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Over the past few months, discussions about tax collections – and more specifically, how best to increase tax collections – have been at the center of many discussions on taxation.
We’ve talked about targeted enforcement, bounties for exposing tax evaders, and even whether the Internal Revenue Service should have more access to your banking information to track down those who aren’t paying their fair share.
Why the interest? The tax gap continues to widen at a time when taxpayers are increasingly vocal about changes in their own tax situation. In an opinion piece for Bloomberg, former IRS Commissioner Charles Rossotti noted that in 2019 the federal government did not collect $ 574 billion in legally owed taxes. This, he writes, is equal to all income taxes paid by 90% of individual taxpayers.
As Congress discusses next steps, the IRS balances increased collection efforts with the realities of taxpayers who have been affected by the pandemic.
During the pandemic, that meant suspending certain enforcement activities, like privileges and deductions from wages and bank accounts. Now that things are returning to normal, albeit slowly, the IRS is once again looking to collect the taxes owed. However, some changes are to be expected. One notable difference is that taxpayers who enter into offers in compromise, or OICs, may receive certain tax refunds. Beginning with offers accepted on or after November 1, 2021, the IRS will generally not offset refunds for tax periods included in the Order after the date of acceptance.
Taxpayers facing financial hardship can also apply for a Compensatory Bypass Refund, or OBR, while an OCI is being considered. Rather, with a bypass, an overpayment that would otherwise be applied to a prior tax liability is issued as a refund. To apply for an OBR, you must call the IRS at 800-829-1040 or seek help from the Taxpayer Advocate Service.
Other collection activities are back, although the IRS says they do so while respecting the rights of taxpayers. It will be interesting to see how this evolves and what role Congress plays in helping fundraisers, from disclosure legislation to IRS funding for enforcement.
Sorting out what’s going on can be intimidating. Fortunately, this week, as always, we’ve collected the latest federal, state, and international tax analysis from our experts to help you stay on top of the news.
The Exchange… This is where great ideas intersect.
—Kelly Phillips Erb
Quick numbers quiz
In fiscal year (FY) 2020, the IRS processed over 240 million tax returns and collected approximately how much taxes?
Answer below.
Our roundup
This week, our experts covered a wide range of topics, from anti-money laundering to tax ferrets. For an overview of what’s in the news, here is our collective overview:
One of the fastest growing areas of tax collection, especially in aWayfair world — is sales tax, an already complex area. So why complicate things? In Simplification is a better way for sales tax compliance, Linda Lester and John Lester argue there is a better way.
Confused About What The Next Step Of Tax Collection Should Look Like? In the ongoing debate over what is needed to raise the existing tax revenue, Yale Law Professor Yair Listokin wonders if we should not think outside the box and consider bringing back the tax ferrets.
States also hope to collect revenue. In Tesla, the cost of building the tunnel could be exempt from sales tax, materials used in Boring Co.’s Las Vegas tunnel project were apparently taxable on sales. However, because the Florida sales tax law applicable to public works projects differs significantly from that of Nevada, the Fort Lauderdale tunnel project proposed by The Boring Company may be exempt from sales tax, writes Alan S. Lederman. by Gunster.
The United States is not the only country that wants to change its tax laws. In the first part of a two-part article, Eugen Trombitas of PwC NZ reviews the main developments in indirect taxation in New Zealand in 2021. The second part will focus on the global developments in indirect taxation for 2022.
Some financial changes have a global impact. By the end of 2021, many businesses will have stopped using London Interbank Tariffs, or LIBOR, in their contracts. In The Legal Impact of Libor on Contracts and Business, LinkSquares’ Tim Parilla examines what this could mean for businesses and what advisers need to think about moving forward.
And sometimes change creates risk. Several recent events have made it clear that fraudsters will continue to exploit crises and that anti-money laundering efforts will have to respond. In The Future of Anti-Money Laundering: Assessing Risks by Understanding Crises, BRG’s Christopher Sidler, Deb Bonosconi and Valtteri Tamminen examine the future of anti-money laundering and what businesses and advisers need to know.
