From his home in the quiet village of Rorbas, outside Zurich, Rudolf M. Elmer is chipping away at the centuries-old traditions of Swiss banking secrecy.
Mr. Elmer, who ran the Caribbean operations of the Swiss bank Julius Baer for eight years until he was dismissed in 2002, moved to Mauritius in the Indian Ocean and began parceling out to global tax authorities what he said were the secrets of his former employer.
Now back in his native country, he continues to disclose the inner workings of Julius Baer — one of many Swiss institutions that investigators say help clients evade billions of dollars in taxes by routing money through offshore havens in the Caribbean and Switzerland.
“It is a global problem, and I am only the messenger who provides the bad news, or even better, the truth,” Mr. Elmer, 54, wrote in a recent e-mail message. “Offshore tax evasion is the biggest theft among societies and neighbor states in this world.”
He said that he would fly on Tuesday to Düsseldorf, Germany, where the tax authorities are putting him up in a five-star hotel as he prepares to divulge client secrets.
Mr. Elmer joins a group of whistle-blowers that includes Bradley Birkenfeld, the former UBS private banker who disclosed the bank’s secrets, pushing it toward a settlement with the United States government, and Heinrich Kieber, a former data clerk at the LGT Group, the Liechtenstein royal bank, who stole client data and funneled it to American and European authorities.
Mr. Elmer’s disclosures are attracting particular interest as the Internal Revenue Service and the Justice Department embark upon a strategy of “it takes a rogue to catch a thief” to encourage insiders who engaged in wrongdoing to reveal the secrets of their employers.
Lawyers and Congressional investigators who have begun to review Mr. Elmer’s claims say that his internal bank and client documents provide fresh ammunition for American authorities as they take their crackdown on offshore tax evasion beyond UBS to clients of other banks.
Mr. Elmer has given documents to the I.R.S., a Senate subcommittee investigating tax evasion and investigators for Robert M. Morgenthau, then the Manhattan district attorney, his lawyer Jack Blum said. They cover more than 100 trusts, dozens of companies and hedge funds and more than 1,300 individuals, from 1997 through 2002, Mr. Blum said.
Mr. Elmer contends that his documents detail the undisclosed role of American investment management companies in funneling American, European and South American clients who wished to avoid taxes to Julius Baer; the backdating of documents to establish trusts and foundations used to evade taxes; and the funneling of trades for hedge funds and private equity firms from high-tax jurisdictions through Baer entities in the Cayman Islands.
“What he has is the confirmation of something very important: that a number of other banks in the voluntary disclosure process are turning up,” Mr. Blum said, referring to 14,700 wealthy Americans, many of them UBS clients, who came forward to disclose their secret accounts last year. The I.R.S. declined to comment on Mr. Elmer’s case but said in a statement that it was “investigating other banks that have enabled Americans to evade taxes.”
Source
Monday, February 15, 2010
Monday, December 28, 2009
IRS nixes tax deductions for houses donated for firefighter training
UPPER ARLINGTON, Ohio - The battered house on Sherwin Road was put to good use before the fire department burned it to the ground.
SWAT teams barged through the front door in an exercise on dealing with domestic violence. Rescue crews scattered mannequins around the house and blew smoke through the halls to simulate a meth lab explosion. Firefighters set fires in one room after another and practiced putting them out. Then, in one last drill, they torched the whole place.
Five years later, though, a dispute still smolders over the homeowner's attempt to claim a $287,000 charitable tax deduction for donating the house to the fire department, which has burned down at least 32 such homes in Upper Arlington since 1988.
The Internal Revenue Service is trying to stop homeowners from claiming such deductions.
Lured by the prospect of free demolition, homeowners around the country sometimes offer their houses to the local fire department for training purposes. The department burns down the house, clearing the way for the owner to build a bigger and better home.
In court cases in Ohio and Wisconsin, the IRS is arguing that because such houses are already slated for demolition, donating them for fire training isn't an act of charity.
