The House of Representatives approved multiple tax administration bills under the suspension of the rules process, a fast-track procedure that allows for limited debate, no amendments, and passage upon an affirmative two-thirds vote. These measures, which attracted overwhelming bipartisan support, include the following…
The End Tax Penalties on American Hostages Act (H.R. 9496)
Introduced by Reps. Claudia Tenney (R-N.Y.), Don Beyer (D-Va.) and Dina Titus (D-Nev.) – it would extend IRS due dates for hostages and persons wrongfully detained by disregarding a person’s time in detention when determining deadlines, interest, and penalties for that taxpayer.
The Tax Relief for Fraud Victims Act (H.R. 9500)
Introduced by Reps. Max Miller (R-Ohio) and Tom Suozzi (D-N.Y.) – it would repeal limits on deductions for personal casualty losses and allow increased taxpayer relief with respect to theft losses involving fraud, deceit or misrepresentation. It would also add an exception to the additional tax on early retirement plan distributions for distributions arising from theft losses involving fraud, deceit or misrepresentation.
The Protecting Taxpayers from Ghost Preparers Act (H.R. 9499)
Introduced by Rep. Nicole Malliotakis (R-N.Y.) – it would help shield taxpayers from the consequences of so-called ghost tax preparers who file income tax returns that appear as if the taxpayer prepared them, unbeknownst to the taxpayer. The bill would crack down on these illegal operators and clarify the tax law so that taxpayers deceived by ghost preparers aren’t saddled with assessments, taxes, or penalties indefinitely.
These House-passed measures now move to the Senate, where lawmakers have already assembled a broader bipartisan tax administration package.
Let me leave you with this…
I’m writing about these because there’s a high chance that they’ll be passed into law. They all received strong bi-partisan support in the House and the Senate is already trying to pass its own version of these measures.
But I especially like the law about Ghost Preparers.
The IRS began allowing e-filed income tax returns at a national level back in 1990. It took a few years, but criminals figured out how to steal money using e-filing a few years after that.
In order for someone else to steal your identity, e-file a return on your behalf, and collect a bogue refund, they only need the correct spelling of your name and your Social Security Number. That’s it.
Your filing status is irrelevant because they change all the time. People get married or divorced without giving the Service any notice. Addresses also change as does the number of dependents that are claimed.
Back in the early 90’s the Service was trying to get more people to electronically file, so they sped up the refund process. For the first time in history you could get your tax refund deposited into your bank account in a couple of weeks!
Oh my goodness, how fantastic is that? But the IRS didn’t implement any safeguards for that process and just sent money wherever it was instructed.
That year, almost 2,000 phony returns were filed and refunds were sent to the same apartment address in Moscow. I’m not talking about Moscow, Idaho, but rather the one in the Soviet Union.
That netted the criminal or criminal organization behind this scam a little over $15M. And they were never found… just gone like a thief in the night.
The Taxpayer Inspector General for Tax Administration (TIGTA) used to release figures on the amount of tax fraud at the major IRS Service Centers. They haven’t released the numbers for several years because they determined that it had become a disincentive for taxpayers to electronically file.
But the last year the numbers were released, TIGTA told us that 4.7% of all of the returns filed at the Kansas City Service Center were fraudulent. Just in case you’re curious, tens of millions of returns are processed there annually.
I can’t even imagine how much money the Service lost by sending out all those refunds. And what happens when you become a victim of IRS Identity Theft?
We need to fill out a stack of paperwork that’s the size of the Old Testament and send it to the Service. And how long does it take the IRS to process it, verify your identity, and forward you a refund?
Almost two years.
There’s another cute little factoid that everyone should know. Over 90% of the victims of IRS Identity Theft e-file their returns.
Not only does e-filing increase the chance you’ll be audited because choosing audit victims is an electronic process, but it also increases the chance your identity will be cloned. Think about it.
Sometimes the old ways are better. It might be time to invest $0.78 in a postage stamp.
At least, once they pass this new bill, Identity Theft Victims won’t have to ask the Service to nullify the penalties after a two year wait.
As always, if you’re having problems with your accounting and tax work, we’d love to help. Please contact us today…
We’re all going to get through this. Let’s get through it together..
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President
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