Is It Time To Change Our Tax System Yet?

Recently, the U.S. Treasury Department’s Inspector General for Tax Administration issued an interim report accessing the IRS’s performance during this year’s tax season. According to tax attorneys reviewing the report, the Inspector General found that taxpayers experienced long waits on the telephones to get answers to their questions. He also noted the accuracy rate of the agency’s sponsored volunteers for the Income Tax Assistance and Tax Counseling for the Elderly was fair, but the IRS’s quality controls were not sufficient to adequately prevent fraudulent refunds. Overall, the Inspector General appears to have given the IRS a thumbs-up.

A spokesperson for the IRS, Ms. Michelle Eldridge, said “the IRS has seen a successful filing season for millions of taxpayers despite significant challenges, including late law changes that delayed return processing.” Ms. Eldridge went on to say “through early April, the IRS has processed nearly 96 million returns, and issued almost 81 million refunds totaling $234 billion.”

Most tax lawyers and other IRS observers agree the agency had a rough filing season. While the IRS did identify 335,341 tax returns making fraudulent claims as of early March of this year, and it did have a 97% capture rate to prevent fraudulent returns, there were a host of problematic issues which plagued the agency this year and demonstrated how truly complex and confusing our tax system really has become.

Tax attorneys point to the auditors finding significant problems processing the first-time homebuyer credit. The IRS had to deal with two credits ($8,000 and $6,500) this year and thousands of taxpayers got caught up in delays and confusion over the issue. The problem was so bad, tax lawyers say the Inspector General concluded the lack of adequate controls may have caused the IRS to pay-out more than $513 million dollars to taxpayers who did not qualify for the homebuyer credits.

But the homebuyer credit problems weren’t all that plagued the IRS this year. Tax attorneys note the agency had to deal with an unusually high number of motor vehicle deductions (remember the American Recovery and Reinvestment Act of 2009 which allowed people to take deductions for state and local sales and excise taxes paid on qualified new cars between a specified date range?) Specifically, the IRS handled nearly 220,000 claims totaling $315 million dollars pertaining to that little deduction. Then, of course, tax attorneys remind us the IRS also was dealing with confusion over the non-business energy property credit; errors in giving tax breaks when adopting a child; continuing customer service issues with average waits of 62 minutes; and the list goes on.

The Inspector General’s report can’t help but leave one marveling at the intricate, complex, confusing mess which has become our tax system. The billions of dollars changing hands with nobody really sure if their entitled to keep it or obligated to give it back. A confusing and complicate web of rules and regulations which eat up and spit out taxpayers who for whatever reason end up having unfiled returns and/or owe back taxes, or do they? Who knows?

If you are trying to wade through our tax system and need help, consult a competent tax lawyer or other tax professional to get the answers. If you want to avoid having to seek out this type of help in the future, than lobby Congress to simplify our tax system and help end this madness.

 

Segal, Cohen & Landis
9100 Wilshire Blvd. Ste. 601E
Beverly Hills, CA 90212
(310) 285-3999

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