Congress has engaged in its traditional year-end brinksmaship, passing a set of retroactive extensions of popular tax breaks. These also included some changes that may be of interest to tax resisters. For example:
- Tax penalties for failure to file and failure to pay will now be indexed for inflation, as of .
- Congress has created a new variety of tax-advantaged savings accounts, designed to help people fund accounts for disabled people. If I’m interpreting what I’ve read about this correctly, the tax advantages are modest: deposits to these trust funds are not deducted from taxable income, but any investment gains on the amounts in the funds, as well as the principle, are not taxable to the disabled person they are given to if they are withdrawn for the purposes of paying the qualified expenses of that person.
Meanwhile, the IRS has begun pronouncing doom and gloom as a result of the latest cuts to its budget.
- Quick to appeal to American’s bottom-line, IRS Commissioner John Koskinen said that people may experience delays in getting their income tax refunds. With any luck this will encourage more people to reduce their withholding so they aren’t owed refunds at tax filing time.
- The agency has instituted a hiring freeze (with unspecified “mission-critical exceptions”) and overtime is similarly banned.
- Koskinen says the cuts will hurt the IRS enforcement arm: “In some ways,” he said, “these budget cuts are really a tax cut for tax cheats. Because to the extent we have fewer people to audit and enforce the tax code, that means some people cutting corners on their taxes or not complying are going to get away with it.”
- Washington Post opinion writer Catherine Rampell amplifies this: Over the long run, IRS budget cuts make tax evasion look not only easier but also more justifiable. Our tax system functions mostly through voluntary compliance. But as taxpayers get more disgusted by their interactions with the IRS — and by reports of rich companies not paying their fair share of taxes… — ‘tax morale’ will wane and tax cheating will likely rise.”
- Koskinen himself says “the cutbacks in IRS enforcement resources and casework will mean that billions more in taxes owed to the nation will remain uncollected.”
- Mike Causey at Federal News Radio puts it bluntly: “If you’ve ever been tempted to fiddle with your federal income taxes, this may be the year to go for it. There has never been a better time.”
- There are already indications that big companies are increasingly willing to play “the audit lottery” — taking far-out tax positions in the hopes that the IRS won’t have the manpower to audit them, or even if they do, the consequences won’t be that bad.
- The IRS is toying with the idea of a short-term, agency-specific shutdown with unpaid leave for employees as a way of saving money.
- The agency can probably forget about attempts to modernize its antediluvian information technology infrastructure.