Tax News

CCH (cch.taxgroup.com) reports:

  The California State Board of Equalization (SBE) and the Employment Development Department (EDD) have announced that taxpayers affected by wildfires and (for the SBE) flash flooding in Inyo County may be eligible for emergency tax relief in regard to taxes administered by those agencies.

  For all taxpayers and fee payers who cannot meet tax filing and payment deadlines due to the fires and floods, the SBE may grant a one-month extension to file or pay taxes or fees. The SBE also may extend deadlines for filings that were delayed by disruption of the normal activities of the U.S. Postal Service or private mail and freight companies. Relief is also available from interest and penalties for those unable to file their returns or pay taxes and fees due in a timely manner. Persons requesting relief must include with their returns a statement signed under penalty of perjury stating the cause for the late filing. Claims for property tax relief must be filed with the county assessor.

  Employers in the county of Inyo directly affected by the damage resulting from the fire may request up to a 60-day extension of time from the EDD to file their state payroll reports and/or deposit state payroll taxes without penalty or interest. A written request for extension must be received within 60 days from the original delinquent date of the payment or return to file or pay.

  Subscribers to CCH Tax Research NetWork can view the text of the SBE release and the EDD e-mail.

News Release 55-08-L , California State Board of Equalization, July 17, 2008; E-mail , California Employment Development Department, July 18, 2008.

 

CCH (cch.taxgroup.com) reports:

  Referrals of criminal tax investigations by the IRS to the U.S. Department of Justice continue to climb dramatically, the Treasury Inspector General for Tax Administration (TIGTA) has reported. At the same time, however, the IRS's Criminal Investigation Division continues to lose experienced investigators faster than it can recruit new ones. TIGTA unveiled its findings in a special report, Statistical Portrayal of the Criminal Investigation Division's Enforcement Activities for Fiscal Years 2000 through 2007, 2008-10-133.

Investigations and Convictions

  Investigations referred to the Justice Department has increased continually for five years and are now at an eight-year high, TIGTA discovered. Fiscal year (FY) 2007 ended with 4,600 subject investigations, a three-percent increase over FY 2006 and a nearly 50 percent increase since FY 2002. "For the first time since we began reporting on its enforcement activities, the Criminal Investigation Division had more investigations awaiting prosecution by the Justice Department than open criminal investigations," TIGTA reported.

  Criminal convictions are also up, TIGTA found. "The number of taxpayers convicted of a crime was 2,155, which exceeded the FY 2007 performance plan goal of 2,069 and was an increase of 6.7 percent from FY 2006"

Enhanced Publicity

  TIGTA also found that greater publicity of tax crimes fosters compliance. The publicity rate for prosecutions in FY 2007 was nearly 80 percent, an all-time high. Enhanced publicity, according to TIGTA, "sends a message to taxpayers that violations of the Internal Revenue Code and related financial crimes are investigated and prosecuted."

Staffing Shortfalls

  Despite the uptick in criminal referrals and convictions, the Criminal Investigation Division appears troubled by high employee turnover. The total number of special agents fell three percent from FY 2006 to FY 2007 and the trend appears to be continuing. "According to most recent estimates, the Criminal Investigation Division's planned hiring of approximately 96 special agents would not offset the FY 2007 attrition of 150 agents or the FY 2008 attrition of approximately 150 agents." TIGTA predicted that the loss of experienced employees will negatively affect productivity in the near future.

  By George L. Yaksick, Jr., CCH News Staff

TIGTA Report: Final Audit Report --Statistical Portrayal of the Criminal Investigation Division's Enforcement Activities for Fiscal years 2000 through 2007 (Reference Number: 2008-10-133) [Document will be available on July 22. --CCH.]
 

CCH (cch.taxgroup.com) reports:

  IRS Commissioner Douglas H. Shulman said on July 18 that he is studying the Service's controversial private collection initiative but declined to predict the future of the program. Shulman added that the IRS is ready to help lawmakers understand if the policy goals of proposed tax legislation are administrable. Shulman spoke in Washington, D.C., at a special event to mark the 10th anniversary of the IRS Restructuring and Reform Act of 1998 (P.L. 105-206) (RRA '98).

