RANGEL BILL CLAMPS DOWN ON UNREPORTED FOREIGN INCOME
Washington, D.C. - Legislation introduced by House Ways and Means Committee Chairman Charlie Rangel, D-N.Y., and Rep. Richard E. Neal, D-Mass., dubbed the Foreign Account Tax Compliance Act of 2009, would impose heavy new penalties on U.S. taxpayers who fail to properly report income held in banks abroad - while tax accountants and other advisors who assist U.S. individuals in forming or acquiring foreign entities would themselves be subject to new reporting requirements.
The legislation would also put new pressure on foreign financial institutions to report the identities of all U.S. accountholders to the Internal Revenue Service. Taxpayers who deposit funds in offshore banks that refuse to enter into such reporting agreements with the IRS would be subject to a stiff new U.S. withholding tax on deposits of U.S.-source income or gross proceeds from the sale of certain assets producing U.S.-source income.
The bill drew a solid thumbs-up from Obama administration officials during recent hearings before Neal's Ways and Means Subcommittee on Select Revenue Measures.
Testifying before that panel, IRS Chief Counsel William J. Wilkins said that the bill meshes neatly with his agency's ongoing campaign to convince taxpayers to "voluntarily" disclose and pay tax on offshore income.
So far this strategy is "already producing results, [as] over 7,500 people came forward under its special offshore voluntary compliance program that ended in mid-October," he told the subcommittee.
The next step, he said, will be for the IRS to begin "mining the voluntary disclosure information from people who have come forward" to identify accountants and other professionals who enabled taxpayers to evade U.S. taxes abroad.
"We will be scouring this information to identify financial institutions, advisors and others who promoted or otherwise helped U.S. taxpayers hide assets and income offshore and skirt their tax responsibilities at home," he told Congress. -Ken Rankin
TIGTA CITES COSTS, DELAYS IN IRS MODERNIZATION
Washington, D.C. - The Treasury Inspector General for Tax Administration has concluded that cost overruns and schedule delays with the Internal Revenue Service's Business Systems Modernization Program have increased during 2009.
An annual report on TIGTA's review of the program stated that the modernization program has not achieved the same level of success with meeting cost estimates as in the prior year, nor has the trend of improvement it demonstrated in each of the prior three years continued.
From May 2008 to May 2009, five of the 17 project milestones scheduled for completion were between 30 and 375 percent over budget. In the previous year, 19 of the 20 scheduled milestones were completed within the 10 percent cost estimate. In addition, 82 percent of the milestones were completed on schedule in the current year, compared with 90 percent in the previous year.
The IRS has recognized that it faces significant challenges. The immediate challenge in meeting the requirements of the next phase of project development and systems integration is the future of its Customer Account Data Engine. The data engine is intended to replace the Individual Master File as the IRS's tax account database.
The TIGTA review also concluded that the IRS is continuing to develop and deploy modernized applications. The modernization program involves integrating thousands of hardware and software components, and replacing outdated technology.
The IRS plans to implement a process improvement strategy and is considering using elements from the Individual Master File and the current Customer Account Data Engine to re-engineer the IRS tax account management process. The review concluded that until the re-engineered database's use is implemented and made available for integration with other systems and applications, continued improvement to taxpayer account management will be curtailed.
TIGTA also noted that the IRS has yet to consider the challenge in modernizing the management of business taxpayer accounts. "They have not set forth a definitive plan," said Alan Duncan, TIGTA assistant inspector general for audit (security and information technology services). "It has yet to be considered."
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