the IRS is not in compliance with certain requirements of Executive Order 13520 for fiscal year 2013. For example, the IRS has not established annual improper payment reduction targets as required.

Nonetheless, the IRS is making some progress related to its inability to comply with this requirement, TIGTA acknowledged. For instance, the IRS has received approval from the Office of Management and Budget to establish and report supplemental measures in lieu of annual reduction targets.
While the IRS is currently not in compliance with the quarterly reporting requirement for high-dollar improper EITC payments (that is, payments totaling more than $5,000) for fiscal year 2013, according to TIGTA, new revisions to the quarterly reporting requirements make it unlikely that the IRS would be required to report any quarterly high-dollar payments for fiscal years 2014 and beyond.

TIGTA made no recommendations in the report. In response to the report, IRS CFO Robin Canady wrote, “The Earned Income Tax Credit (EITC) is the Treasury Department’s only high risk program and poses numerous challenges with respect to improper payments and reporting.”

Canady also reiterated some of the IRS’s objections to the report last month on the EITC and the ACTC: “As we reported in our response to your performance audit on the Additional Child Tax Credit (ACTC), the IRS disagrees with your assertion that our risk assessments do not accurately reflect the risk associated with the ACTC payments and TIGTA’s potential outcome measure estimates.”

A provision in a report attached to the $1.1 trillion spending bill passed by Congress last month aims to stem the tide of improper payments of refundable tax credits such as the EITC by requiring taxpayers who use consumer tax prep software to self-prepare their tax returns to undergo the same kinds of questions that professional tax preparers are required to answer for their clients’ returns (see Congress Requires Self-Preparers and Consumer Tax Software to Check for Improper Tax Credits).

IRS Offers Rules on Hardship Exemptions from ACA Individual Mandate

Tuesday, November 25th, 2014

Originally Published in ACCOUNTINGTODAY.COM

The Internal Revenue Service has issued a notice, regulations and other guidance related to the Affordable Care Act, including information on getting a hardship exemption from the individual mandate for health insurance coverage.

Notice 2014-76 provides a list of the hardship exemptions that taxpayers can claim on a federal income tax return without obtaining a hardship exemption certification from the health insurance marketplace.

Under the Affordable Care Act, for each month beginning after Dec. 31, 2013, Section 5000A of the Tax Code requires individuals to either have minimum essential health coverage for themselves and any nonexempt family member whom the taxpayer can claim as a dependent, qualify for an exemption, or include an individual shared responsibility payment with their federal income tax return.

An individual is exempt from the requirements for a month if he or she has a hardship exemption certification issued by the health insurance marketplace certifying that the person has suffered a hardship affecting their ability to obtain minimum essential coverage that month.

The IRS simultaneously released Revenue Procedure 2014-62, which announces the indexed applicable percentage table for calculating an individual’s premium tax credit for taxable years beginning after 2015. The document also announces the indexed required contribution percentage for determining whether an individual is eligible for affordable employer-sponsored minimum essential coverage for plan years beginning after 2015.

The same Revenue Procedure cross-references the required contribution percentage, as determined under guidance issued by the Department of Health and Human Services, for determining whether an individual is eligible for an exemption from the individual shared responsibility payment because of a lack of affordable minimum essential coverage, beginning after 2015.

In addition, the IRS issued TD 9705, finalizing its regulations for minimum essential coverage and other rules regarding the individual shared responsibility payment, also known as the individual mandate.

Budget Cuts Hit IRS’s Ability to Collect Delinquent Taxes

Thursday, November 6th, 2014

Originally Published in ACCOUNTINGTODAY.COM

Years of budget cuts are having a negative impact on the ability of the Internal Revenue Service to collect delinquent taxes, according to a new government report.

The IRS’s Automated Collection System is responsible for answering incoming taxpayer calls and working the inventory of taxpayer delinquent accounts, the report from the Treasury Inspector General for Tax Administration noted. Since fiscal year 2010, the ACS workforce has declined by 39 percent due to attrition or reassignment, TIGTA found. Because those resources are needed to answer telephone calls, fewer resources are available to work on the inventory of past-due taxes.

This has contributed to unfavorable trends in several ACS business results, the report noted, including the amount of new inventory of cases of uncollected taxes outpacing closures of such cases; the inventory of delinquent tax cases taking longer to close; more cases being closed as uncollectible; fewer enforcement actions being taken; and more aged cases being transferred to a holding file queue that the IRS maintains of uncollected taxes.

