More on Tax Day Bill 2010

Yesterday, we talked about the new Taxpayer Assistance Act of 2010.  Today I want to cover some more provision of the bill.  Congress wants to "help out" the American Taxpayer.

The new bill will allow the IRS to refer qualifying taxpayers to Low Income Taxpayer Clinics, which are intended to provide education and assistance to the folks who probably most need help comprehending their taxes.  It will also more than triple the budget for LITC's.  On the topic of low income taxpayers, the bill also would require the IRS to review W-2's and wage and tax statements to identify people who may be eligible for the Earned Income Tax Credit.  The EITC is probably one of the most under-utilized credits for a combination of two reasons.  1) EITC is directed at taxpayers with low income who are the least likely segment of the population to use a professional tax preparer and 2) EITC calculation is one of the most complicated tax calculations and forms to complete and therefore most likely to require the assistance of a professional tax preparer.  My guess is a lot of people who qualify for the credit look at the form and think I can't figure this out and I can't afford to pay someone to fill it out so forget it.  Rather than simplify the credit though Congress wants the IRS to notify more people that they need to look at the EITC form and think, I can't figure this out and I can't afford to pay someone to fill it out so forget it.

The IRS will now be allowed to use"mass communication" including the internet and the IRS website to inform people of undeliverable refunds that the service is holding.  Just last year the IRS received over 100,000 refund checks totaling over $123 million back from the Postal Service, because the mailing address was incorrect.  That means the average check returned is over $1,000.  I think I would notice if I was missing $1,000.

Congress is also requiring the IRS to notify taxpayers when it suspects that they or their dependents identity has been stolen.  I guess I am glad they are looking out for me, but personally I want my bank and credit card company to be required to notify me when THEY think my identity is stolen.  That is where a thief actually has a chance to steal some of my money.  It seems to me that what the IRS is going to notice is if someone other than me is using my social security number on a W-2 or 1099.  I have to wonder if this has more to do with people who try to avoid paying taxes by giving out a bogus social security number.  It does tie in nicely to their announced efforts to crack down on incorrect information returns.

Speaking of which, they intend to pay for a lot of the costs in this new bill with increased penalties for failing to file or filing incorrect information returns (W-2's and 1099's).  Congress estimates they will raise $419 million dollars over 10 years with just this one provision.  Given my discussions with business owners and the apparent lack of knowledge in the business community about information return requirements, I think they are guessing low.