10 Updates

What The NSA Can Learn From The IRS

Jan 28 2014, 11:37am CST | by

I would guess that a few years ago, few people had any idea what the National Security Agency (NSA) is or what it does. Now, this agency is fodder for conversation around the water cooler and in the...

Filed under: news

 
 
 

26 weeks ago

What The NSA Can Learn From The IRS

Jan 28 2014, 11:37am CST | by

I would guess that a few years ago, few people had any idea what the National Security Agency (NSA) is or what it does. Now, this agency is fodder for conversation around the water cooler and in the blogosphere. Whatever your personal feelings are about the issues, most would agree that the recent revelations about NSA activities have raised the level of national dialogue about the needs of government versus the interests of citizens in privacy. Lost in the in the discussion, however, is another federal agency that arguably intrudes even more into the personal lives of citizens: the Internal Revenue Service. Again, irrespective of your opinions of the appropriateness of the IRS’s reach, most would agree this agency has access to a substantial amount of data about the lives and finances of taxpayers.

Consider how the IRS has both access to information and authority to act on this information. As a business owner, this knowledge can help you avoid an unwanted run-in.

-   Filing: We take filing our taxes for granted, but it wasn’t always such a given. In fact, it took an amendment to the U.S. Constitution 100 years ago to make the income tax a permanent aspect of federal law. The NSA doesn’t expect people to file as a spy, yet most of us understand why the IRS expects income earners to declare their income and tax paid on that income. For most, it’s considered an obligation of being a citizen. In fact, the U.S. is the only country that even requires its non-resident citizens to report and pay taxes on their worldwide income.

-   Reporting: Our tax system has obligations that go well beyond income earners filing their taxes.  Individuals and institutions also are statutorily required to report on income they pay to others; and, failure to report that income can result in stiff penalties. While the NSA can’t require citizens to report others as spies, the IRS requires income providers to file 1099s, W-2s and other statements of income paid. Keep in mind these reporting requirements extend well beyond national boundaries.

  • The U.S. successfully forced Switzerland to disclose the names of wealthy Americans who hid assets in Swiss bank accounts.
  • In the last few weeks, eight jurisdictions – including the Cayman Islands, the Isle of Man and other famous tax havens – signed separate agreements with the IRS to help it implement the Foreign Account Tax Compliance Act (FATCA).  This law was enacted by Congress to uncover tax evasion.

-   Matching:  It is commonly known that the IRS aggressively matches records between those who report income and those who receive that income. I recently had a question where an employer issued a 1099 for a deferred compensation payment in 2013, but the individual did not actually receive that payment until early 2014. The recipient intends to report the income as being received in 2014. Although I didn’t have a definitive answer as to how this discrepancy will be resolved, I was adamant that the IRS will, at some point, detect this mismatch in reporting years and inquire about it.

The opportunity for the IRS to match reportings and filings is one of the reasons Congress has passed laws requiring employers to report on income items even when the income has yet to be paid. Examples include reporting on 401(k) deferrals, business-owned life insurance and other employee-related transactions. This gives the IRS a huge database of information with which to connect the dots.

In the last few years, the IRS has been given other tools to enforce its mandate to collect taxes.

-   Tax Shelters:  Nine years ago, there was a new disclosure requirement for advisors who provide “material aid, assistance or advice with respect to any reportable transaction.” In English, this translates to a requirement that tax shelters must report themselves as tax shelters. The chilling effect of this reporting requirement is exactly what the government intended. A tax shelter promoter can no longer claim caveat emptor when a taxpayer has a tax scheme torn apart on an audit. The promoter potentially will share in the prosecution and penalties. I’d imagine the NSA would love to have enforcement powers of this nature.

-   Tax Snitch: There is formal process known as The IRS Whistleblower Program. This helps catch the cheats that are outside the net cast by normal filing and reporting requirements.  One whistleblower received a payment in excess of $100 million. This program has the potential for finding so many tax cheats (and revenue) that some Senators have complained the IRS is too slow in utilizing this program.