In addition, the IRS has not established performance metrics to measure the effect that answering incoming calls has had on compliance business results, TIGTA pointed out. Capturing such data would allow ACS management to assess the impact of prioritizing call handling.

“IRS management should take steps to ensure that inventory routing and ACS resource capabilities are aligned with overall IRS tax administration priorities and their vision for the role of the ACS in the Collection enforcement strategy,” said TIGTA Inspector General J. Russell George in a statement.

TIGTA recommended that the IRS re-examine the ACS’s role in the collection workflow process, including inventory delivery to the ACS as well as case retention criteria, and align ACS resources accordingly. The IRS should also request a study to determine the impact of the policy change to not require Notice of Federal Tax Lien determinations on certain unpaid balances, according to TIGTA. The IRS should also establish performance metrics for ACS call handling data to measure the impact that answering taxpayer calls has on compliance business results, the report suggested.

IRS officials agreed with the recommendations and plan to take corrective actions. “We recognize the critical role ACS plays in our Collection program and, while it is our intent that ACS’s role not be diminished going forward, the current budget environment requires us to continually evaluate our programs and priorities in light of declining resources,” wrote Karen Schiller, commissioner of the IRS’s Wage & Investment Division, in response to the report. “To that end, the Wage & Investment and Small Business/Self-Employed Divisions are currently realigning our compliance programs. As part of this effort, we are creating a single Collection organization within the Small Business/Self-Employed Division. The executive lead of this new Collection organization will have end-to-end accountability for the Collection program and will be responsible for reducing redundancies in our Collection processes and improving taxpayer services while identifying emerging Collection issues. While we are continuing to develop the structure and the concept of operations for this new Collection organization, ACS will be a key component. And, as part of our work on the concept of operations for the new Collection organization, we will be reviewing our ACS program to determine whether the Collection responsibilities and authorities currently assigned to our ACS employees need to be enhanced. We are proud of ACS’s contributions to our Collection program and it is our intent that ACS’s role be enhanced going forward.”

In further response to the report, the IRS pointed out that budget cuts are havin g an impact on its ability to collect revenue and taxes. “This report dramatically illustrates the bottom-line impact that IRS budget reductions have on revenue collection and unpaid taxes,” the IRS said in a statement emailed to Accounting Today. “With the IRS funding down by $850 million since Fiscal 2010 and priority programs such as identity theft requiring more resources, staffing for Automated Collection System fell from 2,824 in 2010 to 1,730 in 2013. At the same time, the report notes that tax collection in this program fell by $400 million. This is a clear example that deep cuts to the IRS budget hurts tax collection and threatens the nation’s revenue collection.”

IRS Prodded to Fix Search and Seizure Process

Thursday, November 6th, 2014

Originally Published in ACCOUNTINGTODAY.COM

The Internal Revenue Service’s Criminal Investigation unit needs to improve its search and seizure warrant process to ensure that the evidence it seizes is properly secured and controlled, according to a new government report.

The report, from the Treasury Inspector General for Tax Administration, found that the IRS does not always follow all procedures to ensure that evidence it seizes is properly stored and controlled.

The report comes in the wake of a recent high-profile exposé in The New York Times of abuses in IRS Criminal Investigation’s civil asset forfeiture practices. The Times investigation identified cases in which the IRS had seized large sums of money from business people who had been depositing cash in their bank accounts in amounts under $10,000, prompting the banks to send suspicious activity reports to the IRS. In some cases, innocent business people had thought that keeping the deposits under $10,000 would make it easier for the banks to process the deposits without needing to do the extra paperwork that is required for reporting any deposits over $10,000. But the practice also fits a pattern known as “structuring” that could be a sign of illegal activity, prompting the IRS to seize the assets without needing to file criminal charges. The IRS now plans to change its policy in such cases.

The new TIGTA report pointed out that each IRS Criminal Investigation, or CI, special agent has the authority to perform all duties under all laws and regulations administered by the IRS, including the authority to conduct searches and issue search and seizure warrants.

For its report, TIGTA requested 152 closed search and/or seizure warrant cases from the IRS to review. However, CI management did not provide 91 of these cases. According to CI management, the cases contained grand jury information, were part of an ongoing investigation or had been sealed by the court.

