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

 
 
 

38 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

8 weeks 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 slashin ...
Source: Business Times Singapore   Full article at: Business Times Singapore
 

 
Update
1

8 weeks 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 tragedies o ...
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

Mexico joins efforts to combat Ebola outbreak in West Africa
Mexico City, Oct 25 (IANS) Mexico is joining the international efforts to combat an outbreak of the deadly Ebola virus in West Africa, the foreign affairs ministry said Friday.
 
 
Both US nurses recover from Ebola: hospitals
Washington, Oct 25 (IANS) Both US nurses who contracted Ebola while caring for a patient from Liberia have recovered from the potentially deadly disease, the hospitals that treated them said Friday.
 
 
UN gives Rwanda $7.2 mn for policy planning
Kigali, Oct 25 (IANS) The government of Rwanda and One UN Rwanda Friday signed 7.2 million dollars financing deal to build capacity in data generation and enhance evidence based on policy planning.
 
 
US nurse with Ebola to be discharged from hospital
Washington, Oct 24 (IANS) A US nurse infected with the Ebola virus disease while caring for a patient from Liberia in Texas will be discharged from hospital soon, the US National Institutes of Health (NIH) said Friday.
 
 
 

Latest from the Network

Second MERS case reported in Qatar
Doha, Oct 23 (IANS) A 43-year-old man in Qatar has tested positive for Middle East Respiratory Syndrome (MERS) in the second confirmed case of the deadly virus in 10 days, media reported Thursday. The patient had...
Read more on Business Balla
 
Two people die in Pakistan bomb blast
Islamabad, Oct 23 (IANS) At least two people were killed and 12 others injured in an explosion that took place in Pakistan's Balochistan province Thursday, media reported. The bomb was planted on a motorcycle, Dawn...
Read more on Politics Balla
 
Trott extends contract with Warwickshire till 2017
London, Oct 23 (IANS) England batsman Jonathan Trott, whose mental issues led to his abrupt departure from last winter's Ashes tour, has confirmed his successful comeback to competitive cricket by signing a new three-...
Read more on Sport Balla
 
Srikanth, Kashyap big movers in BWF rankings
Kuala Lumpur, Oct 23 (IANS) Indian men shuttlers Kidambi Srikanth and Parupalli Kashyap jumped seven places each in the latest Badminton World Federation (BWF) rankings released Thursday while Olympic bronze medallist...
Read more on Sport Balla
 
Alvin Stardust dead
London, Oct 23 (IANS) English singer Alvin Stardust died after a short illness. He was 72. Stardust's manager confirmed the news about his demise Thursday, reports mirror.co.uk. He was recently diagnosed with...
Read more on Celebrity Balla
 
Indian man reunited with family after 40 years
Dubai, Oct 23 (IANS) An Indian man, who had disappeared from his hometown in Kerala nearly 40 years ago, has been found by his family at a hospital in Dubai in the UAE, a newspaper report said. Now in his 60s, Abdulla...
Read more on Politics Balla
 
Srikanth, Kashyap, Saina rise in world rankings
Kala Lumpur, Oct 23 (IANS) Indian men shuttlers Kidambi Srikanth and Parupalli Kashyap jumped seven places each in the latest released Badminton World Federation (BWF) rankings Thursday while Olympic bronze medallist...
Read more on Sport Balla
 
Flintoff signs for Big Bash side Brisbane Heat
Brisbane, Oct 23 (IANS) Former England captain and all-rounder Andrew Flintoff, who retired from international cricket in 2009, Wednesday confirmed that he will play for Brisbane Heat in the Big Bash League (BBL) this...
Read more on Sport Balla
 
OPEC daily basket price falls again
Vienna, Oct 23 (IANS/WAM) The basket of 12 crude oils of the Organization of Petroleum Exporting Countries (OPEC) closed at $81.94 a barrel Wednesday compared to $82.09 Tuesday, the OPEC Secretariat said. The new OPEC...
Read more on Business Balla
 
Lopez to sign multi-million dollar deal?
Los Angeles, Oct 23 (IANS) Singer-actress Jennifer Lopez is reportedly in the final stages of securing a multi-million dollar deal to perform in Las Vegas. The 45-year-old is being offered $350,000 per show at The...
Read more on Celebrity Balla