If the federal government is to function, it has long been understood they need to collect revenue from its citizens. Most would agree they want the system to be fair and enforceable. That’s why over 150 years ago President Abraham Lincoln and Congress created the position of commissioner of Internal Revenue.  The IRS has long taken more of a stick-than-carrot approach to enforcement, and generally has been allowed to do so without much other than the predictable grumbling of the citizenry. It will be interesting to see where the national interest takes the NSA debate, but the IRS example demonstrates how policy can become institutional.   

 

Source: Forbes Business

 
Update
10

7 weeks ago

RM47mil KWSG contributions still unclaimed

Jun 9 2014 7:54am CDT | Source: Business Times Malaysia

KUALA LUMPUR: About RM47 million of contributions in the Teachers Provident Fund (KWSG) still remain unclaimed, the Dewan Raky ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
9

7 weeks ago

Gold shop lost almost RM1mil

Jun 9 2014 3:50am CDT | Source: Business Times Malaysia

KANGAR: A gold shop owner lost almost RM1 million after after the safe on in his shop was broken into by robbe ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
8

7 weeks ago

Motion to debate MAS losses in Dewan Rakyat rejected

Jun 9 2014 3:39am CDT | Source: Business Times Malaysia

KUALA LUMPUR: AN emergency motion to debate the losses incurred by Malaysia Airlines last year, amounting to RM1.2 billion was rejected by the ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
7

7 weeks ago

MH370 Tragedy: Hisham: RM27.6 mil spent on 1st phase of SAR

Jun 9 2014 2:11am CDT | Source: Business Times Malaysia

KUALA LUMPUR: Malaysia spent some RM27.6 million in its first phase of the search operations for missing Malaysia Airline flight MH370, said Acting Transport Minister, Datuk Seri Hishammud ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
6

7 weeks ago

9.1m litres of diesel seized in a month

Jun 8 2014 1:11am CDT | Source: Business Times Malaysia

PUTRAJAYA: The Domestic Trade, Cooperatives, and Consumerism ministry has seized some 9.1 million litres of diesel and property worth RM58 million since mounting ‘Operasi Diesel Selatan’ in the ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
5

7 weeks ago

Girl, 9, awarded RM2.78m compensation for medical negligence

Jun 6 2014 4:56am CDT | Source: Business Times Malaysia

KUALA LUMPUR: A nine-year-old girl who suffered brain damage during her birth at a government hospital was awarded over RM2.78 million in compensat ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
4

7 weeks ago

Malaysia's total trade in April up 12pc

Jun 5 2014 11:52pm CDT | Source: Business Times Malaysia

KUALA LUMPUR: Malaysia's total trade in April 2014 rose by 12 per cent from a year ago to RM123.86 billion due to growing trading activities, International Trade and Industry Minister Datuk Seri Must ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
3

7 weeks ago

Works Ministry to spend RM20m for upgrading works at 50 accident black spots

Jun 4 2014 11:35pm CDT | Source: Business Times Malaysia

JOHOR BARU: The Works Ministry will implement upgrading works at 50 accident prone locations in the country that have been identified this year involving an allocation of RM20 million. ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
2

7 weeks ago

Najib launches loan scheme for Ramadan traders

Jun 4 2014 10:24pm CDT | Source: Business Times Malaysia

PUTRAJAYA: Prime Minister Datuk Seri Najib Razak today launches RM45 million Ramadan Bazaar Sch ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
1

8 weeks ago

Residents bring up objection against Kidex to Suhakam

Jun 4 2014 4:49am CDT | Source: Business Times Malaysia

PETALING JAYA: A group of 20 Petaling Jaya residents held a meeting with the Human Rights Commission of Malaysia (Suhakam) over their objection against the proposed RM2.2 billion Kinrara Damansara Sky ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 

Don't miss ...