For 70 of the cases, CI management could not provide any documentation to support the contention that the cases contained grand jury information, were part of an ongoing investigation or were sealed. Instead, TIGTA had to rely on CI management’s verbal statements. TIGTA noted this constitutes a significant “scope impairment” on its audit because it prevented TIGTA from fully evaluating CI’s processing of search and seizure warrants and from determining whether the IRS is following established legal requirements to prevent the abuse of taxpayer rights.

However, TIGTA was able to review the remaining 61 closed search and/or seizure warrant cases provided by the IRS and found that 14 cases were missing documentation of the Criminal Tax Counsel’s post-search warrant inventory review, were missing signed affidavits, and/or contained errors on their search warrants.

“Our report found that procedures were not always followed to ensure that seized evidence was properly stored and/or controlled,” said TIGTA Inspector General J. Russell George in a statement. “Without maintaining proper documentation and following evidence procedures, evidence may be inappropriately disclosed, lost, tampered with, or stolen.”

TIGTA recommended that the IRS ensure that the required documentation is maintained in the case files, including the Criminal Tax Counsel’s post-search warrant inventory reviews, as well as signed copies of the affidavits. TIGTA also recommended that the IRS reinforce the need for physical controls over seized evidence, study the physical space needs for evidence storage, and improve access controls over evidence.

In response to the report, the IRS agreed with all five recommendations and plans to take corrective actions on four of them. While the IRS said it agreed with the fifth recommendation, IRS officials stated that they do not have the capability to have a designated evidence custodian in each post of duty due to resource constraints. Instead, the IRS will issue a reminder to managers and special agents of the proper procedures for preserving the chain of custody.

“We take the findings in this report very seriously, and appreciate and agree with your recommendations for ensuring proper documentation and proper storage of all evidence,” wrote J. Donald Fort of IRS Criminal Investigation. “Reductions in our administrative resources have necessitated that special agents maintain the administrative files and evidence for their individual cases; however, we are in the process of working on an improved system of maintaining and storing documents such as search and seizure warrant files. In addition to implementing your recommendations, we intend to add additional procedures and measures of our own to further improve and strengthen our current procedures. First, the policies for proper case file documentation for search and seizure warrants and proper storage of the evidence will be reinforced to all Special Agents. Second, through management and national reviews, we will ensure that the policies and procedures for properly maintaining administrative documentation related to search and seizure warrants are being properly followed. In addition, we are actively working on securing sufficient space for all seized evidence. As you are aware, evidence can only be stored in Criminal Investigation (CI) space, which is restricted secured-access space that is accessible only by CI employees. CI is cognizant of, respects and is sensitive to the rights of taxpayers, when utilizing the authority to conduct searches and obtain search and seizure warrants in accordance with the Fourth Amendment to the United States Constitution. We stress to our special agents to consider all other investigative tools before deciding that a search warrant is the least intrusive means to acquire evidence for an investigation.”

The IRS further elaborated on the steps it is taking in a statement emailed to Accounting Today. “The IRS takes the findings of this report very seriously and notes that TIGTA had no findings of any improper search or seizure warrants served,” the IRS said. “While the IRS’s Criminal Investigation division currently emphasizes proper documentation and storage of evidence, it will pro-actively address the areas where improvements can be made. IRS agrees with all five TIGTA recommendations and is taking corrective action on four of them. The fifth recommendation, to have a designated evidence custodian at each post-of-duty, requires staffing and other resource costs that the current budget environment cannot support. However, CI case agents are the official evidence custodians for the evidence obtained in their investigations and as such maintain the chain of custody.”

“It is important to note that IRS Criminal Investigation facilities are themselves in secure space, which is not accessible by the general public or unauthorized persons,” the IRS pointed out. “We are working with Facility Management and Security Services to secure space to address CI space needs to increase storage capacity.”

The IRS also pointed to the impact of budget cuts on its enforcement efforts. “Since 2010, the IRS budget has been reduced nearly $850 million,” said the IRS. “At the same time, we have 13,000 fewer employees today than we did in 2010. Specifically for our enforcement efforts, we have experienced a decrease of nearly 10 percent in the number of Special Agents during the same time period, falling from 2,780 in 2010 to 2,549 in 2013.”

New 1023-EZ Form Makes Applying for 501(c)(3) Tax-Exempt Status Easier; Most Charities Qualify

Wednesday, July 2nd, 2014

From IRS Newswire, an IRS e-mail service

WASHINGTON — The Internal Revenue Service today introduced a new, shorter application form to help small charities apply for 501(c)(3) tax-exempt status more easily.