The dispute adds a new element of controversy to the decades-old debate over whether the risks associated with "live burns" — more than a dozen firefighters have been killed in the past two decades — outweigh the training benefits.
Fire chiefs say live burns supply invaluable training for volunteer departments, which make up the bulk of the nation's firefighters. And some fear that the tax disputes will discourage donors from coming forward.
Nobody tracks the number of live burns each year, but fire officials say they are increasingly rare because of mounting safety and environmental restrictions and because fewer homes are up for demolition in this slumping economy.
"We need to keep our skills current. Those opportunities are going to become fewer and farther between," said Fire Chief Mitch Ross in Upper Arlington, the wealthy Columbus suburb where the Sherwin Road home owned by James Hendrix burned down in 2004.
Churches, corporations and cities with vacant properties also donate buildings for fire training. Sometimes it is a dilapidated old barn, other times a sprawling suburban house. (The Hendrix home, not including the land, was appraised at $287,400).
It's impossible to know exactly how many people have tried to claim such deductions; the IRS would not comment.
Steven Willis, a professor at the University of Florida who studies income tax law, said a charitable deduction can be no greater than the value of whatever was donated, and a house given to a fire department has negative value, since the owner was going to have to pay somebody to get rid of it.
"The whole idea of a charitable deduction is that you give something to charity and you don't get anything back, right?" said Paul Caron, a tax scholar at the University of Cincinnati. "When you give $100 to the Catholic Church, you don't get anything for that $100."
The IRS maintains in court papers in the Wisconsin case that the homeowners do not qualify for a deduction because they are donating only a "partial interest" in their home, rather than the entire property. The agency also says homeowners are letting firefighters only use the property, not donating it in full.
But a lot of work goes into preparing a house to be burned down, including a detailed inspection by environmental authorities, said Terry Grady, a lawyer representing Hendrix, who wants the IRS to refund him $100,590 in "erroneously collected" taxes. Hendrix built a new house on the property.
"They have to, in fact, pay their mortgage off. They have to make sure there's no asbestos in the house," Grady said. "And you know, conversely, the benefits to the fire department are just immense."
Although the demolition is free, the homeowner is responsible for clearing away the debris.
ESPN commentator Kirk Herbstreit, who also lives in Upper Arlington, let firefighters burn his home in 2004. The former Ohio State football star's claim of a $330,000 tax deduction was rejected a year later. Herbstreit declined to comment.
A case similar to the Hendrix dispute has also unfolded in Chenequa, Wis., where Theodore Rolfs filed for a $76,000 tax deduction on his lakefront home that was burned in 1998. The trial concluded in 2006. Rolfs is still waiting for a verdict.
Rolfs, who had been told it was common practice to receive the deduction, was taken aback when the IRS rejected his.
"Their arguments didn't make any sense," he said.
At Rolfs' house, firefighters wheeled a truck down to the shore and practiced pumping lake water onto the flames, a crucial training exercise in Chenequa, which has no fire hydrants, said Rolfs' attorney, Michael Goller.
Environmental laws in some states ban live burns. In other states, most fire departments adhere to safety guidelines that say windows should be boarded up, floors inspected for sturdiness and shingles and carpets stripped away.
Three firefighters were trapped by flames and perished in a 100-year-old farmhouse in Milford Township, Mich., during a controlled burn in 1987. In February 2007, a fire recruit was killed in a training exercise in a Baltimore rowhouse.
Source
SWAT teams barged through the front door in an exercise on dealing with domestic violence. Rescue crews scattered mannequins around the house and blew smoke through the halls to simulate a meth lab explosion. Firefighters set fires in one room after another and practiced putting them out. Then, in one last drill, they torched the whole place.
Five years later, though, a dispute still smolders over the homeowner's attempt to claim a $287,000 charitable tax deduction for donating the house to the fire department, which has burned down at least 32 such homes in Upper Arlington since 1988.
The Internal Revenue Service is trying to stop homeowners from claiming such deductions.
