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  • Tales of the Red Tape #23: Internal Revenue Scam

    The straight text of the U.S. tax code exceeds 5,000 pages. Throw in the annotations necessary to actually decipher the thing and it swells beyond 72,000 pages. (Instructions for filing the “EZ” form run 41 pages.) All of which will yield a whopping $2.6 trillion in federal tax receipts (estimated) for 2012.

    So, naturally, the Internal Revenue Service (IRS) has concocted new regulations that make the preparation of tax returns even more difficult and costly.

    The new rules require tax preparers who aren’t lawyers or Certified Public Accountants to obtain a “Preparer Tax Identification Number” (PTIN) every year (at an aggregate annual cost of at least $60 million), pass a “competency” exam ($116 million, all told), submit to a “suitability” check by the IRS, and accumulate at least 15 hours of continuing education credits each year (up to $200 per course).

    The big heads at the IRS evidently believe that the 1 million or so unregulated (gasp!) tax preparers are responsible for the dismal state of our tax system. As opposed to, say, 72,000 pages of contorted tax rules that no one understands—including IRS agents.

    All told, the agency estimates that new record-keeping costs alone will top $48.5 million a year. (Alas, the vast majority of the individuals subject to the new rules either operate or are employed by small businesses.)

    The IRS contends that the costs are justified by the “special benefit” conferred upon tax preparers of being allowed by the government to receive compensation for preparing federal tax returns. (In other words, tax preparers ought to be downright grateful about paying the government for the right to ply the very trade they practiced before the IRS turned it into a “special benefit.”)

    To handle all the paperwork associated with the new rules, the government has created a Return Preparer Office “dedicated solely…to best serve tax return preparers and taxpayers by providing efficiency and expertise in this area.”

    (Oops. The efficient and expert employees of said office have already issued PTINs to 331 imprisoned felons—43 of whom are serving life sentences, according to a recent report by the Treasury Inspector General for Tax Administration.)

    May we suggest that the IRS worry first about the competency of its own? For example:

    • The agency was wrong in 17 percent of its disputes with taxpayers over supposed math errors in tax returns, and it failed in 40 percent of the cases to resolve the disputes in a timely fashion, according to the Treasury Inspector General for Tax Administration (TIGTA).
    • The Inspector General, in a small sampling, found errors in 61 percent of the returns prepared by volunteers recruited by the IRS to assist low-income taxpayers, the elderly, and those with language barriers.
    • Only 19 percent of written inquiries from taxpayers received timely and accurate responses from the IRS, according to the TIGTA. Moreover, out of 350,000 calls to a toll-free phone line for hearing- and speech-impaired taxpayers, the agency responded to 339.
    • Under the so-called Cash for Clunkers program, the agency awarded $151 million in undeserved tax deductions to 4,257 individuals, according to an audit. Recipients included 439 imprisoned felons, 16 dead people, and 18 children.

    So what we have, then, is a new regulatory scheme that won’t dent the real problem—our incomprehensible tax code—but will make it more costly for taxpayers to hire the help they need to comply.

    Posted in Featured [slideshow_deploy]

    7 Responses to Tales of the Red Tape #23: Internal Revenue Scam

    1. Prfssrpah says:

      Of course it is never their fault–always yours.

      Political rule of Entropy: Political systems start simple evolve into complicated than overly complex before becoming unworkable and finally ending in systems failure.

      Remember the first income tax 100 years ago was basically one sentence long and one small percentage

    2. Bobbie says:

      someone suggested that businesses should stop being the tax collectors! they could stop tomorrow…
      and all home owners obligated to pay property tax should take it out of escrow and stop paying it…

      What "people" has the president been elected to "serve" that he would only serve them paid by America's tax dollars and not America as a whole?

    3. Bosco Richardson says:

      Don't forget to recapture your COBRA assistance payments! (that was a classic mess.)

