IRS Collection Agents For Hire Collect Less Than 5% Of Assigned Accounts
We have railed against the
Internal Revenue Service using private tax collectors for a long time. At the very least, having tax data in non-IRS control is just bad policy especially since we read every so often about the agency's own employees being terminated for snooping around tax files belonging to celebrities or neighbors.
We hate the notion that a collection agent, regardless of how many documents are signed, can be given access to the same kind of information. We know that the information is given when taxes are allegedly owed (although dispute issues still remain unclear), but having federal tax information in the hands of private companies incentivized to collect revenue gives us a bad feeling.
Things are looking up, however, because even IRS Taxpayer Advocate Nina Olsen reported to Congress that the
private debt collectors are "falling far short" of the IRS' goals. We were worried about privacy issues, but we should have been worried about the program's management.
Olson reported to Congress that the private collection agencies only managed to collect $31 million of more than $180 million expected.
Worse, the program cost more than it took in. The IRS sold this program to legislators by claiming that the program would generate $1.5 billion to $2.2 billion over a 10 year period. Right now, the program is only $1.47 billion behind for the next 9 years.
To her credit, Olson continues to call for the program to end. To buttress her argument, she shared that the collection agents are not required to divulge the scripts their agents use when calling potential debtors, or as we like to call them, citizens. The IRS is reportedly blind to the scripts used (which none of us who have ever hired a call center would ever allow) and the program continues on in 2008.
Are you outraged yet? Good. Contact your local legislators. If you're not sure who to contact, here are links for the
House of Representatives and the
U.S. Senate. Tell your representatives that you won't tolerate gross financial mismanagement, lack of accountability from private contractors doing government work you pay for and taxpayer information released to non-government employees.
Labels: collections, IRS, taxes
Millions of Consumers Face Tax Filing Delay
If taxes are, along with death, certain, than consumers anticipating a refund are also almost certainly anxious to file as soon as possible each new year.
Tax refunds are never a good thing. Receiving a tax refund means that a consumer has essentially given the federal government an interest free loan. Worse, if the consumer is carrying debt and uses the refund to help pay that debt, accruing interest could have been avoided by having the proper amount withheld.
Yet another wrinkle occurs when consumers are subject to the Alternative Minimum Tax (AMT). As a result of tax code changes enacted in December, the rules covering who is affected by AMT and by how much have changed. IRS computers will need to be re-programmed according to the tax collection agency. As many as 4 million consumers could potentially be affected by these changes, with the biggest change being that their federal returns cannot be filed until February 11, 2008.
That date is being called a "target date" by the IRS and is obviously subject to change. Consumer Help Web will keep you posted on new announcements.
More
tax return delay information is available at the IRS site.
----
Important Note: This information is presented for news and information purposes. Consumer Help Web, Inc. is not a tax preparation entity, nor is this legal or financial advice. Consult your tax advisor or the Internal Revenue Service for more information on how this delay could impact you.Labels: IRS, taxes
IRS Private Tax Collectors To Stop Activities
We told you two years ago about the
IRS retaining private debt collectors for income tax. The House of Representatives, led by rising Dem star Chris Van Hollen of Maryland, voted by a wide margin to end the program.
Van Hollen used strong words when speaking against the program, which was controversial from its inception and suffered from higher than anticipated start up costs. Republicans claimed the program had not been given enough time to work while Democrats said the initial results precluded the program from continuing.
When we spoke with consumers, most were less concerned about a private agency collecting money owed the government, but expressed uneasiness over tax records, even if only the amount due, being shared with a non-governmental agency. As one taxpayer told us, "What if the person is appealing the tax bill or fighting it? The IRS already makes enough mistakes. I wouldn't want them telling collection agencies I was a deadbeat."
Labels: collections, IRS, taxes, Van Hollen
Six Months After California Settlement, Jackson Hewitt In Hot Water Again
Summertime may not be the season most people associate with taxes and tax preparers, but the IRS and Department of Justice are both reported to be examining Jackson Hewitt, the nation's #2 tax preparer.