Outsourcing Tax Collection

  Two private collection agencies, The CBE Group of Waterloo, Iowa, and Pioneer Recovery Credit of Arcade, N.Y., are currently working taxpayer accounts. According to the Tax Fairness Coalition, the private collection agencies have recovered roughly $60 million since September 2006 (TAXDAY, 2008/06/30, M.1).

  At his confirmation hearing earlier this year, Sen. Charles E. Grassley, R-Iowa, ranking member of the Senate Finance Committee, asked Shulman to commit to full implementation of the private collection initiative (TAXDAY, 2008/01/30, C.2). Shulman told Grassley that he would look at the program.

  When asked on July 18 about the future of the initiative, Shulman said that he is "studying the issue of private tax collection." Shulman added that he is not ready "to give an opinion (about the initiative) at this time."

  Opponents and supporters of private tax collection have been much more vocal. "It's a waste of taxpayers' money. IRS employees could collect more money for less," Colleen M. Kelley, president of the National Treasury Employees Union (NTEU), which represents IRS employees, said earlier this year (TAXDAY, 2008/02/01, T.1). "At a time when uncollected tax debt at the IRS is at a 10 year high, we cannot afford to let billions of dollars simply fall off the books at the expense of taxpayers. The program continues to bring in millions in uncollected tax debt to help close the tax gap," a spokesperson for the Tax Fairness Coalition, told CCH.

  In June, the House Appropriations Committee voted to terminate the initiative (TAXDAY, 2008/06/30, C.1). Similar legislation is pending in the Senate.

Tax Legislation

  "The legislation (RRA '98) proposed that the IRS have a seat at the table as tax legislation is drafted to offer its view on whether the legislation is administrable," Shulman explained. He noted that the IRS currently provides a complexity analysis of proposed legislation upon request by the Joint Committee on Taxation. "I think there is more we could and should do to ensure that the policy goals of legislation are administrable."

Ten Years

  Looking back on the 10 years since passage of RRA '98, Shulman said that the Service has made great progress in improving customer service and enforcement. "One of the clear mandates of the Act was for IRS to dramatically improve service to taxpayers. No one can argue that this was not the right thing to do."

  Before Congress passed RRA '98, service at the IRS had fallen to "unacceptable levels," Shulman said. Taxpayers could not reach the IRS for help and when they did, they often received incorrect information, he added. Over the past 10 years, the IRS has shown "dramatic" improvement in customer service.

  Enforcement has also improved. Shulman acknowledged that enforcement fell to record lows in the years immediately after passage of RRA '98. Shulman's immediate predecessor, Mark W. Everson, refocused the agency on enforcement.

  The IRS' reorganization into customer segments has also helped enforcement, Shulman observed. "I believe the recent success the IRS has had in combating abusive shelters was, in no small part, attributable to the existence of the Large and Mid-Size Business (LMS Division." Before RRA '98, "the responsibility for dealing with tax shelter abuses would have been the responsibility of the examination function, which was to some degree independently managed in each region and district office and had responsibility for all examination activity." LMSB, Shulman said, is "able to bring the focus and expertise necessary to address the issues."

Workforce Issues

  Finally, Shulman said that the IRS must focus on recruitment and retention of talented employees (TAXDAY, 2008/07/11, I.2). "We have a lot of people at the IRS who could leave and make double or triple their salary." Many employees stay with the agency because of their commitment to public service, he added.

  By George L. Yaksick, Jr., CCH News Staff

IR-2008-90

Other References:

 
Code Sec. 6306

  CCH Reference - 2008FED ¶38,084E.01

 
Code Sec. 7804

  CCH Reference - 2008FED ¶43,266.01

  Tax Research Consultant

  CCH Reference - TRC IRS: 3,000

  CCH Reference - TRC IRS: 3,058

Tax Analysts report: