IRS lagging badly on customer service, report says
Many national media outlets wrote articles on the annual report from National Taxpayer Advocate Nina Olson, which was released on January 9. The taxpayer advocate runs an independent office within the IRS and submits a report each year to Congress.
We’ll start with this one from the USA Today on problems with IRS customer service. According to the report, only 61 percent of the more than 100 million customer service phone calls made to the IRS last year were answered.
The report also noted the agency has not done a good job in recent years dealing with walk-in customers at local offices and responding on a timely basis to letters. Olson cited an 8 percent cut in IRS funding and staffing since 2010 as the cause, the article stated.
“Tax preparation and filing assistance is now, for the most part, privatized,” the report said. “That is, for a taxpayer to comply with his or her requirement to file a tax return, the taxpayer must pay for assistance, pay for software, and pay for advice.”
Clear Bitcoin tax rules needed, taxpayer advocate says
Richard Rubin and Carter Dougherty of Bloomberg wrote about Olson wanting the IRS to give taxpayers clear guidance on how it should handle transactions involving digital currencies, including Bitcoin.
Olson listed digital currency as one of the twenty-five most serious issues encountered by taxpayers. Spending Bitcoins to purchase goods may trigger capital gains and losses or ordinary income and losses, which have different tax rates, the article stated.
“According to Olson’s report, a big distinction for the IRS to make is whether Bitcoin is property, in which case capital gains rules would apply with a top basic rate of 20 percent,” Rubin and Dougherty wrote. “If it’s treated like a ‘nonfunctional currency,’ ordinary income tax rates would apply with a top rate of 39.6 percent.”
IRS top cop says the agency is too hard on offshore tax dodgers
In a CNNMoney.com article, Lynnley Browning wrote: “The Congressionally appointed watchdog, Nina E. Olson, unleashed a fresh critique Thursday of the IRS's amnesty programs for Americans with undeclared offshore bank accounts. The unmistakable message from Olson, also known as the national taxpayer advocate: Many Americans get screwed over financially by entering the programs.”
The IRS Offshore Voluntary Disclosure Program, comprised of three initiatives since 2009, including one ongoing, is intended to lure tax cheats out of the woodwork and discourage wealthy Americans from hiding assets overseas, the article stated.
For the 2009 initiative, the report found that the average taxpayer ended up paying penalties nearly four times, or 386 percent, of the basic tax owed. Additionally, Olson found that the bottom 10 percent of those who entered the 2009 program, as measured by an average account balance of $44,885, got hit with penalties equal to nearly six times the amount of tax owed, according to the article.
“The penalties are extraordinarily high as compared with most other penalties the IRS administers,” Olson said in the report.
Pension drag on earnings may reverse
Michael Rapoport of the Wall Street Journal reported on January 8 that large companies, such as AT&T and Verizon Communications Inc., could show stronger results than expected when they report fourth-quarter earnings in the coming weeks because they switched to “mark-to-market” pension accounting to make it easier for investors to gauge plan performance.
“With the switch, pension gains and losses flow into earnings sooner than under the old rules, which are still in effect and allow companies to smooth out the impact over several years,” he wrote. “Companies that switch to valuing assets at up-to-date market prices may incur more volatility in their earnings, but it offers a more current picture of a pension plan’s health and its contribution to the bottom line.”
According to Rapoport, instead of using mark-to-market pension accounting, most companies filter pension gains and losses into earnings gradually, and compute pension performance using an estimated rate of return, not the actual return.
SEC charges Diamond Foods over nutty accounting
Diamond Foods and its former CEO agreed to a $5 million settlement with the US Securities and Exchange Commission (SEC) on January 9 after the packaged snack-food company allegedly used a fraudulent accounting scheme to jack up earnings, CNNMoney.com reported.
In addition to the settlement, former CEO Michael Mendes has agreed to pay $125,000, after voluntarily forfeiting $4 million in compensation.
In 2012, Diamond was forced to restate its earnings for the previous two fiscal years after revealing it had misreported the prices it paid to buy walnuts, the article stated.
Republicans call for removal of Obama supporter leading IRS targeting probe
House Republicans are not happy that the person leading the US Department of Justice’s investigation of the IRS targeting scandal is one of President Obama’s political supporters.
“In a letter sent to US Attorney General Eric Holder, the lawmakers said they've learned trial attorney Barbara Kay Bosserman is leading the probe,” FoxNews.com reported. “They detailed federal campaign finance records showing she's given more than $6,000 to Obama's two presidential campaigns – and urged Holder to remove her from the case.”
Dr. Who accountant jailed for fraud
Our site in England, AccountingWEB UK, reported on January 7 that a former BBC production accountant was sentenced to two years in prison after pleading guilty to seventeen fraud charges amounting to £80,000.
Oliver Ager worked on twenty episodes of Dr. Who in 2007 and 2008, and hospital drama Casualty for seven episodes between 2008 to 2012. He was fired from his job by BBC Finance following allegations of fraud in October 2012.