Wednesday, April 24, 2013


* No surprise here.  THE HILL reports that IRS Overpaid Up to $13.6B in Low-Income Tax Credits, Report Finds”.

The Internal Revenue Service (IRS) overpaid between $11.6 billion and $13.6 billion in tax credits designed to help low-income families in fiscal 2012, the Treasury Department announced in a report released Monday.

The overpayments account for 21 percent to 25 percent of the tax credits issued under the Earned Income Tax Credit (EITC), the IRS estimated.

The report from the Treasury Inspector General for Tax Administration, the department's IRS watchdog, highlights the difficulties faced by the agency in properly issuing refunds and credits under the popular program.

Though the fiscal 2012 overpayment was among the agency's lowest in a decade, since 2003, as much as $132.6 billion has been improperly distributed as part of the EITC.”

How many times do I have to say it?  Refundable credits are bad fiscal and tax policy.  The Earned Income Credit should NOT be in the Tax Code.

* I have always told clients and readers to keep the hard copy of their Form 1040 (or 1040A) and all attached schedules and forms forever, most recently in “Tax Tip: How Long Should I Save My Tax Records" at MAINSTREET.COM.  As I say in the TT – “You never know when the information on a prior year’s return will come in handy for a variety of tax or financial reasons, or just to satisfy personal curiosity”. 

Fellow tax blogger “Tax Mama” Eva Rosenberg apparently agrees with me, and over at MARKETWATCH.COM she lists in detail several reasons why you should “Never Throw Away Your Tax Returns”.

* Kay Bell, the yellow rose of taxes, warns “Don't Become a Charity Scam Victim in the Wake of This {now Last} Week's Terrible Events in Boston and West, Texas” at DON’T MESS WITH TAXES.

Good advice!

* Claudia Buck discusses what could happen if you fall victim to one of those “pennies on the dollar” so-called “tax resolution” companies who advertise on tv in “Personal Finance: When Tax 'Help' is Just a Mirage” at THE SACREMENTO BEE.

* Joe Kristan agrees with me this time!  In his post “Robot Returns?” at the ROTH AND COMPANY TAX UPDATE BLOG he shares my concerns about the proposed “autofill” return.  And he offers the following comment on my bottom line –

That would actually make sense.”

See, as I always say, great minds to think alike.

* We have a friend in Taxpayer Advocate Nina Olsen!  At the website of the Office of the Taxpayer Advocate we are told –

The National Taxpayer Advocate reiterates her longstanding recommendation that the individual AMT be repealed.” 

Hey, idiots in Congress.  Are you listening?   

* Fellow tax blogger TAXGIRL Kelly Phillips Erb is interviewed in “Enterprising Lawyer: Kelly Phillips Erb” at ATTORNEY @ WORK.

* Kelly’s fellow FORBES.COM blogger David John Marotta asks the question Is A $3 Million IRA Sufficient For Retirement?

He is talking about BO’s proposal to cap the accumulation in tax-preferred retirement accounts at $3 Million.  

He answers his own question (and suggests BO’s “understanding of financial planning is fundamentally flawed”) with the correct answer (highlight is mine) -

You may believe the government needs to collect more money in taxes. But this proposal is an awful way to do it. Money in traditional retirement accounts may grow tax free. However the entire amount is ultimately taxed during the withdrawal phase.

During that delay, the government’s portion grows at market rates of return. Were the government to collect its portion early, it would forgo years of growth. Government revenues have benefited greatly from these tax-preferred accounts. To suggest that collecting tax and spending this tax more quickly collects $9 billion over 10 years is a suspect claim.”  

Savings is good.  The more savings the better for the economy.  Capping retirement account accumulation ain’t going to raise taxes or help the economy.  As someone else pointed out, the wealthy will just find other ways to invest tax deferred. 

David continues to show his wisdom when he concludes –

No legislation should inhibit individuals from taking care of their own retirement. Government officials know very little about retirement planning. They haven’t even had the foresight to keep Social Security solvent.”


No comments: