A truly great day for American democracy! I look forward to more indictments to follow – and to Trump’s prosecution, conviction and incarceration.
Let’s celebrate with some BUZZ.
* Scott Hodge, President Emeritus & Senior Policy Advisor at the Tax Foundation, tells it like it is explaining “Why Congress Is More to Blame than IRS for $26 Billion in Refundable Tax Credit Overpayments” at the TAX FOUNDATION website -
“Over the past three decades, lawmakers have increasingly turned to the Internal Revenue Service (IRS) to deliver social and economic benefits through the tax code rather than traditional federal agencies. As a result, the IRS now administers 21 refundable and non-refundable tax credits for individuals, such as the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC), and roughly two dozen more tax breaks for corporations, such as the green energy tax credits enacted in the Inflation Reduction Act.
Because tax credits do not have the same built-in metrics and accountability that typically accompany formal spending programs, little is known about the efficacy of these tax programs. IRS data can tell us how many taxpayers claimed a tax credit and how much it reduced their tax liability but cannot tell us if the credit changed taxpayer behavior or decision-making.”
The main problem with the erroneous practice of distributing federal social welfare program benefits through the Tax Code -
“Unlike most federal benefit programs, the IRS cannot control in advance who claims the benefit. Traditional social benefit programs such as Medicaid, Temporary Assistance for Needy Families (TANF), and the Supplemental Nutrition Assistance Program (SNAP) require a lengthy application process and involve case workers who interview and pre-screen applicants to validate their eligibility.
Not so with tax credits and deductions. Tax benefits are self-validating. In other words, it is up to the taxpayer (or their preparer or software) to determine their eligibility for the tax break. The only method by which the IRS can verify eligibility for a refund is after the tax return has been submitted. Only then can the IRS check a return’s accuracy with costly enforcement tools, such as computer software, or through an audit.”
One example of the huge cost of tax fraud from the erroneous practice (highlight is mine) -
“The EITC has a long history of erroneous overpayments. Indeed, based on the data available on PaymentAccuracy.gov, between 2004 and 2022, the EITC error rate averaged 25 percent. After adjusting for inflation, EITC overpayments totaled $351 billion over that 18-year period.”
The bottom line of the post –
“ . . . lawmakers should avoid delivering social and economic benefits through the tax code whenever possible and work to simplify or repeal the tax expenditures already in the tax code.”
I have been saying this for years – most recently here..
* Kay Bell provides a detailed discussion of the IRS plan for a truly free direct online filing option in “IRS to run free Direct File pilot in 2024” at DON’T MESS WITH TAXES.
* And Kay tells us “Most states also offer free online tax filing options”.
I have used the New Jersey free-file options for my 1040 clients for years. I especially like the relatively new updated system. Click here.
* The NSTP BLOG (National Society of Tax Professionals) answers the question “SECURE ACT 2.0 – When Does the RMD Start?” -
“If the RMDs were started before 2023, the changes do not affect them. Anyone who turned 72 during or before 2022 follows the RMD rules in place at the start of 2022. Those who turned 72 in 2022 must take their first RMD no later than April 1, 2023, and their second RMD by December 31, 2023, unless they qualify for an exception.
If the individual turns 72 in 2023, their first RMD will be for 2024 (the year they turn 73) and can be taken as late as April 1, 2025.”
TTFN
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