Not all tax disputes, from audit to collections, need to involve litigation. In Continuing Success of Tax Mediation in the UK, BDO’s Talia Greenbaum explores how and why mediation continues to be successful for the UK tax administration despite the restrictions of Covid-19.
Opinion and commentary
The collective goal of net zero carbon by 2050 may be desirable. But in Carbon Reduction Costs Will Turn Off Investors, Gary Shilling examines fiscal and other measures aimed at achieving the goal and cautions against costs and lack of feasibility.
Columnists and contributors
A record 4.4 million Americans left their jobs in September 2021, more than the previous record, set the month before. It’s a phenomenon that has been dubbed “The Great Resignation.” So what comes next? In What You Should Know About Taxation Before Leaving Your Job, we provide an overview of some of the options available and their tax consequences.
Projector
Our Spotlight series shines a light on the careers and lives of tax professionals around the world. This week’s Spotlight is on podcaster and CPA Eric Pierre.
To listen
Cities and counties have long used so-called “sin taxes†to discourage socially harmful behavior. A few localities hope to use excise taxes to reduce the attractiveness of arms and ammunition. One, Cook County, Illinois, recently had its gun tax overturned by the Illinois Supreme Court as a violation of the constitution’s uniformity clause. In this week’s episode Talking Tax, Bloomberg Tax’s Michael Bologna spoke to Cooper & Kirk’s Pete Patterson about the state of the litigation and Rosanna Smart, an economist with Rand Corp., who supports local measures to gun control but questions the value of excise taxes. as a strategy for combating armed violence.
Almost 1.5 million fewer mothers of school-aged children were actively working in March 2021 than in February 2020. In this week’s episode of the Taxgirl podcast, Kelly is joined by attorneys Lisa Jerles and Mara Geronemus to discuss pursuing a successful and fulfilling career while being a mother. Jerles and Geronemus have created a networking group aimed at changing the narrative around motherhood, which is often seen as a handicap rather than an asset. Listen now.
Exclusive content for Bloomberg tax subscribers
Don’t want to wait for updates from Twitter to find out what’s going on with reconciliation (HR 5376)? Check out our Bloomberg Tax and Accounting watch page, which brings together resources on related tax provisions, including the latest news from our team of journalists on Capitol Hill, links to key documents and our growing body of work. analyzes. * Note: Your Bloomberg Tax ID will be required to access the monitoring page.
Quick response to numbers
The IRS raised nearly $ 3.5 trillion in fiscal 2020.
Be published
At Bloomberg Tax & Accounting Insights, we want to give our readers a taste of what to expect in 2022 to get the year off to a good start. So we ask the people in the best position to give us advice: you.
We’re publishing a series of smaller articles (up to 200 words) on what to watch for in 2022 in five categories:
- Individual
- Business
- International
- Payroll / Employment
- Business Management
Don’t know what that might look like? Here is an example :
The IRS has made no secret that it takes cryptocurrency seriously. As headlines focus on sophisticated efforts to track down tax evasion and fraud involving cryptocurrency, the IRS has introduced a straightforward compliance initiative: a question on Form 1040.
In 2022, it’s a simple question: At some point in 2021, have you received, sold, traded or otherwise assigned a financial interest in a virtual currency?
Why ask? An IRS dive into the data suggests a lack of compliance. For the 2013 to 2015 tax years, the IRS processed approximately 150 million individual returns per year. Matching the data, he found that only 807 people reported likely bitcoin-related transactions in 2013 – in 2015, the number fell to 802. The IRS hopes asking the question will encourage voluntary compliance.
In 2021, the IRS clarified—via an FAQ-that if your only transactions involving virtual currency were purchases with real currency, you do not have to answer yes to the question.
Compliance efforts are also in place on the issuer side, but we have a few years. Under the Infrastructure Bill, Gross Revenue Forms 1099-B and Cost-Based Income Tax Returns for digital asset sales in the United States will be required for returns filed in 2024.
You can find more information about submissions here.
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What did you think
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