Hewitt is not a target of the Justice Department's case, which centers on one of its larger franchisees. Meanwhile, the company disclosed that the IRS was examining Jackson Hewitt's corporate situation.
At the beginning of 2007,
we reported that California had reached a settlement with the company. Sometimes, it doesn't rain, but it pours. Hewitt, which has long chased H&R Block (a company with its own share of troubles) has over 6,000 locations in the nation, but about 80% of those are owned by franchisees.
The company continues to book solid, if unspectacular, growth and the stock's beta and pricing are as steady as one could hope for when looking at investments. Even the dividend keeps rising, but the company concedes in official filings that adverse publicity can impact revenue. Meanwhile, the results of the Justice Department's investigation may find that the consistency of preparation and offering of additional services for sale may vary widely between franchisees, creating a shopping issue for consumers.
As with all major chain preparers, consumers should thoroughly investigate the
branch they are visiting, not necessarily the headquarters company. That is good advice whether you are eating at McDonald's, sleeping in a Marriott hotel or having your taxes down by a household name. One simple call to your local (or state) consumer affairs agency should provide you with the information you need. Be sure to call Consumer Affairs instead of a business-sponsored organization like the BBB that has no regulatory authority and cannot compel a company to change its business practices or even respond to complaints.
Labels: Jackson Hewitt, taxes
IRS and Justice Dept Give Last Minute Tax Warnings
To curb the marketing of tax shelters to corporations and individuals, the Justice Department's Tax Division has helped the IRS to identify and pursue nearly every customer who engaged in certain abusive tax shelter transactions, while at the same time pursuing the professionals who designed, facilitated or accommodated the underlying tax shelter transactions.
Bringing Fraudulent Tax Return Preparation to a HaltThe Tax Division continues to bring civil injunction suits to stop tax preparers who habitually prepare bogus tax returns. In response to the government's efforts, courts across the country have barred tax preparers from preparing inaccurate returns.
Since January 2001, the Justice Department has sought and obtained injunctions against more than three dozen tax return preparers, including 18 since January 2006. It expects to obtain many more injunctions throughout the year. The United States recently has obtained injunctions that barred the following schemes by tax preparers:
*Filing tax returns that falsely report "zero income";
*Claiming that only income from a foreign source is taxable, using a spurious interpretation of Section 861 of the Internal Revenue Code; *Claiming personal living expenses as business expenses;
*Preparing amended tax returns to claim tax refunds without customers' knowledge or consent; and
*Asserting that casino gaming proceeds paid to Native Americans are exempt from federal income tax.
The Department of Justice also has obtained injunctions against employers who fail to withhold, account for, and pay over employment and withholding taxes and against return preparers who prepare related false returns.
Stopping Tax EvasionDuring fiscal year 2006, the Justice Department's Tax Division authorized prosecutions of nearly 1,200 defendants for tax crimes, an increase of more than 34 percent over the number authorized for prosecution in 2001. The Tax Division's criminal enforcement priorities include investigating schemes that involve:
*Using trusts or other entities to conceal control over income and assets;
*Shifting assets and income to hidden offshore accounts;
*Making false statements to the IRS in order to claim tax refunds;
*Selling and promoting fraudulent tax avoidance schemes;
*Using frivolous justifications for not filing truthful tax returns;
*Failing to withhold, report and pay payroll and income taxes;
*Failing to report income on individual and corporate returns; and
*Failing to file tax returns.
*Stopping the Promotion of Tax Fraud Schemes
Since April 2006, the Justice Department and the IRS have vigorously pursued the promoters of tax fraud schemes to stop their activity and to warn would-be promoters that promoting tax fraud schemes leads nowhere but to a federal court injunction or to a long stay in jail.
Since January 2001, the Justice Department has sought and obtained injunctions against nearly 200 promoters of tax fraud schemes, including 66 since January 2006. These injunctions have stopped promoters from selling tax evasion schemes on the Internet, at seminars, or though other means. The tax-scam promoters the government has sought to enjoin have cost the U.S. Treasury an estimated $2.5 billion, and have had an estimated 500,000 customers. Among the government's results in this area are:
In May 2006, David Carroll Stephenson was sentenced to eight years in prison in connection with his promotion of a tax evasion scheme using "pure equity trust" organizations.
