Volume 2, Number 10 What’s News— Report Fraud To The IRS? Watchdog Says IRS Flubs Over 100,000 Tips Annually Reporting fraud to the IRS can be effective and isn’t a waste of time. Yet review the report issued by the watchdog Treasury Inspector General for Tax Administration, you might wonder if it’s worth the bother. Tipping the IRS with evidence of fraud may not produce results. See The Process for Individuals to Report Suspected Tax Law Violations Is Not Efficient or Effective. Here are some rather grim statistics about reports of fraud to the IRS in fiscal 2011: 1. The IRS website for reporting fraud was visited 501,218 times–they do keep statistics. 2. The IRS received a whopping 116,307 submissions on IRS Form 3949‑A. Innocuously, this form is called an Information Referral. It is distinct from Form 211, Application for Award for Original Information, the IRS Whistleblower form. 3. The Report concludes that the IRS is “not efficiently or effectively” processing these forms. 4. Reporting guidelines are confusing and inconsistent. For example, the Instructions to Form 3949‑A don’t explain what types of fraud or tax violations to report. They tell you to check boxes for various tax violations like False Exemption, False Deductions, Multiple Filing, Unsubstantiated Income, Kickbacks, False or Altered Documents, Failure to Pay Tax, Unreported Income, Failing to File Returns, Failing to Withhold, etc. 5. People often report something besides tax fraud or violations. You aren’t supposed to use Form 3949‑A for reporting identity theft but many people do. Even if you use Form 3949‑A as intended, it just isn’t specific enough. In many cases a completed form doesn’t provide the IRS with enough ammo to take any action. 6. Many tips provided to the IRS don’t meet IRS criteria to take action. Do they follow up? Apparently not or not well. 7. The IRS treats identity theft reports on a Form 3949‑A as “regular correspondence.” That means the IRS delays action on identity theft cases. 8. A lack of IRS quality review results in some of the forms simply being destroyed! For example, about 3,000 Forms 3949‑A used to report identity theft were destroyed because there was no procedure on how to process these claims. What’s more, the identity theft victims weren’t even notified. 9. Ineffective IRS routing procedures and oversight allow Forms 3949-A to be sent to the wrong parts of the IRS. 10. Some of the forms are mistakenly considered unworkable. Does the IRS follow up and try to get more data? Well, the forms are retained for 90 days and then destroyed. Obviously, this isn’t a happy list. One hopes that apart from retooling the IRS whistleblower office, actions will be taken to remedy these deficiencies	Click on any headline below to read more: Top Stories of the Month October 2012 CAPITAL GAINS Five Tips About Capital Gain For Everyone (Not Just Mitt Romney) With all the debate over types of income and whether capital gain rates should continue it’s easy to lose sight of a fundamental fact: You too can benefit while capital gain rates remain a bargain. Obama Or Romney, Higher Capital Gain Rates Hit Soon The 15% rate on long-term capital gains expires December 31, 2012. Will it be extended as it was two years ago? Maybe, but it’s unlikely. That means in just a few months, you will pay 20% on long-term gains, right? Not really. SALES TAX Confused By Amazon Taxes? You're Not Alone It is maddening that online sales tax can be such a mystery. Sure, the rules are changing, but do you really have to check out before you know if you'll pay tax? Paying Online Sales Tax? Five Ways To Know It can be darned confusing to determine if you will or won’t pay online sales tax. FOREIGN ACCOUNTS Consider IRS Relief Deals Carefully If you still have undisclosed foreign bank accounts you should feel uneasy. It’s clear that more data is coming from IRS whistleblowers. Like A Passport, The IRS Goes Everywhere If you’re a U.S. citizen or permanent resident you must annually file a tax return. If you have foreign accounts over $10,000, you must annually file an FBAR. SETTLEMENTS AND AWARDS Are Damages For Depression Tax-Free? Damages for emotional distress are taxed. Payments for emotional distress emanating from physical injuries or physical sickness are tax-free. Wage loss will be taxed, but if you suffered physical injuries or physical sickness from workplace harassment, maybe not. Confused? IRS Gets A Share Of Most Legal Settlements After a bitter dispute, you’re collecting a settlement or judgment. Is it taxable income and do you have to report it on your tax return? Usually yes, but the tax treatment can vary enormously. TAX FRAUD Even Tax Cheats Can Claim IRS Whistleblower Rewards Recently a former UBS banker was awarded $104 million for reporting offshore banking irregularities. It’s making many whistleblowers more alert and more claims are on the way. TAX RATES Fleeing 75% Tax Rate? We'll Always Have Paris Sacre Bleu! Sky high French tax rates topping out at 75% caused France’s wealthiest man to apply for Belgian nationality. Best French Exports: Bread, Brie, Fashion and Taxes It should come as no surprise that the French, as good Socialists, are going very, very sophisticated indeed with their much touted 75% tax rate. If U.S. Had 75% Tax Rate, You'd Leave Too Americans have faced a host of donnybrooks abroad and at home. Still, when Facebook’s Eduardo Saverin defriended us, some took it personally. TAX RULES Native American Casino And Tax Rules That May Surprise You As with many other tax rules, these rules are becoming more controversial. Expect renewed discussion of these rules and their limits in the future. What's The Unkindest Tax Of All? Taxes are on everyone’s mind right now. Much of the debate is about who pays, who doesn’t and who should. But it’s also about fairness. If 47% Don't Pay Taxes, Let's Tax Churches We may have a hard time criticizing a church or religion, but taxing them might be different.
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