IRS Tries to Pre-Verify Tax Refunds

[Bees Knees]

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

Here is the link:

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

[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]

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.

[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.

[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?

[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.

[taxea]

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

[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

[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.

[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.

[veritas]

I would take it a step farther.

Refundable credits should not even be called "refunds" after tax liability is satisfied. They are not. They are grants from the government. Refunds should be paid timely when the taxpayer's own withholding/est payments/excess soc sec, etc are involved. Otherwise, when that threshold is reached, additional "refundable" credits should be pre-screened before sending out, especially EITC. IRS computers could be configured to handle this without a lot of difficulty.

After the taxes are prepared they should go down to the welfare agency and apply for the refundable credits. If the case worker makes a mistake they get a 500 fine and if the in case of gross negligence the penalty could be $5,000. If multiple infractions loss of the case workers livelyhood and possible jail time.

In order to prepare the case workers they can all fly to a resort area for "training". They can consult with the IRS for the finer points in celebrity sketching, line dancing and science fiction parody short films and most importantly the nuances of taking the 5th when asked to appear before those pesky congressional panels.

[JohnH]

They could also get money "back" into the economy faster by lowering tax rates.
By not "removing" it in the first place, they would eliminate all time delay.

But we all know THAT isn't going to happen since it keeps it in the hands of the wrong people.

[Golden Rocket]

Politically Unworkable

This makes sense to me. Do two payments in the case of refundable credits. One for the actual "refund" and one for the free government money.

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."

[Edward]

The only way to repair all the fraud and erroneous refunds would be to ELIMINATE the free filiing - look at the millions free filing - and the millions of errors that are being made by these filers - I know many of my previous clients are using this method (cause they have called me for tax advice - but I have not provided them with such). Some of these returns are complicated and I know they don't have the tax knowledge to prepare such returns. Too, many preparers are advertising they DO TAXES and too, are going the Free File route for the client and leaving no evidence as to who did the return as they are not retaining a file copy, nor reporting any of the income collected. I recall reading somewhere years ago that this free filing could result in problems later on. Admitedly I lost alot of clients thru this program,and IRS is going to have many, many more problems also.

[David1980]

Refundable credits should not even be called "refunds" after tax liability is satisfied. They are not. They are grants from the government. Refunds should be paid timely when the taxpayer's own withholding/est payments/excess soc sec, etc are involved. Otherwise, when that threshold is reached, additional "refundable" credits should be pre-screened before sending out, especially EITC. IRS computers could be configured to handle this without a lot of difficulty.

This makes sense to me. Do two payments in the case of refundable credits. One for the actual "refund" and one for the free government money. Preferably with the refund of withholding and so forth verified (query a database to see if the withholding actually exists for the SSN) or fraud would just shift more to claiming non-existent withholding instead of refundable credits. Probably congress would need to give IRS authority to do it. And the government doesn't really have a proven track record with implementing technology (seems I keep seeing news articles time to time on a VA claims system) so ... it won't happen. But it should.