Tax Compliance Measures by IRS

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The IRS has been taking laudable steps to ensure tax compliance by both big time businesses and individual taxpayers. In a session with the National Press Club, outgoing IRS Commissioner Doug Shulman said the agency is “putting a big dent in offshore tax evasion” as part of its plan to focus on large businesses.Commenting further on this issue, Shulman said, “We upped the ante in a meaningful way with our work on Swiss financial institutions, where for the first time in history, a bank secrecy jurisdiction turned over thousands of names and account numbers.”

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In conjunction with this, the IRS has also initiated measures to encourage taxpayers with untaxed overseas assets to step forward and declare their offshore wealth and avoid criminal prosecution by paying up the taxes they owe. Shulman said that the IRS does this by going through the information it receives, launching investigations on banks and taxpayers and then giving them a chance to pay. Thus far, the IRS has held two Voluntary Disclosure Programs of late (one in 2009 and another last year) and approximately 33,000 people participated in the programs and paid back taxes, amounting to more than $4.4 billion.

Another step taken to help people comply with their tax obligations is to revise the “Fresh Start” program aimed at helping taxpayers struggling to pay taxes by providing new penalty relief to the unemployed and making installment agreements available to more people. Now those taxpayers who have been out of jobs for at least 30 days will not have to pay failure-to-pay penalties.

Several technological innovations were also put in place. The IRS app, IRS2Go allows users to track their tax refunds and eases e-filing. The IRS2Go app is freely downloadable from the iTunes store and Android marketplace. E-filing has also exponentially increased from 16% of taxpayers filing electronically 15 years ago to 77% doing so last year. Filing electronically is a win-win situation for both taxpayers and the IRS. For taxpayers, it means speedier refunds and safer transactions. For the IRS, it means substantial cost savings. According to Commissioner Shulman, it costs only 15 cents to process an electronic return, whereas it costs the IRS $3.50 to process a paper return.

One of Commissioner Shulman’s desires is for Congress to review the tax code before the expiry of several laws that are due end of this year. These laws have to either be repealed or extended. Many analysts believe this would only take place after the Presidential elections later this year. But delaying it till then would likely mean lots of confusion in the laws in next year’s tax season. Some taxpayers may pay according to the old legislation while others pay according to the new ones. in response to a question on this matter, Shulman said, “If Congress doesn’t act until the end of the year, you could have a real disaster in the filing season where some people are filing under one law and another under another law. We’re hopeful these pieces of legislation will pass sooner than later.”

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