“This is a common-sense approach that will help reduce lengthy processing delays for small tax-exempt groups and ultimately larger organizations as well,” said IRS Commissioner John Koskinen. “The change cuts paperwork for these charitable groups and speeds application processing so they can focus on their important work.”

The new Form 1023-EZ, available today on IRS.gov, is three pages long, compared with the standard 26-page Form 1023. Most small organizations, including as many as 70 percent of all applicants, qualify to use the new streamlined form. Most organizations with gross receipts of $50,000 or less and assets of $250,000 or less are eligible.

“Previously, all of these groups went through the same lengthy application process — regardless of size,” Koskinen said. “It didn’t matter if you were a small soccer or gardening club or a major research organization. This process created needlessly long delays for groups, which didn’t help the groups, the taxpaying public or the IRS.”

The change will allow the IRS to speed the approval process for smaller groups and free up resources to review applications from larger, more complex organizations while reducing the application backlog. Currently, the IRS has more than 60,000 501(c)(3) applications in its backlog, with many of them pending for nine months.

Following feedback this spring from the tax community and those working with charitable groups, the IRS refined the 1023-EZ proposal for today’s announcement, including revising the $50,000 gross receipts threshold down from an earlier figure of $200,000.

“We believe that many small organizations will be able to complete this form without creating major compliance risks,” Koskinen said. “Rather than using large amounts of IRS resources up front reviewing complex applications during a lengthy process, we believe the streamlined form will allow us to devote more compliance activity on the back end to ensure groups are actually doing the charitable work they apply to do.”

The new EZ form must be filed online. The instructions include an eligibility checklist that organizations must complete before filing the form.

The Form 1023-EZ must be filed using pay.gov, and a $400 user fee is due at the time the form is submitted. Further details on the new Form 1023-EZ application process can be found in Revenue Procedure 2014-40, posted today on IRS.gov.

There are more than a million 501(c)(3) organizations recognized by the IRS.

IRS Workers Got $1.1 Million in Bonuses Despite Owing Back Taxes

Thursday, April 24th, 2014

originally posted on latimes.com on April 23, 2014

WASHINGTON — The IRS paid a total of about $1.1 million in bonuses over about two years to more than 1,100 employees who had been disciplined for failing to pay their own taxes, according to an inspector general’s report.

Those employees also received awards of more than 10,000 hours of extra time off and 69 faster-than-normal pay grade increases. They were among more than 2,800 IRS employees during that period who got performance awards within one year of disciplinary action, such as suspensions or written reprimands, the report found.

This is bad news for the Internal Revenue Service’s image, “which already has taken some very serious hits over the past couple of years,” said Pete Sepp, executive vice president of National Taxpayers Union.

The Treasury’s inspector general for tax administration noted that the performance awards did not violate the law.

But he said that “providing awards to employees who have been disciplined for failing to pay federal taxes appears to create a conflict with the IRS’ charge of ensuring the integrity of the system of tax administration.” The IRS’ contract with the National Treasury Employees Union says disciplinary action or investigations do not preclude an employee receiving a bonus or other performance award unless it would damage the integrity of the agency.

The inspector general’s report, released Tuesday, found that the more than two-thirds of IRS employees received performance awards in the 2011 and 2012 fiscal years.

The audit was done because new federal guidelines in 2011 required agencies to reduce spending on bonuses and other awards.

IRS spending on bonuses went down in 2012 compared to 2011.

In 2011, the IRS paid $91.6 million in bonuses and granted almost 520,000 hours of extra time off to a total of 70,500 of the agency’s approximately 104,400 employees, the report said. That amounted to awards for 67.5% of employees.

The following year, spending on cash bonuses dropped to $86.3 million and time off awards fell to about 490,000 hours. But the percentage of employees receiving performance awards increased. The agency gave awards to 67,870 of its 98,000 employees in 2012 — or 69.3%.

Throughout that time, many employees who had been the subject of disciplinary action received performance awards.

From Oct. 1, 2010, to the end of 2012, more than 2,800 employees who had been disciplined received more than $2.8 million in cash bonuses and more than 27,000 extra hours of time off, the report said.

Those included 1,146 employees with tax problems, the report said.

The IRS has been under fire since agency officials said last year that employees improperly targeted applications from conservative groups seeking tax-exempt status.

