| « Back to News Archive |
| D’oh! Even Homer Simpson May Be At Risk of an IRS Random Audit! |
07-31-2007 |
In The Simpson’s Movie, one of this summer’s most eagerly anticipated films,
hapless Homer loses his job and puts Springfield at risk after he accidentally
releases toxic waste from the power plant. Such unlikely comedic premises are
the hallmark of the animated television series that has had us laughing at
life’s absurdities for nearly 20 years. But it was no laughing matter on Capitol
Hill last week when the Internal Revenue Service released a little toxic tax
news of its own: a proposed adjustment to its 2008 operating budget that would
nearly quadruple the funds earmarked to nail tax cheats. Much of this budget
bump would be aimed at the self-employed and small business ranks that the IRS
considers a den of deadbeats, scofflaws and tax dodgers. That finding, based on
a 2001 random audit of 45,000 tax returns, found plenty of room for
noncompliance among those who have no employer to withhold their taxes or report
their income separately to the IRS. As Homer Simpson would say, “D’oh!”
“Integrity Cap Adjustment” On July 17, IRS Deputy Commissioner Linda Stiff
appeared before the House Budget Committee to discuss a so-called “integrity cap
adjustment” of $406 million to the 2008 fiscal year budget. Stiff explained that
$115 million of the proposed adjustment would enable the IRS to maintain its
2007 base enforcement levels (adjusted for pay increases and inflation), while
$291 million would support its kinder, gentler random audit campaign to increase
voluntary taxpayer compliance, and thus reduce the estimated $290 billion ““tax
gap” between taxes owed and taxes paid each year. In her written statement,
Stiff said the extra money would help the IRS improve compliance by increasing
such “front-line” enforcement measures as: -Increased audits of high-risk tax
returns, collecting unpaid taxes listed on tax returns and investigating tax
evaders for possible criminal referral among small business and self-employed
taxpayers, -Increased examination coverage for large complex business returns,
foreign residents and smaller corporations with significant international
activity, and -Increased coverage in the automated under-reporter program by
minimizing revenue loss. According to Stiff, every dollar allocated to the
“integrity cap adjustment” would return $13 to $14 in previously lost revenue,
not including the improved collections that would result from the deterrent
effect that front-line enforcement may have on the taxpaying public.
Full benefits from the adjustment would be realized in three years. The
Random Audit Specter As Traders Accounting reported in this column last month,
the IRS plans to resume random audits this October, when it will select 13,000
of the expected 136 million 2006 income tax returns from various income
categories for a closer look. The random audit program, which came under fire
for privacy abuses and was subsequently abandoned under a Congressional cloud in
the 1990s, had been used to feed data about taxpayers – and tax dodgers – into
the government’s computer models, as well as help recoup some of the billions
lost to tax dodgers each year. To cushion the news and offset the expected
negative public reaction to reviving the random audit initiative, the IRS
promises a kinder, gentler random check this time around, mostly owing to
advances in computer technology and IRS data capabilities. In fact, according to
the IRS, you may never know that your tax return has been pulled to the curb.
Instead, if it is randomly selected, it could be electronically compared to the
IRS database file on you. Should supplemental information be needed, you may be
able to mail or email it to the taxman rather than having to appear in person.
Like it or loathe it, one thing is clear: The IRS random audit program is back –
and likely here to stay. The IRS’ latest request to increase fourfold the money
earmarked for its renewed enforcement campaign further underscores the taxman’s
resolve to use random audits strategically, both to collect lost revenue and
intimidate wayward filers into compliance. The best defense against the specter
of a random audit is to have a Traders Accounting tax professional at your side.
As traders and accountants, we understand the unique opportunities for tax
saving that accompanies trader tax status.
We’re skilled and knowledgeable in tax compliance, and experienced in
representing our trader clients in the event of an audit. In the Simpson’s world,
adversity is often hilarious. But in real life, tax trouble is no laughing
matter. Don’t just say “D’oh!” – contact Traders Accounting today to discuss the
tax-wise strategies that are right for you.
|
| |
| « Back to News Archive |
|
|
| • |
Comprehensive overview on the business of trading. |
| • |
Learn how to save $5,000 to $8,000 a year off trader tax. |
| • |
Breakthrough recommendations to legally lower your taxes. |
| • |
Fill out our short form to receive the free guide AND a 30 minute phone consultation! |
| • |
Get updates of our weekly Free Webinar Training classes. |
| • |
Automatically receive our weekly newsletter. (No Spam!) |
| • |
Learn if new Tax Court rulings affect you. |
| • |
Get the latest tax reduction strategies. |
|
|
|
|
 |
|
News Details