 

<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

blog comments powered by Disqus

Latest stories

OPEC daily basket price closes tad higher
Vienna, July 30 (IANS) The basket of 12 crude oils of the Organization of Petroleum Exporting Countries (OPEC) stood at $105.44 a barrel Tuesday, against $105.22 last Thursday, according to the OPEC Secretariat.
 
 
Moscow calls US sanctions 'illegitimate'
Moscow, July 30 (IANS) The economic sanctions imposed by the United States are a revenge on Russia, the country's foreign ministry said Wednesday.
 
 
EU boosts funding to fight Ebola epidemic
Brussels, July 30 (IANS) The European Union Wednesday allocated an additional 2 million euros ($2.68 million) in aid to tackle the Ebola epidemic in West Africa.
 
 
Top doctor in Sierra Leone dies of Ebola
Nairobi, July 30 (IANS/EFE) Sierra Leone's top Ebola virus doctor, Sheikh Umar Khan, died a few days after contracting the lethal disease which has claimed the lives of 672 people in Western Africa, health authorities in Sierra Leone announced Wednesday.
 
 
 

Latest from the Network

Jessica Simpson wants to be thinner?
Jessica Simpson is allegedly eager to lose more weight. The Weight Watchers spokesperson, who lost 50 pounds before marrying Eric Johnson in Montecito, California earlier this month, is said to be determined to stick to...
Read more on Celebrity Balla
 
Chris Pratt's son brought him closer to Anna Faris
Chris Pratt says his premature baby boy brought him closer to his wife, Anna Faris. The 'Guardians of the Galaxy' star and the 37-year-old actress welcomed their son, Jack, into the world nine weeks early in August 2012...
Read more on Celebrity Balla
 
Drew Barrymore pays tribute to late half-sister
Drew Barrymore has paid tribute to her estranged older half-sister, who was found dead on Tuesday (07.29.14). The 39-year-old actress offered her sympathies to her extended family after Jessica Barrymore, whom she only...
Read more on Celebrity Balla
 
G7 warns Russia faces more sanctions
London, July 31 (IANS) The G7 leaders in a joint statement Wednesday said Russia will face further economic sanctions if it continued to support rebels in Ukraine. The warning came after the EU added eight more...
Read more on Politics Balla
 
Kim Kardashian slams Rob's ex-girlfriend
London, July 31 (IANS) Reality TV star Kim Kardashian has hit out at brother Rob Kardashian's ex-girlfriend Adrienne Bailon for bad mouthing her sibling. Talking to a Latina magazine, the actress-and-singer, who dated...
Read more on Celebrity Balla
 
Kohli's significant dinner date with Vaughan (Analysis)
Southampton, July 31 (IANS/RAY) Tuesday night, India batsman and vice-captain Virat Kohli had dinner with Michael Vaughan, former England captain, at a Brazilian restaurant in Southampton. This was revealed by the...
Read more on Sport Balla
 
Few Americans believe US winning fight against terror: Poll
Washington, July 31 (IANS) Belief that the US is winning the fight against terrorism has dropped to its lowest level in more than a decade of regular tracking, a poll has found. A new Rasmussen Reports national...
Read more on Politics Balla
 
Simon Cowell will be a great dad: Ex-girlfriend
Los Angeles, July 31 (IANS) Former Playboy model Carmen Electra says that her ex-boyfriend, Simon Cowell, will be a great father to his son Eric. The 54-year-old music mogul and his girlfriend, Lauren Silverman,...
Read more on Celebrity Balla
 
Reach out to others as friends: UN chief
United Nations, July 31 (IANS) UN Secretary-General Ban Ki- moon has called upon all to reach out to one another as friends and build long-term foundations for lasting peace in the time of mistrust and violence....
Read more on Politics Balla
 
When Rita Ora forgot her lines
Los Angeles, July 31 (IANS) Singer Rita Ora found acting "difficult" as she kept forgetting her lines while filming her scenes for the upcoming erotica "Fifty Shades of Grey". The 23-year-old singer, who is playing...
Read more on Celebrity Balla