Lured by the prospect of free demolition, homeowners around the country sometimes offer their houses to the local fire department for training purposes. The department burns down the house, clearing the way for the owner to build a bigger and better home.
In court cases in Ohio and Wisconsin, the IRS is arguing that because such houses are already slated for demolition, donating them for fire training isn't an act of charity.
The dispute adds a new element of controversy to the decades-old debate over whether the risks associated with "live burns" — more than a dozen firefighters have been killed in the past two decades — outweigh the training benefits.
Fire chiefs say live burns supply invaluable training for volunteer departments, which make up the bulk of the nation's firefighters. And some fear that the tax disputes will discourage donors from coming forward.
Nobody tracks the number of live burns each year, but fire officials say they are increasingly rare because of mounting safety and environmental restrictions and because fewer homes are up for demolition in this slumping economy.
"We need to keep our skills current. Those opportunities are going to become fewer and farther between," said Fire Chief Mitch Ross in Upper Arlington, the wealthy Columbus suburb where the Sherwin Road home owned by James Hendrix burned down in 2004.
Churches, corporations and cities with vacant properties also donate buildings for fire training. Sometimes it is a dilapidated old barn, other times a sprawling suburban house. (The Hendrix home, not including the land, was appraised at $287,400).
It's impossible to know exactly how many people have tried to claim such deductions; the IRS would not comment.
Steven Willis, a professor at the University of Florida who studies income tax law, said a charitable deduction can be no greater than the value of whatever was donated, and a house given to a fire department has negative value, since the owner was going to have to pay somebody to get rid of it.
"The whole idea of a charitable deduction is that you give something to charity and you don't get anything back, right?" said Paul Caron, a tax scholar at the University of Cincinnati. "When you give $100 to the Catholic Church, you don't get anything for that $100."
The IRS maintains in court papers in the Wisconsin case that the homeowners do not qualify for a deduction because they are donating only a "partial interest" in their home, rather than the entire property. The agency also says homeowners are letting firefighters only use the property, not donating it in full.
But a lot of work goes into preparing a house to be burned down, including a detailed inspection by environmental authorities, said Terry Grady, a lawyer representing Hendrix, who wants the IRS to refund him $100,590 in "erroneously collected" taxes. Hendrix built a new house on the property.
"They have to, in fact, pay their mortgage off. They have to make sure there's no asbestos in the house," Grady said. "And you know, conversely, the benefits to the fire department are just immense."
Although the demolition is free, the homeowner is responsible for clearing away the debris.
ESPN commentator Kirk Herbstreit, who also lives in Upper Arlington, let firefighters burn his home in 2004. The former Ohio State football star's claim of a $330,000 tax deduction was rejected a year later. Herbstreit declined to comment.
A case similar to the Hendrix dispute has also unfolded in Chenequa, Wis., where Theodore Rolfs filed for a $76,000 tax deduction on his lakefront home that was burned in 1998. The trial concluded in 2006. Rolfs is still waiting for a verdict.
Rolfs, who had been told it was common practice to receive the deduction, was taken aback when the IRS rejected his.
"Their arguments didn't make any sense," he said.
At Rolfs' house, firefighters wheeled a truck down to the shore and practiced pumping lake water onto the flames, a crucial training exercise in Chenequa, which has no fire hydrants, said Rolfs' attorney, Michael Goller.
Environmental laws in some states ban live burns. In other states, most fire departments adhere to safety guidelines that say windows should be boarded up, floors inspected for sturdiness and shingles and carpets stripped away.
Three firefighters were trapped by flames and perished in a 100-year-old farmhouse in Milford Township, Mich., during a controlled burn in 1987. In February 2007, a fire recruit was killed in a training exercise in a Baltimore rowhouse.
Source
Tuesday, December 15, 2009
SC gov's state flights may raise tax liabilities
COLUMBIA, S.C. — South Carolina Gov. Mark Sanford's use of state planes for personal and political trips could open him and the state to federal tax penalties because the flights never were recorded as taxable fringe benefits.
