360° Coverage : What The NSA Can Learn From The IRS

2 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

 
 
 

30 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
2

3 days ago

Khazanah throws MAS RM6b lifeline

Aug 29 2014 5:01pm CDT | Source: Business Times Singapore

August 30, 2014 1:15 AMKHAZANAH Nasional will inject RM6 billion (SS$2.4 billion) over three years to resuscitate loss-making Malaysia Airlines (MAS) under a recovery plan that includes even an Act of Parliament. Other key moves are migrating its operations, assets and liabilities to a new company (NewCo) and slashing the workforce of 20,000 b ...
Source: Business Times Singapore   Full article at: Business Times Singapore
 

 
Update
1

4 days ago

MAS posts loss of RM307m for Q2

Aug 28 2014 5:00pm CDT | Source: Business Times Singapore

August 29, 2014 1:13 AMMALAYSIA Airlines (MAS) registered a loss of RM307 million (S$122 million) for the second quarter to end-June, but warned of worse to come in the second half when the "full financial impact of the double tra ...
Source: Business Times Singapore   Full article at: Business Times Singapore
 

 

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

Nigeria to get Japanese drug for Ebola treatment
Abuja, Sep 2 (IANS) Nigeria will soon get a Japanese drug to treat Ebola, the country's Health Minister Onyebuchi Chukwu said Monday.
 
 
Japan to aid connectivity upgrade in northeast India
Tokyo, Sep 1 (IANS) India and Japan Monday decided to strengthen cooperation for improving connectivity and socio-economic development in northeastern states of India.
 
 
Three Ebola cases recorded in Nigeria oil hub
Abuja, Sep 1 (IANS) At least three cases of Ebola virus disease (EVD) have been recorded in Nigeria's oil hub of Port Harcourt, where a fatality was confirmed last week, the country's Minister of Health Onyebuchi Chukwu said here Monday.
 
 
India, Japan to elevate strategic partnership
Tokyo, Sep 1 (IANS) Prime Minister Narendra Modi Monday said relations with Japan were of the "highest priority" for his government and announced a slew of initiatives, including turning the strategic partnership into a "special" partnership and a fast-track channel for Japanese investors.
 
 
 

Latest from the Network

Modi stresses on women empowerment, education
Tokyo, Sep 2 (IANS) Prime Minister Narendra Modi Tuesday stressed on the need for women's empowerment in the present-day world. Modi, who was addressing students of the Sacred Hearts University here, said he has...
Read more on Politics Balla
 
Country with knowledge will lead world: Modi
Tokyo, Sep 2 (IANS) Prime Minister Narendra Modi Tuesday said that 21st century is the century of knowledge and the country with "knowledge and information will lead the world". "...the one who has knowledge and...
Read more on Politics Balla
 
Eight killed in China landslides
Beijing, Sep 2 (IANS) At least eight people were killed and 24 missing Tuesday after heavy rains caused landslides in China's Chongqing province. Rescue teams, including fire-fighters and police, have evacuated over 7...
Read more on Politics Balla
 
Spain returns Colombian treasure
Bogota, Sep 2 (IANS/EFE) Spain has returned to Colombia 691 indigenous artefacts seized in a police operation 11 years ago. The items - from different epochs, cultures and regions, include objects with organic and...
Read more on Celebrity Balla
 
Travel across India for enhanced learning: Modi
Tokyo, Sep 2 (IANS) Prime Minister Narendra Modi Tuesday asked IT experts to step out of their rooms and travel across India to enhance their learning. "You will learn as much outside your rooms as you will learn...
Read more on Politics Balla
 
New anti-terror measures to be introduced in Britain: Cameron
London, Sep 2 (IANS) British Prime Minister David Cameron Monday said his country will introduce a slew of measures to prevent terror suspects from travelling abroad, imposing tougher constraints on suspected...
Read more on Politics Balla
 
I don't enjoy my voice: Romeo Santos
Los Angeles, Sep 2 (IANS) Singer Romeo Santos is often baffled by fans who pay to listen to him sing, because he hates his own voice. The 33-year-old says he hates both his speaking and singing voice, reports...
Read more on Celebrity Balla
 
Eight killed in France building collapse
Paris, Sep 2 (IANS/EFE) As many as eight people have died due to a building collapse in Paris till Monday, French emergency management services said. Firefighters had recovered before dawn Monday the bodies of two...
Read more on Politics Balla
 
Modi focuses on women's empowerment, education
Tokyo, Sep 2 (IANS) Prime Minister Narendra Modi Tuesday stressed on the need for women's empowerment in the present-day world as he began the fourth day of his visit to Japan. Modi, who was addressing students of the...
Read more on Politics Balla
 
George Clooney's back pain continues
Los Angeles, Sep 2 (IANS) Almost 10 years after filming the Oscar-nominated movie "Syriana", actor George Clooney is still feeling the effects of his on-set back injury. The actor traveled to Duke University earlier...
Read more on Celebrity Balla