Friday, June 5, 2009

Congress will remove 20% deposits in Offer in Compromise cases

House Ways and Means Oversight Subcommittee Press Release: Chairman Lewis on IRS Operations and Fiscal Year 2010 Budget Proposals

June 5, 2009

111th Congress

House Committee on Ways and Means

For Immediate Release:

Thursday, June 4, 2009


Matthew Beck (W&M) - (202) 225-8933

Brenda Jones (Lewis) 202-225-3801

Chairman Lewis on IRS Operations and Fiscal Year 2010 Budget Proposals

WASHINGTON, DC --Ways and Means Oversight Subcommittee Chairman John Lewis (D-GA), delivered the following statement today at a Subcommittee hearing reviewing IRS operations and budget proposals for Fiscal Year 2010 with IRS Commissioner Douglas Shulman.

"Again this year, the Subcommittee is holding an oversight review of the Internal Revenue Service. We intend to examine the operations of the agency, its budget, and its service to taxpayers.

"This is the first time the Commissioner has been before the Subcommittee this Congress. We welcome him. This is also the first time many of the Members of this Subcommittee will have the opportunity to review the agency. I look forward to their participation.

"Today's hearing is a chance for the IRS to assure this Subcommittee and the public that it is acting fairly --fair in how it treats taxpayers and fair in how it treats its employees. Overall, I think the agency has done a good job. However, there is always room for improvement.

"I do not think it is fair that five million taxpayers received busy signals when they called this year for help and almost 18 million taxpayers hung up before getting through. If the agency needs additional resources to meet its customer service mission, we need to know that.

"I am also concerned that low-income taxpayers are having their Social Security payments levied by the agency. And, it is a shame that victims of identity theft do not have their cases resolved with more urgency.

"Where this Subcommittee can help the agency improve, we will. Taxpayers wanting to settle their tax debts should not be required to make a down payment with their offer. Small businesses should not be run out of business by tax shelter penalties aimed at big corporations. These issues require tax law changes that the Ranking Member and I support.

"Finally, I want to be sure that the agency is being fair to its employees. Each year, the agency's employees collect about $2.7 trillion and process 250 million returns. As fewer paper returns are filed, the agency has started to consolidate. In these difficult times, I ask the agency to take every reasonable step to ensure that employees at these locations, such as Atlanta and Andover, are not without jobs.

"Thank you."

Commissioner Testifies on State of IRS Operations Before House Oversight Subcommittee
IRS Commissioner Douglas H. Shulman, in testifying before the House Ways and Means Oversight Subcommittee on June 4 in Washington, D.C., discussed the IRS's operations and budget proposals for fiscal year 2010. Shulman addressed a wide range of topics presented by subcommittee members, ranging from telephone responses and the Making Work Pay credit, to tax shelters and the IRS's international tax enforcement efforts.

Telephone Responses
Several lawmakers questioned Shulman on reports that numerous taxpayers have had difficulty getting through to IRS telephone representatives to discuss their positions. Subcommittee Chairman John Lewis, D-Ga., stated, "I do not think it is fair that 5 million taxpayers received busy signals when they called this year for help and almost 18 million taxpayers hung up before getting through."

Shulman responded that the IRS has received an enormous volume of telephone calls in recent tax years regarding the tax benefits provided in recent economic stimulus legislation; however, the Service was attempting to maintain its attention to both paper communications with taxpayers and its telephone services. Shulman also reported that the IRS is encouraging taxpayers to make greater use of the Service's website and that the IRS has changed the script of its telephone greeting to tell callers what their expected wait time will be before speaking with an IRS representative. Shulman promised to monitor the Service's progress on the issue and to continue improvement.

Making Work Pay Credit
A subcommittee member asked Shulman about potential discrepancies between the IRS's recently released withholding tables under the new Making Work Pay credit and the actual amount of the credit that taxpayers will receive. The member questioned whether some taxpayers would be left with an unwanted tax burden due to inaccurate withholding from their wages. Shulman replied that the tables were more of a guide to taxpayers rather than an exact indication of what they are actually required to withhold. By definition, he stated, the tables cannot possibly accommodate the specific situation of every taxpayer, so they are more of an average.

Shulman also pointed out that the IRS and Treasury did recently correct a problem with withholding tables for pensioners. These individuals may have been withholding too little from their monthly receipts, since they were not entitled to the credit.

IRS 2010 Budget Proposals
In discussing the IRS's budget proposals for the 2010 fiscal year, Shulman reported three main focuses:

(1) Cracking down on international tax evasion;

(2) Requiring return preparers who file a certain volume of returns to file electronically; and

(3) Eliminating the 20-percent down payment for taxpayers proposing offers-in-compromise (OICs).

With regard to the latest proposal, Shulman estimated that the down payment requirement was responsible for the sharp decline in taxpayer requests for offers in compromise (OICs) in recent tax years. Shulman further asserted that, given the tumultuous state of the U.S. economy, taxpayers who do not have the money to pay their income tax liabilities are likely not willing to attempt to propose an OIC when there is not even a guarantee that the IRS will accept their offer. He stated that he was disturbed by this trend and promised to perform an internal review to get to the root of the matter.

Tax Shelters
Some subcommittee members also questioned whether Shulman's recent initiatives to crack down on tax shelters have been disproportionately geared toward small businesses. Lewis stated, "Small businesses should not be run out of business by tax shelter penalties aimed at big corporations."

In response, Shulman pointed out that it was Congress that passed strict liability penalties for failing to report a listed transaction --those transactions with often the most questionable tax positions. The draconian nature of the law itself, Shulman reasoned, gave the IRS little discretion in enforcing the penalty, often resulting in taxpayers unwittingly getting caught up in enforcement of a law that was not intended to affect them.

International Tax Enforcement
Finally, ranking subcommittee member Charles Boustany, R-La., voiced concern that the IRS's latest efforts to crack down on offshore tax abuses may be incorrectly punishing taxpayers attempting to do business abroad and engage in legitimate tax planning. "Tax evasion is a federal crime, and individuals who break the law by hiding their income in offshore accounts should be aggressively pursued and punished to the fullest extent of the law. But these efforts should not be confused with policies such as the ability of U.S. businesses to defer tax on foreign profits --a long-standing principle of sound tax policy that puts our businesses on a more even playing field with foreign competitors."

As he has asserted on previous occasions, Shulman emphasized that the IRS's latest focus has primarily been directed toward individual taxpayers avoiding tax by hiding assets in offshore accounts and multi-national businesses that abuse the rules. Shulman pointed out that there was a difference between legitimate businesses that happen to disagree with the IRS about interpretation of the law and those who push the boundaries of the law.

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