IRS to Verify Refunds for Nonresident Aliens

Accounting to a new government report, the IRS is likely to take action to strengthen its controls over the processing of refunds sent out to nonresident aliens. The goal is to prevent issuing erroneous refunds.

Accounting Today reports:

The report, by the Treasury Inspector General for Tax Administration, noted that failure to address the problem could result in significant losses to the federal government as the questionable refunds issued to nonresident aliens are high and the probability of recovering fraudulent refunds from nonresidents living outside the U.S. very low.

“If the IRS does not take immediate steps to improve its ability to verify refunds to nonresident aliens before the refunds are sent out of the United States, the problem could increase significantly,” warned TIGTA Inspector General J. Russell George in a statement. “TIGTA discussed the control weaknesses we identified with the IRS and it is working on actions to address them.”

Nonresident aliens who receive U.S. sources of income must report and pay taxes on that income and file the U.S. Nonresident Alien Income Tax Return (Form 1040NR) with the IRS. This income is also subject to income tax withholding. In 2009, the IRS processed approximately 598,000 Forms 1040NR for tax year 2008. The total taxes withheld on these returns amounted to more than $2.4 billion and refunds amounted to more than $712 million.

TIGTA performed an audit to determine whether IRS controls ensured that only eligible nonresident aliens receive refunds. TIGTA found that inaccurate and fraudulent Forms 1040NR were not detected during processing. As a result, TIGTA identified a significant number of control weaknesses in the processing of refunds claimed on Forms 1040NR. In some 40 cases of questionable refunds issued to nonresident aliens, the refunds were very high, totaling more than $2.3 million.

Continue reading at Accounting Today.com...

Nebraska Town Votes to Banish Illegal Immigrants

The New York Times reports the residents of Freemont, Nebraska are trying to pass a law banning illegal immigrants from all other jobs and even rental homes. The new law, if it passes, will try to bar landlords from renting to those in the country illegally, requiring renters to provide information of the person to the police and to obtain city occupancy licenses.

Opponents say paying to defend such a local law would require a significant cut in Fremont city services or a major tax increase — or combination of the two. But advocates feel federal authorities failed to enforce immigration restrictions, forcing places like Freemont, Nebraska with a small but growing Hispanic population to take matters into their own hands.

The advocates of the law complained that illegal immigrants were causing an increase in crime, taking jobs that would once have gone to longtime residents and changing the character of their quiet city, some 30 miles of farm fields from Omaha.

Fremont’s Hispanic population, practically nonexistent two decades ago, has grown to about 2,000 people, according to some estimates. No one knows how many illegal immigrants live in Fremont, and the estimates (depending on which side of this debate one is on) vary enormously—as stated by the New York Times article.

It’s interesting to note how the new law wouldn’t apply to the area’s two largest meatpacking plants –including Hormel. They happen to be just outside official city limits.

This is what the A.CL.U. had to say in a statement about the Nebraska issue, “If this law goes into effect, it will cause discrimination and racial profiling against Latinos and others who appear to be foreign born, including U.S. citizens,” Laurel Marsh, executive director of A.C.L.U. Nebraska , said in a statement issued late Monday. “The A.C.L.U. Nebraska has no option but to turn to the courts to stop this un-American and unconstitutional ordinance before the law goes into effect. Not only do local ordinances such as this violate federal law, they are also completely out of step with American values of fairness and equality.”

Some residents were outraged by the choice, and began collecting signatures on a petition to put the question to a vote — the vote that ultimately came on Monday.

Read the the full article here. Tell me your thoughts on Facebook or @ronideutch on Twitter.

IRS sells SD Indian Tribe's Land to Settle Debt

According to the Associated Press, the IRS auctioned off acres of land owned by a Native American tribe to help pay off a tax debt totaling more than $3 million dollars. The tribe asserts that the sale is illegal under a federal law protecting Indian land, but the IRS asserts they are within their right since the group never had the Bureau of Indian Affairs put the land back into trust, which would have protected it from seizure. Additionally, the tax liability stems from unpaid payroll taxes, which is a type of tax avoidance the IRS takes very seriously.

The 7,100 acres, or 11 square miles, of Crow Creek Sioux tribal land in central South Dakota ranch sold for almost $2.6 million, less than the $4.6 million it was appraised at, said IRS spokeswoman Carrie Resch. She did not say who bought the land.

The tribe filed a lawsuit Monday in U.S. District court in Pierre seeking to block the sale. Judge Roberto A. Lange declined their request but promised to schedule a trial to hear the tribe's arguments.

The land in question was part of the tribe's original reservation established in an 1868 treaty, and was held by the federal government in a trust for the tribe. But it was eventually allotted to individual tribal members, who then sold it to non-Indians, putting it outside the tribe's legal jurisdiction.

Tribal Chairman Brandon Sazue said he hopes the tax dispute can still be resolved in a way that allows the tribe to keep the land. Lawyers said the tribe can purchase the land back during a 180-day redemption period, and the land will not change possession during that time. A trial is tentatively set for March 29-30, which is within the redemption period.

IRS Investigates Man Running Secret Bank

The Internal Revenue Service has brought charges up against a Washington man who was operating a "warehouse bank" from his own home. According to court documents he had taken in over twenty eight million dollars from people across the country looking for a "discreet" bank account. According to an IRS investigator, Robert Arant had hundreds of customers who used his banking services to conceal assets for the purpose of evading taxes. A civil complaint was brought up against Arant for promoting abusive tax shelters and unlawfully interfering with Internal Revenue Service laws. For more information visit WTOPnews.com.