IRS employees disciplined for failing to pay back taxes should not be denied bonuses, but the money should be diverted to pay the penalty, said Sepp of the Taxpayers Union.

“If we’re assuming that the awards are given out on true merit … then say, ‘Sorry you owe $800 on a lien and you’ve exhausted all your appeals your reward is reduced accordingly,’ ” he said.

The inspector general, however, recommended the IRS consider a policy requiring managers to consider disciplinary actions, especially those for failure to pay taxes, before deciding on bonuses and other performance awards.

The agency issued a statement saying that it already was making changes to its bonus policy.

“The IRS takes seriously our unique role as the nation’s tax administrator. We strive to protect the integrity of the tax system, and we recognize the need for proper personnel policies,” the agency said.

The IRS said it had developed a policy linking conduct to performance awards for executives and senior-level employees.

Even without such a policy, during the previous four years “the IRS has not issued awards to any executives that were subject to a disciplinary action,” the agency said.

The IRS said it is considering a similar policy for the rest of the agency’s workforce, but that would have to be negotiated with the National Treasury Employees Union.

A spokesman for the union did not immediately respond to a request for comment.

Sepp said he had broader concerns about the large percentage of IRS employees receiving bonuses. “It just doesn’t’ seem in tune with the reality of any workforce, public or private, that more than half of them would get some kind of merit-based award,” he said.

IRS Doing More Audits of Large Partnerships

Tuesday, April 22nd, 2014

Originally Published in ACCOUNTINGTODAY.COM

As the number of large partnerships involving 100 or more direct partners continues to grow, the Internal Revenue Service is taking a closer look at them, according to a new government report.

The report, from the Government Accountability Office, acknowledged that there is no statutory, IRS or industry-accepted definition of a “large partnership.” However, the GAO used a combination of criteria for partner size and asset size used by IRS to define large partnerships as those that reported having 100 or more direct partners and $100 million or more in assets. Due to the growth of large partnerships and the limited publicly-available data on them, the GAO was asked to provide information on the number and characteristics of large partnerships and on those large partnership returns that have been subject to an IRS audit.

The GAO report found that the number of large partnerships increased from 720 in tax year 2002 to 2,226 in tax year 2011. Large partnerships also increased in terms of the average number of direct partners and average asset size.

The IRS had data on two categories of large partnership return audits. First, the number of completed field audits of large partnership returns increased from 11 in fiscal year 2007 to 31 in fiscal year 2013. Second, IRS counted audits closed through its campus function, which increased from 42 to 143 over the same period. “Unlike field audits, campus function audits generally do not entail a review of the books and records of the large partnership return but rather were opened to pass through large partnership return audit adjustments to the related partners’ returns,” the GAO noted.

The percentage of IRS audits that resulted in no change to the taxpayer’s return varied from fiscal year 2007 to 2013 but was 52 percent for campus function audits and 45 percent for field audits in fiscal year 2013, according to the GAO.

Senate Finance Committee Chairman Ron Wyden, D-Ore., took note of the findings in the report and said it could play a role in the tax reform efforts. “This is a real problem and serves as yet another example of why Congress needs to get serious about comprehensive, bipartisan tax reform,” he said in a statement. “This includes looking at the growth of large partnerships and working with the proper parties—including the IRS—to put in place a smart framework for auditing and governance. By rebuilding our tax fundamentals, rather than jumping from one fire drill to the next, Congress can better ensure that we have a fair code and enforcement system in place.”

However, the IRS may be constrained in its audit efforts by budget constraints. IRS commissioner John Koskinen said recently that the audit rate for individual tax returns last year was at its lowest rate since 2005, due to budget cuts in recent years, and he expects it to decline further this year (see IRS Audit Rate Hits New Low).

Wyden, along with Senators Carl Levin, D-Mich., and John McCain, R-Ariz., pointed out that the GAO’s preliminary report shows that the IRS is failing to audit 99 percent of the tax returns filed by large partnerships with assets exceeding $100 million.

“The GAO report shines a needed spotlight on how the IRS is auditing large partnerships, and the news isn’t good,” said Levin, chairman of the Senate Permanent Subcommittee on Investigations. “The GAO report shows that while the number of these massive partnerships with massive assets has exploded, IRS audits haven’t kept pace.”

According to GAO, “[b]etween tax years 2002 and 2011, the number of businesses organized as partnerships (with 100 or more partners and $100 million or more in assets) increased more than 200 percent, accounting for $2.3 trillion in assets and $68.9 billion in total net income by 2011.”

