GAO SAYS IRS 2003 FINANCIALS ARE GOOD AND BAD: The General Accounting Office said that fiscal 2003 financials from the Internal Revenue Service were “fairly presented in all material aspects.” However, the GAO said that the service “had to rely on resource-intensive compensating processes” to prepare its financial statements due to serious deficiencies in financial systems and internal control weaknesses.
While the GAO said that the IRS in fiscal 2003 continued to make great strides in a number of areas, such as property and equipment inventory records and control of software licenses, it also added that the “lack of a financial management system that can produce timely, accurate and useful information needed for day-to-day decisions continues to be one of the largest obstacles facing IRS management.”
The GAO concluded that the IRS remains “unable to produce reliable, timely financial and cost-based performance information for decision-making, or to fully address the financial management and operational issues that affect its ability to fulfill its responsibilities as the nation’s tax collector.”
For its part, the IRS agreed with the report and said that only by integrating its new financial management systems could it overcome the majority of weaknesses cited in the auditor general’s report.
Everson says IRS Helped Curb Tax Shelter Abuse: The Internal Revenue Service’s increasingly aggressive crackdown on abusive tax shelters appears to be the key reason that major accounting firms have backed away from these tax avoidance schemes, IRS Commissioner Mark Everson told congressional investigators.
Testifying at the second day of Senate Government Affairs Subcommittee hearings into the role of accountants and other professionals in the “tax shelter industry,” Everson noted that witnesses from KPMG, Ernst & Young and PricewaterhouseCoopers who testified earlier indicated that “the biggest accounting firms no longer engage in mass marketing” of abusive tax shelters.
“If this is true,” he said, “we believe that IRS efforts may have played a significant role in this development.”
According to the tax commissioner, accounting firms and their clients “may have recognized the increased risk of detection of tax returns claiming tax benefits from abusive tax avoidance transactions.”
One federal regulator at the Senate hearings conceded that his agency is not equipped to crack down on tax shelter abuse by accountants or businesses.
Federal Reserve Banking Supervision and Regulation Director Richard Spillenkothen told the subcommittee that government bank examiners “are not legal or tax experts” and “are not trained to identify violations of non-banking laws or compliance with the tax code.” He also cautioned against holding bankers responsible for abusive tax shelter activities promoted by their customers’ accountants.
IRS LAUNCHES ONLINE PRODUCTS SUITE: The Internal Revenue Service has unveiled e-services, a suite of Internet-based tools that enables users access to client information and provides tax professionals with more options for working electronically with the IRS.
The three new e-services tools are:
● Registration. Preparers must register online to create an electronic account. The registration process is a one-time process.
● Preparer Tax Identification Number Application, or PTIN application. This allows paid preparers to receive a PTIN immediately online, and eliminates the need to complete and mail a paper Form W-7P.
● Interactive Taxpayer Identification Number Matching, or TIN Matching. This is a pre-filing service offered to banks or others that pay income subject to backup withholding. Authorized payers can match up to 25 taxpayer identification number and name combinations against IRS records before submitting an information return.
Preparers can register for e-services through the Tax Professional’s page on IRS.gov.
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