I’ve finished my initial set of classes for the Volunteer Income Tax
Assistance program. I hope to be able to help a bunch of people get their
Taxpayer Assistance Centers
, programs like
can be more helpful than they are correct or accurate:
Inspector General for Tax Administration auditors made 34 anonymous visits to
nationwide in an attempt to have a tax return prepared. These visits resulted
in 23 prepared tax returns. Results show taxpayers do not always receive
proper and accurate customer service assistance during tax return preparation.…
employees incorrectly prepared 19 (83 percent) of the 23 tax returns prepared
during our visits. If 17 of the 19 incorrectly prepared tax returns had been
would have incorrectly refunded approximately $32,000. If the remaining 2
incorrectly prepared tax returns had been filed, the
would have inappropriately withheld $2,400 in tax refunds.
Note that this is an audit of
TACs — the volunteer programs like
are a second line of defense, staffed by people like me, who are amateurs with
only a couple of classes to back us up. I wonder whether we’ll be able to
compete with the
employees’ 17% accuracy rate.
Today’s inspiring read:
Against All Odds by Adam Hochschild from ’s Mother Jones magazine.
“You can hold back from the suffering of the world, you have free permission
to do so and it is in accordance with your nature, but perhaps this very
holding back is the one suffering that you could have avoided.” — Franz Kafka
A further breakdown of the numbers shows $30.1 billion was lost because people
failed to file tax returns, $248.8 billion was lost to underreporting income
and $31.8 billion was lost to underpaid taxes. In effect, the
concludes that a full 15 percent of taxpayers are noncompliant, though not
necessarily criminals. Tax fraud or evasion by individuals, as opposed to
corporations, is overwhelmingly responsible for the tax gap, especially from
incomes based on easily concealed cash transactions.
I wrote about a neat little tax dodge that some companies
were using: They hunt up a government or other organization that’s got some
big hunk of stuff that’s depreciating without giving them any tax benefit.
They take that big hunk of stuff off of their hands, for a fee, and then lease
the big hunk of stuff back, for a somewhat lesser fee, while writing off the
expense of their new asset on their tax forms so as to lower their taxes
(presumably by somewhat more than that somewhat lesser fee).
Our local newsweekly covers what happened
when San Francisco’s Municipal Railway tried this trick in
. It seemed like a great idea:
[T]he agency received $43 million in a complex “lease/lease-back” deal that
allowed private investors to depreciate (that is, to write off the wear and
tear suffered by) 118 rail cars for federal income tax purposes. Muni paid out
$10 million to lawyers and financial consultants to prepare the deal, and kept
$33 million. The investors gained a tax advantage that presumably was valued
far in excess of the $43 million that Muni received…
But then things got sticky. The
Department started complaining to Congress about scams like this. Now it looks
like they’re going to make them illegal, and send auditors out to shut down
the ones that have already been concocted. And it looks like the tax-evading
investors had better lawyers than did
In entering the tax-shelter deal, Muni signed a contract that, as interpreted
by a tax expert I spoke with, would make San Francisco responsible for the
benefits of the tax break to the private investors for the 25-year life of the
deal, should the
disallow the shelter.
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