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  • National Taxpayer Advocate Report Shows Upcoming Tax Problems

    Wednesday 08th of August 2012 9:11:00 AM

    Nina E. Olson, a National Taxpayer Advocate released a report to Congress their lists of major issues that they will be focusing on this upcoming fiscal year. Among the items listed were concerns about expired and/or expiring tax provisions as well as the rise in tax fraud and tax-related identity theft.

    Among the expired tax provisions that are now taking effect are the so-called “AMT patch.” With its expiration an estimated 27 million more taxpayers will be subject to the Alternative Minimum Tax. Another provision expiring are deductions for state and local sales taxes which will affect about 11 million taxpayers. The deduction for mortgage insurance premiums has expired and will affect four million taxpayers and the provision allowing those over age 70 ½ to make tax-free withdrawals from their IRAs for charitable contributions has expired.

    The loss of these provisions will affect at least 42 million taxpayers in the coming year. 

    There are even more tax provisions that are set to expire at the end of 2012 including the Bush tax cuts which reduced the marginal tax rates, reduced the tax rate on dividends and long-term capital gains, various marriage penalty relief programs and aspects of the child tax credit, earned income credit and the adoption credit.  If these provisions are allowed to expire rates for nearly all taxpayers will go up. 

    There has been a 72 percent increase in the number of tax fraud and tax related identity theft cases in the past year with more than 450,000 cases reported.

    Tax fraud normally comes in the form of fraudulent returns or activities that are meant to increase the amount of a person’s tax refund. Tax related identity theft takes place when a person steals an identity then uses that person’s Social Security number to file a false tax return in an effort to receive an illegal refund.

    “While Congress and taxpayers rightfully demand that the IRS stop payment on fraudulent refund claims, Congress and taxpayers also rightfully demand that the IRS pay refunds out to legitimate taxpayers immediately,” Olson wrote in her report.  The TAS intends to focus its efforts on tax fraud and identity theft to help the IRS come up with a better solution to this problem. The TAS has raised questions about the IRS’s ability to provide assistance to victims of these crimes. It has also pointed out the IRS’s failure to follow its directives designed to help victims of identity theft and victims of returns filed by fraudulent preparers.

    The Tax Advocate Service (TAS) is an independent organization within the IRS. Twice per year they are required to file a report to Congress identifying the most serious problems encountered by taxpayers as well as the discussing the tax issues that are most frequently litigated in court.

    SOURCE – irs.gov.com

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