IRS Tries to Pre-Verify Tax Refunds

[joanmcq]

This would be wonderful if Congress would stand for it. But they won't. They want money rushed into the economy as fast as it could get there. As you well know, many taxpayers (the number has been said to be 47%) don't even have income taxes at all.

In other words, if it weren't for refundable credits there would be no refund at all for these folks. In fact, half of the people who get these refundable credits might not even file. That adds even more problems for the IRS.

As perfunctorily appealing as this concept of "two refunds" might be, there is more downside according to the way politicians think. In too many cases, instead of "two refunds" there might be "no refunds."

This is already done when earlier years are under audit, so the idea isn't a stretch at all. I had a case where EITC, HOH, & dependency were being examined for prior years, and for the current tax year, the client got back as a refund what he would have received without these three items. The rest was suspended until the audit was resolved.

[David1980]

This would be wonderful if Congress would stand for it. But they won't. They want money rushed into the economy as fast as it could get there. As you well know, many taxpayers (the number has been said to be 47%) don't even have income taxes at all.

In other words, if it weren't for refundable credits there would be no refund at all for these folks. In fact, half of the people who get these refundable credits might not even file. That adds even more problems for the IRS.

I don't believe the 47% figure is that they have no tax withheld, but rather they end up paying no federal income tax. They still pay social security and Medicare taxes as well as state and local taxes. Most probably still have federal income tax withheld and could file for a refund of that even if they do not qualify for refundable tax credits.

[taxxcpa]

Withholding at time of payment

One way that would work would be to withhold at the top rate then let everyone file for a refund if they were in a lower bracket. The 1099s could be due before tax season started.

The State of Louisiana uses that method for casino winnings. They withhold at 6%, but non-residents usually only have enough LA income to owe 2%.

Of course peiple in the zero percent bracket might not like that method

[taxea]

Both free and self filing should be eliminated. They should require taxpayers to use professionals.

[Bees Knees]

Both free and self filing should be eliminated. They should require taxpayers to use professionals.

So would professionals be exempt from having to use a professional? Or could professionals self file their own returns?

Speaking of professionals, I just got done reading a court case where an EA told his client he could amortize the value of his life over 15 years. The EA lost his license and is now serving time for tax fraud. The client tried to have the accuracy related penalty abated for following the advice of a professional. The Court said no. Relying on a professional is not in itself enough to avoid the penalty.

[David1980]

So would professionals be exempt from having to use a professional? Or could professionals self file their own returns?

Speaking of professionals, I just got done reading a court case where an EA told his client he could amortize the value of his life over 15 years. The EA lost his license and is now serving time for tax fraud. The client tried to have the accuracy related penalty abated for following the advice of a professional. The Court said no. Relying on a professional is not in itself enough to avoid the penalty.

How did the taxpayer determine the value of his life?

[JohnH]

He probably used Fair Market Value.
That would be the average between what he thinks he's worth and what his wife thinks he's worth.

[Bees Knees]

How did the taxpayer determine the value of his life?

He estimated what his services were worth - how much someone should pay him if he worked for someone else, then amortized that amount over 15 years and took the deductions against his LLC income.

[WhiteOleander]

He estimated what his services were worth - how much someone should pay him if he worked for someone else, then amortized that amount over 15 years and took the deductions against his LLC income.

You're makin' this up!!!!!!!!!!

[Bees Knees]

You're makin' this up!!!!!!!!!!

Here is the link:

http://www.ustaxcourt.gov/InOpHistoric/MillsMemo.TCM.WPD.pdf