IRS Data Show Tax Agency Audits Big Firms Less Often

According to new data from the IRS, there has been a 20% drop in number of audits being performed on companies with more than $250 million in assets over the past decade. As Kevin McCoy of USA Today explains, although these numbers are surprising, the data could be somewhat misleading as the total number of returns filed changes every year.

The data confirm a downward trend identified in a critical analysis this week by the Transactional Records Access Clearinghouse, a non-partisan research organization based at Syracuse University. The IRS provided the data to USA TODAY after questioning TRAC's conclusions.

"There's been a steady decline in IRS audits of the largest corporations," said TRAC co-director Sue Long.

The drop is significant for taxpayers — who face a midnight deadline to file their personal income tax returns — because TRAC found the IRS identified nearly $28.6 billion in tax-underreporting by the nation's largest firms in fiscal year 2009.

The IRS said audit percentages are an imperfect measure because they include tax returns filed, a changing number the agency can't control. The annual number of large corporation audits rose more than 22% in the last decade, IRS data show.

Continue reading at USA Today.com…

Federal Employees Owe $3 Billion in Taxes

Last week the IRS reported that over 276,300 current and retired federal employees owe approximately $3.04 million in unpaid taxes from 2008. Although high, this number is actually down from $3.59 million in unpaid taxes in 2007.

According to Washington Post.com, the list includes White House and Congressional staffers and current and former active-duty and reserve members of the military.

In a sign that the IRS practices what it preaches, the Treasury Department, which includes the tax-collecting agency, had the best compliance rate of Cabinet-level departments. Less than 1 percent of employees were delinquent with their taxes.

The Department of Housing and Urban Development fared worst among Cabinet departments, with slightly more than 4 percent of workers owing a combined $4.76 million.

Among all government agencies and departments, the U.S. Postal Service had the greatest number of tax delinquents. The government's second-largest employer had 28,913 workers -- or just under 4 percent -- owing roughly $298 million.

Fifty White House staffers owed a combined $812,917 in 2008, the IRS said. Up on Capitol Hill, slightly more than 4 percent of House staffers owed Uncle Sam $5.8 million, compared to 3.2 percent of Senate employees that owed almost $2.5 million.

Democratic Health Care Bill Divulges IRS Tax Data

With all of the talk around the Obama administrations 1,000 page health care bill, it can be difficult to pick apart. However, CBS News published a great article this morning on one section we should all be aware of. According to the report private financial data of millions of Americans could end up being handed over to the health care choices commissioner. Read more about this story below.

One of the problems with any proposed law that's over 1,000 pages long and constantly changing is that much deviltry can lie in the details. Take the Democrats' proposal to rewrite health care policy, better known as H.R. 3200 or by opponents as "Obamacare." (Here's our CBS News television coverage.)

Section 431(a) of the bill says that the IRS must divulge taxpayer identity information, including the filing status, the modified adjusted gross income, the number of dependents, and "other information as is prescribed by" regulation. That information will be provided to the new Health Choices Commissioner and state health programs and used to determine who qualifies for "affordability credits."

Section 245(b)(2)(A) says the IRS must divulge tax return details -- there's no specified limit on what's available or unavailable -- to the Health Choices Commissioner. The purpose, again, is to verify "affordability credits."

IRS Tax Revenue Falls Along With Taxpayers' Income

As I discussed on the FOX Business Network, the IRS recently saw it’s largest revenue drop in over 30 years. You can watch my appearance here, but USA Today also posted an interesting article on the same subject. You can find a snippet of their article below, or check out the full post here.

Federal tax revenue plunged $138 billion, or 34%, in April vs. a year ago — the biggest April drop since 1981, a study released Tuesday by the American Institute for Economic Research says.

When the economy slumps, so does tax revenue, and this recession has been no different, says Kerry Lynch, senior fellow at the AIER and author of the study. "It illustrates how severe the recession has been."

For example, 6 million people lost jobs in the 12 months ended in April — and that means far fewer dollars from income taxes. Income tax revenue dropped 44% from a year ago.

"These are staggering numbers," Lynch says.

Big revenue losses mean that the U.S. budget deficit may be larger than predicted this year and in future years

"It's one of the drivers of the ongoing expansion of the federal budget deficit," says John Lonski, chief economist for Moody's Investors Service. The Congressional Budget Office projects a $1.7 trillion budget deficit for fiscal year 2009.

The other deficit driver is government spending, which, the AIER's report says, is the main culprit for the federal budget deficit.

The White House thinks that tax revenue will increase in 2011, thanks in part to the stimulus package, says the report from AIER, an independent economic research institute. But it warns, "Even if that does happen, the administration also projects that government spending will be so much higher each year that large deficits will continue, and the national debt held by the public will double over the next 10 years."

The government may have a hard time trimming spending to reduce the deficit when the recession ends. The 77 million Baby Boomers— those born in 1946 through 1964 — will start tapping their federal retirement benefits soon, which means increased government outlays for Social Security and Medicare.

Use of Refundable Tax Credits Has Grown in Recent Years

From Wall Street Journal.com:

Republican presidential candidate John McCain has taken to calling Democratic rival Barack Obama's tax plan "socialist," because it would give tax cuts to people who currently pay no income taxes.

But such proposals -- known in tax parlance as "refundable tax credits" -- have become increasingly common in recent years, supported by both parties. Sen. McCain himself uses them as the cornerstone of his health-care plan.

"Traditional welfare is frowned upon by the public, and government spending is similarly frowned upon," said Scott Hodge, president of the Tax Foundation, a nonpartisan research group in Washington. "So politicians are looking at new ways to deliver targeted benefits ... and by delivering it through the IRS, it sounds far more palatable to the public."

Refundable tax credits have become increasingly popular over the past two decades, as a series of tax breaks have allowed more households to eliminate their income-tax liability altogether. President Bill Clinton's welfare overhaul relied on expanding the earned-income tax credit, which is for low-income working individuals and families and is designed to provide an incentive to work. President George W. Bush's 2001 tax cuts increased an existing child tax credit, and made it refundable so households that didn't pay taxes could receive it.

Currently, 62% of households pay income taxes, down from 82% in 1984. Some 57 million tax filers don't pay any federal income taxes, according to the Tax Policy Center, a nonpartisan Washington think tank.

Sen. Obama, who says he wants to give 95% of all households tax relief, makes his case by saying that he is offering most Americans tax relief. His plan counts on raising taxes on individuals earning more than $200,000 a year and families who make more than $250,000 a year.