Yet in 2012, for example, IRS field audits reviewed the books and records of only 0.8 percent of large partnership returns, according to the preliminary report.

“Auditing less than 1 percent of large partnership tax returns means the IRS is failing to audit the big money,” said Levin in a statement. “It means over 99 percent of the hedge funds, private equity funds, master limited partnerships and publicly traded partnerships in this country, some of which earn tens of billions each year, are audit-free. It is obvious something is wrong with the IRS audit program for large partnerships. We literally cannot afford to allow these entities to go unaudited.”

The final GAO report is expected to provide additional qualitative analysis of why the IRS has performed so few audits of large partnerships. It is expected to focus in part on the unified partnership audit procedures in the Tax Equity and Fiscal Responsibility Act (TEFRA), which some view as responsible for making large partnership audits time-consuming and expensive.

“If Congressionally-imposed red tape or budget cuts are partly responsible for the poor audit numbers, we need to find that out and change it,” Levin added.

The IRS told the Associated Press that budget cuts in recent years have led to reductions in its enforcement staff.

“Since Fiscal 2010, the IRS budget has been reduced by nearly $900 million,” the IRS said in a statement. “The IRS has about 10,000 fewer employees than in 2010, affecting our work across our taxpayer service and enforcement categories. Last year, we had 3,100 fewer people in our key enforcement positions than in 2010.”

IRS Reiterates Warning of Pervasive Telephone Scam

Tuesday, April 15th, 2014

Sent In the IRS Newswire

WASHINGTON – As the 2014 filing season nears an end, the Internal Revenue Service today issued another strong warning for consumers to guard against sophisticated and aggressive phone scams targeting taxpayers, including recent immigrants, as reported incidents of this crime continue to rise nationwide. These scams won’t likely end with the filing season so the IRS urges everyone to remain on guard.

The IRS will always send taxpayers a written notification of any tax due via the U.S. mail. The IRS never asks for credit card, debit card or prepaid card information over the telephone. For more information or to report a scam, go to www.irs.gov and type “scam” in the search box.

People have reported a particularly aggressive phone scam in the last several months. Immigrants are frequently targeted. Potential victims are threatened with deportation, arrest, having their utilities shut off, or having their driver’s licenses revoked. Callers are frequently insulting or hostile – apparently to scare their potential victims.

Potential victims may be told they are entitled to big refunds, or that they owe money that must be paid immediately to the IRS. When unsuccessful the first time, sometimes phone scammers call back trying a new strategy.

Other characteristics of this scam include:

• Scammers use fake names and IRS badge numbers. They generally use common names and surnames to identify themselves.

• Scammers may be able to recite the last four digits of a victim’s Social Security number.

• Scammers spoof the IRS toll-free number on caller ID to make it appear that it’s the IRS calling.

• Scammers sometimes send bogus IRS emails to some victims to support their bogus calls.

• Victims hear background noise of other calls being conducted to mimic a call site.

• After threatening victims with jail time or driver’s license revocation, scammers hang up and others soon call back pretending to be from the local police or DMV, and the caller ID supports their claim.

If you get a phone call from someone claiming to be from the IRS, here’s what you should do:

• If you know you owe taxes or you think you might owe taxes, call the IRS at 1.800.829.1040. The IRS employees at that line can help you with a payment issue – if there really is such an issue.

• If you know you don’t owe taxes or have no reason to think that you owe any taxes (for example, you’ve never received a bill or the caller made some bogus threats as described above), then call and report the incident to the Treasury Inspector General for Tax Administration at 1.800.366.4484.

• If you’ve been targeted by this scam, you should also contact the Federal Trade Commission and use their “FTC Complaint Assistant” at FTC.gov. Please add “IRS Telephone Scam” to the comments of your complaint.

Taxpayers should be aware that there are other unrelated scams (such as a lottery sweepstakes) and solicitations (such as debt relief) that fraudulently claim to be from the IRS.

The IRS encourages taxpayers to be vigilant against phone and email scams that use the IRS as a lure. The IRS does not initiate contact with taxpayers by email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels. The IRS also does not ask for PINs, passwords or similar confidential access information for credit card, bank or other financial accounts. Recipients should not open any attachments or click on any links contained in the message. Instead, forward the e-mail to phishing@irs.gov.

More information on how to report phishing scams involving the IRS is available on the genuine IRS website, IRS.gov.

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