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Tag Archive for GAO

IRS Collected $5.5 Billion From OVDI, But According to GAO, May Be Missing Billions More?

The IRS may be missing potential taxCayman_Islands dodgers who report their foreign accounts but who avoid paying penalties by not reporting previous years’ returns. The Government Accountability Office (GAO) released Offshore Tax Evasion: IRS Has Collected Billions of Dollars, but May be Missing Continued Evasion (GAO-13-318):

Tax evasion by individuals with unreported offshore financial accounts was estimated by one IRS commissioner to be several tens of billions of dollars, but no precise figure exists. IRS has operated four offshore programs since 2003 that offered incentives for taxpayers to disclose their offshore accounts and pay delinquent taxes, interest, and penalties. GAO was asked to review IRS’s second offshore program, the 2009 OVDP. This report (1) describes the nature of the noncompliance of 2009 OVDP participants, (2) determines the extent IRS used the 2009 OVDP to prevent noncompliance, and (3) assesses IRS’s efforts to detect taxpayers trying to circumvent taxes, interests, and penalties that would otherwise be owed.

IRS has detected some taxpayers with previously undisclosed offshore accounts attempting to circumvent paying the taxes, interest, and penalties that would otherwise be owed, but based on  GAO reviews of IRS data, IRS may be missing attempts by other taxpayers attempting to do so. GAO analyzed amended returns filed for tax year 2003 through tax year 2008, matched them to other information available to IRS about taxpayers’ possible offshore activities, and found many more potential quiet disclosures than IRS detected. Read more

Virtual Currency and Taxes

TaxConnections Blog Post by Annette Nellen about virtual currency.There has been a lot of mention in recent news stories about Bitcoin. Reuters reported this week that the Treasury Department’s financial crimes group (FinCEN) hosted a meeting with the Bitcoin Foundation (“Regulators, Bitcoin group discuss virtual currency,” 8/26/13). USA Today reports that the Senate Homeland Security and Government Affairs Committee began investigating virtual currency a few months back and recently sent letters to some federal agencies to learn how they regulate such currencies (“Government eyes regulation of ‘Bitcoins'” (8/26/13). There have also been recent stories about virtual currencies and Ponzi schemes and money laundering, which obviously leave negative connotations about these currencies although some, like the Bitcoin, are being used for legitimate business transactions.

What is “Bitcoin”? It is a means for transacting business that has its foundation in software code and enough people willing to use it as a medium of exchange. A March 2013 release from FinCEN stated the following regarding virtual currencies (such as Bitcoin): “In contrast to real currency, “virtual” currency is a medium of exchange that operates like a currency in some environments, but does not have all the attributes of real currency. In particular, virtual currency does not have legal tender status in any jurisdiction.”

There are a few well known virtual currencies including the Linden dollar in Second Life and Amazon coins. Virtual currencies vary in terms of where they are usable (only in the online game or website), whether they can be exchanged for real currency, and how they are created or obtained. Read more

“Quiet Disclosures” – Is the Jig Up?

iStock_tax evasionXSmallCertain findings and recommendations by the Government Accountability Office (GAO) about offshore tax evasion and the IRS efforts to combat it have many taxpayers worried. The GAO is an independent, nonpartisan agency that works for Congress and is often referred to as the “congressional watchdog.” It investigates how the federal government spends taxpayer dollars and makes recommendations as to how a governmental agency can be more efficient and effective.

Recently issued GAO report, Offshore Tax Evasion: IRS Has Collected Billions of Dollars, but May be Missing Continued Evasion, provides key information about the IRS’ offshore voluntary disclosure initiatives. More importantly, however, GAO indicates its review of IRS data shows that the IRS is missing what appear to be rampant “quiet disclosure” and “new account” filings.

“Quiet Disclosures” / “New Account” Filings

With a “quiet disclosure”, taxpayers quietly amend past tax returns and FBARs reporting previously unreported income and accounts. With “new account” filings, taxpayers report the existence of any offshore accounts as well as income from the accounts on the current year tax return, without amending any prior years’ returns. They often also disclose the existence of the accounts by filing FBARs for the current calendar year making it appear as if the account was just newly opened.

GAO takes the IRS to task for not finding enough “quiet disclosures” and “new account” filings which lose billions of Read more

How Can Theft Prevention, Reporting and Return Filing Be Improved?

Changing the April 15 due date, moving taxpayer information to the cloud, and allowing personal identification numbers (PINs) for taxpayers who want them were all on the table at a Thursday hearing held by the IRS Oversight Board to explore ways to combat fraud and improve tax administration. The board, composed of presidential appointees with tax, technology, or business expertise, advises the IRS on the best ways to meet taxpayer needs.

Fraud and Identity theft

Fraud and identity theft are still rampant, according to Michael Phillips, acting principal deputy inspector general, Treasury Inspector General for Tax Administration (TIGTA), who cited billions of dollars fraudulently claimed on refundable credits such as the American Opportunity tax credit. He said “the IRS recently prevented $12.1 billion of potentially fraudulent refunds from being issued, but more work needs to be done”.

Fraud comes in many forms, observed James R. White, director of tax issues for the United States Government Accountability Office (GAO). Given its many sources, such as failure to file, underreporting, and off-shore tax evasion, Read more

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