    4. Robert E, McKenzie says:

      The author misses the point we had over 600,000 tax preparers in this country who had never been tested to prove they had the skills to prepare returns. A convicted felon could open a tax preparation office upon release from prison.. Every state requires barbers to have a license yet only 2 states regulated tax preparers. You can get over a bad haircut in 2 weeks. It can take years to resolve a bad tax return. As a tax attorney I have had taxpayers come under criminal investigation by the IRS as a result of errors by their preparer. If we license other financial professionals like stockbrokers it is time to regulate tax preparers who receive our most confidential financial information. No one should seek tax assistance from one who has failed to prove a level of competancy and intellectual comapcity to understand our tax laws.
      Testing and background checks are being implemented to protect the public from taxpreparer fraud. For those who agree with the author of this article one can only hope that they do not become the victim of an unqualified preparer before the new registration rules are fully implemented..

    5. How about a Flat Tax like 15% and no loopholes,exemptions etc.(47% of workers pay no federal Taxes at present ) the super wealthy like bill gates,George Soros ,Jeffery Immelt of GE are not taxed on Incomes because re-invest their earnings in their companies and/or into tax exempt non-profit Foundations,Hedge
      Funds which are taxed at a lower rate . Taxpayers foot the bill for "green energy scams like CHEVY Volt
      not in demand but Subsidized as an incentive for people to buy a $41,000 car which BTW were to be built
      in China in stead of buying Hyundai Sonata or Elantra 41MPG costing less than half as much as the Volt and not requiring US Taxpayers mandated contributions. Toyota Pruis also being built in US factories by
      US workers and not getting tax subsidies, while GM has out sourced to Mexico. "Earned Income credit"for
      persons not paying a penny in Income taxes ?! The Inmates are running the Asylum(District of Corruption
      has expanded its historic base of operations from Chicago to the Washington,D.C.branch .Both parties
      SYSTEMS. DEMOCRATIC SOCIALISM does not allow a prosperous middle class and the Epic Failures of the European countries who are bankrupt but have the "Entitled masses rioting in the streets"and the EURO currency going bust and our dollar destined to lose its Reserved World Currency Status .US ranked
      in 10th place for "Economic Freedom".and we continue losing personal liberties ,trading freedom for the
      false promise of "Security".Why the push to get personnel for FEMA Camps?!Now that American citizens
      can be picked up and "Detained indefinitely without due process"now all that is needed is manufactured
      CRISIS …HAARP created weather disasters and /or "Domestic ECO terrorists"publicy stating their desire to
      Collapse the system. 45%unemployment of minority youth("Useful idiots"ready willing & able to cause chaos in the streets and give the Govt.Elite the excuse to declare Martial law) Mainstream Media("Ministry of Truth"as seen in movie" 1984 "continues the Lies to try to fool "WE the People"who have elected these
      so-called public servants to be our representatives and defend our "Constitutional Rights" but who ignore
      the voters calls & letters and cater to the lobbyists and unions who are bankrolling their elections! Asking
      for photo ID to buy an airplane ticket or alcohol or cigarettes is not considered Racist but requiring photo
      ID and valid voter ID cards is discriminatory (against illegals and felons and dead who evidently were able
      to vote in South Carolina's primary maybe).Both Parties have been controlled by the Global Elite "Banksters"and Bloodlines who have been controlling and/or eliminating the masses since the days of
      Babylon !

    6. Realistic says:

      The reasons why smart people do not buy Electric or Hybrid cars are: Batteries are expensive, short lived, efficiency isn’t 100 % and the electricity is not free. Going electric you won’t decrease Air Pollution because 50 % of the electricity is produced by burning COAL. By the way a Jetta Diesel, TDI for $23000 makes 40MPG.

    7. Guest says:

      The reasons why smart people do not buy Electric or Hybrid cars are: Batteries are expensive, short lived, efficiency isn’t 100 % and the electricity is not free. Going electric you won’t decrease Air Pollution because, 50 % of the electricity is produced by burning COAL. By the way a Jetta Diesel, TDI for $23000 makes 40MPG. With a full tank of Chevy Volt, driving non-stop, you make 37MPG, plus $3 or more, the price of electricity you charged 16.0-kW-hr lithium-ion, the hefty $10000 of the 750-pound battery pack.
      Using Chevy Volt, in the Electric Mode Only, Charging and Discharging the battery pack every day, is going to cost you $1000 in electricity, plus $3000 in the battery amortization, with a TOTAL of $4000 per year.

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