In June 2006, a federal judge sentenced five defendants, Dennis Poseley (seven years), David Trepas (five years), Patricia Ensign (18 months), Rachel McElhinney (16 months), and Keith Priest (18 months), to prison terms for their respective roles in promoting a tax evasion scheme that used offshore trusts and bank accounts.
On June 22, 2006, District Judge Elizabeth Kovachevich issued an injunction permanently barring Douglas Rosile, a former certified public accountant whose clients included Wesley Snipes, from preparing federal income tax returns for others and from promoting a frivolous tax argument based on Section 861 of the Internal Revenue Code. Among the documents the government filed in court was a return submitted to the IRS on behalf of Snipes claiming a bogus $7.3 million tax refund.
In November 2006, a federal judge sentenced Milton H. Baxley II to 18 months in prison and fined him $10,000 for contempt of court. On August 9, a jury convicted Baxley on two counts of violating an injunction order barring him from promoting a tax fraud scheme. In December 2006, a federal judge sentenced Thomas Miller to nearly four years in prison for conspiring to defraud the United States in connection with a "pure trust" tax fraud scheme. Miller operated Freedom Education Center, a business in California that sold anti-tax literature and helped people create bogus trusts.
Curbing High-End Tax SheltersDuring the past year, the Justice Department and the IRS have continued their vigorous enforcement efforts against the promoters and facilitators of abusive tax shelters. Abusive shelters for large corporations and high-income individuals have cost the U.S. Treasury billions annually, according to Treasury Department estimates. The Tax Division also has had great success in federal court defending the U.S. Treasury against tax shelter-related claims of large companies and individual investors. The Tax Division is currently litigating approximately 86 tax shelter cases or groups of cases, including 47 separate cases involving the Son of BOSS tax shelter. Among the successes during the past year in this area are the following:
In December 2006, Utah businessman Chandler S. Moisen pleaded guilty to conspiracy and wire fraud in connection with a criminal probe of tax shelters promoted by a group of KPMG, LLP executives. In January 2007, Steven Michael Acosta, a former KPMG manager, pleaded guilty to four felony tax charges in connection with his involvement in KPMG's promotion of tax shelter transactions.
The Supreme Court let stand the decision of the U.S. Court of Appeals for the 6th Circuit that the COLI (corporate-owned life insurance) program The Dow Chemical Company used to claim more than $33 million of tax deductions was an economic sham.
The Supreme Court also let stand the decision of the U.S. Court of Appeals for the Federal Circuit that the IRS was right to disallow the $375 million loss Coltec Industries claimed from its "contingent liability" tax shelter.
The U.S. Court of Appeals for the 2nd Circuit held that the IRS properly disallowed the losses General Electric Capital Corporation claimed from its participation in an equipment leasing tax shelter, resulting in $62 million in additional income taxes. The U.S. District Court for the Middle District of North Carolina granted summary judgment for the United States in the first Lease In - Lease Out (LILO) tax shelter to go to court, BB&T Corporation v. United States.
The U.S. Court of Appeals for the Federal Circuit ruled for the United States on an issue raised by tax shelter participants in several tax shelter refund suits in A D Global Fund, LLC v. United States. The court ruled that the statute of limitations on the return of a person who participates in a tax shelter partnership does not expire at least before the statute of limitations on the partnership's return does.
Coordinated Civil and Criminal ProceedingsThe government brings both its civil and its criminal tools to bear in the fight against tax fraud. An ongoing tax scam causes continuing harm to the federal Treasury and it leaves participants owing taxes, interest, and often, penalties. The government does not wait until a criminal case has been developed to take action to stop the scam. Rather, the Justice Department brings civil injunction suits to stop both the promotion of tax scams and the preparation of false or fraudulent returns. Additionally, in appropriate cases, the Justice Department brings criminal charges against the promoters, preparers, and scam participants to punish them for their unlawful conduct.
Labels: IRS, Justice Department, taxes
