WASHINGTON — The IRS has temporarily stopped collecting penalties from some small businesses that have been hit with big fines for not disclosing the use of questionable tax shelters.
The fines, which can reach $300,000 a year, were an unintended consequence of a 2004 law aimed at big corporations that use the shelters to avoid taxes. Lawmakers asked the Internal Revenue Service last month to suspend collections while they work to change the law.
The IRS agreed to suspend collections through September on cases in which businesses gained less than $200,000 a year from the tax shelters, IRS Commissioner Doug Shulman said in a letter to lawmakers released Tuesday.
Shulman said the penalties, in some cases, "are way out of line with penalties for other similar cases of noncompliance.”
"Many of the transactions now under examination involve tax benefits that are minor when compared to the statutory penalty amounts,” Shulman said in the letter.
What the law does
The existing law imposes reporting requirements on businesses and individuals who use tax shelters that the IRS has identified as abusive. The goal is to red flag these "listed transactions” so IRS agents can more closely examine them.
The penalties for failing to disclose the transactions on tax forms are $100,000 a year for individuals and $200,000 a year for businesses. Taxpayers who use the tax shelters for both individual and business purposes face penalties of $300,000 a year.
The penalties cannot be appealed, National Taxpayer Advocate Nina Olson said in her 2008 annual report. Olson, an independent watchdog within the IRS, cited a case in which a small business owner saved $45,000 over three years from a tax shelter and was fined $900,000 by the IRS.
Lawmakers from both parties said they will work to change the law to make the penalties more in line with the offenses.
by the associated press
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Showing posts with label IRS. Show all posts
Showing posts with label IRS. Show all posts
Wednesday, July 8, 2009
Friday, June 5, 2009
IRS errors
WASHINGTON — The Internal Revenue Service wants to start regulating paid tax preparers used by more than half the nation’s taxpayers in an effort to reduce fraud and errors.
New rules could require education and training as well as licensing for people who get paid to prepare returns, IRS Commissioner Doug Shulman said Thursday.
"In most states, anyone can charge to prepare tax returns regardless of training, education, experience, skill, licensing or registration,” Shulman told reporters. "Virtually anyone can set up a tax return business.”
Shulman said most tax preparers provide quality work, but some are poorly trained or unscrupulous.
The IRS, however, can’t say how many fall into either group because the agency doesn’t track how many complaints are filed against tax preparers or their outcomes, according to a report issued in February by the Treasury Inspector General for Tax Administration.
The problem’s scope
The IRS doesn’t even know how many individuals or companies prepare returns for taxpayers, Shulman acknowledged.
But when the IRS detects a fraudulent return, it’s the taxpayer — not the tax preparer — who must pay the additional taxes, interest and any penalties, according to the IRS.
Shulman said he will seek suggestions for new rules from the industry and consumer groups before making his proposals to President Barack Obama and Treasury Secretary Timothy Geithner by the end of the year. The proposals could include new regulations or laws.
"I want to enter this with an open mind,” Shulman said. "For me, everything’s on the table.”
Shulman said new rules would give him better leverage to make sure tax preparers act ethically, not only to improve enforcement, but to ensure taxpayers get quality help in preparing their returns.
"When people pay good money, they should not get bad advice,” he said.
About 60 percent of taxpayers pay someone to prepare their returns, Shulman said. An additional 20 percent or so buy computer software. However, tax preparers don’t have to be licensed, unless they represent clients in proceedings before the Internal Revenue Service.
Industry giant H&R Block and several members of Congress welcomed Shulman’s initiative.
"We believe that all tax assistance providers should be trained and licensed as necessary,” said Richard C. Breeden, chairman of H&R Block.
by the associated press
New rules could require education and training as well as licensing for people who get paid to prepare returns, IRS Commissioner Doug Shulman said Thursday.
"In most states, anyone can charge to prepare tax returns regardless of training, education, experience, skill, licensing or registration,” Shulman told reporters. "Virtually anyone can set up a tax return business.”
Shulman said most tax preparers provide quality work, but some are poorly trained or unscrupulous.
The IRS, however, can’t say how many fall into either group because the agency doesn’t track how many complaints are filed against tax preparers or their outcomes, according to a report issued in February by the Treasury Inspector General for Tax Administration.
The problem’s scope
The IRS doesn’t even know how many individuals or companies prepare returns for taxpayers, Shulman acknowledged.
But when the IRS detects a fraudulent return, it’s the taxpayer — not the tax preparer — who must pay the additional taxes, interest and any penalties, according to the IRS.
Shulman said he will seek suggestions for new rules from the industry and consumer groups before making his proposals to President Barack Obama and Treasury Secretary Timothy Geithner by the end of the year. The proposals could include new regulations or laws.
"I want to enter this with an open mind,” Shulman said. "For me, everything’s on the table.”
Shulman said new rules would give him better leverage to make sure tax preparers act ethically, not only to improve enforcement, but to ensure taxpayers get quality help in preparing their returns.
"When people pay good money, they should not get bad advice,” he said.
About 60 percent of taxpayers pay someone to prepare their returns, Shulman said. An additional 20 percent or so buy computer software. However, tax preparers don’t have to be licensed, unless they represent clients in proceedings before the Internal Revenue Service.
Industry giant H&R Block and several members of Congress welcomed Shulman’s initiative.
"We believe that all tax assistance providers should be trained and licensed as necessary,” said Richard C. Breeden, chairman of H&R Block.
by the associated press
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