Tax experts who reviewed an Associated Press analysis of more than 100 flights since 2003 said numerous trips could have triggered Internal Revenue Service rules that require adding the value of flights to the governor's wages, making them subject to taxes. The analysis shows nine flights since 2008 alone could be worth $19,019 in taxable benefits.
"The state appears to take the position that they assume that all of these are business flights," said Marianna Dyson, a former IRS fringe benefits lawyer and one of the nation's leading experts on the topic. By doing that, the state "ignored the rules applicable to the use of an employer's aircraft."
The governor's office contends the need to report any of Sanford's trips as income is preposterous because every flight is official business. "It's all working condition fringe benefits that we don't believe is taxable," said Sanford spokesman Ben Fox.
An AP investigation this summer showed Sanford traveled to numerous personal and political events even though state aircraft only are to be used for official business. While the governor has said he did nothing wrong, he has yet to explain how he properly used state planes for all those flights.
The governor on many occasions mixed official business — such as a meeting with newspaper editors — with a political event like a speech to a GOP group — and tax experts say those trips could require Sanford to pay taxes on some flights. It would be up to the IRS to decide, though an agency spokesman would not comment on how governors and states comply with fringe benefit laws.
Plus, Sanford likely needs to pay taxes on the flights taken by his children because they have no official role in state government.
The two-term governor's travel has been under scrutiny since he returned from a secret June rendezvous in Argentina with a woman he later called his soul mate. He has reimbursed the state $3,300 for travel related to a 2008 trip during which their longtime friendship became physical.
Ensuing AP investigations have shown Sanford flew in pricey commercial airline seats despite state requirements for low-cost travel; failed to disclose on ethics or campaign finance documents his use of private planes; and spent $63,000 for charter jets on European trade trips when commercial travel was available for a fraction of the cost.
Sanford's travel is being investigated by the State Ethics Commission, and lawmakers who've urged him to resign are considering whether to try to force him from office. The governor, who says he is trying to save his marriage, insists he's staying.
His spokesman was given detailed information on more than 100 trips with potential tax implications but refused to detail why each was not taxable.
"These claims defy common sense, and the governor stands where he stands — which is right there with literally hundreds upon hundreds of elected officials who also include their family on trips to public events, just as it falls squarely in line with former governors," Fox said.
Sanford, a legend of frugality for telling staff to use both sides of Post-It notes, took his children with him on yearly taxpayer-funded flights from the family's coastal plantation to Columbia to light the state's Christmas tree and to national governors conferences. Experts said the children's flights were nearly always subject to fringe benefit rules.
Bob Kamman, a fringe benefits expert in Phoenix who reviewed the AP research, which was based on flight logs and schedules, said at least 68 flights could be taxable.
He said business and personal travel can mix without tax consequences as long as the primary reason for a trip is business.
In August 2005, Sanford flew to the northwestern part of the state and spent less than two hours meeting with different newspapers before being driven to North Carolina for two nights and a day of "personal time" at a private lodge. The plane returned to Columbia without the governor.
"You have to draw the line somewhere on 'primarily personal' and 'primarily business,' and this is where it should be drawn, especially when the plane has to fly back to Columbia before picking him up again," Kamman said.
Other governors have faced similar scrutiny. An AP review in December estimated former Illinois Gov. Rod Blagojevich could owe more than $60,000 on non-business flights worth at least $225,000. Former Alaska Gov. Sarah Palin's settlement of an ethics investigation for trips taken with her children included a promise to pay any back taxes.
As with private employers, a state is supposed to report taxable benefits for its employees. But in South Carolina, the agencies that manage state aircraft and submit tax forms say the value of state aircraft use has never been reported. That's in part because the agencies rely on officials to verify they use the aircraft properly, and then assume that all of them do.
Failing to report benefits as income could subject the state to a penalty of 25 percent of what wasn't reported. For the flights since 2008, that tab could approach $5,000.
Dyson, the former IRS fringe benefit lawyer, said the idea was to protect taxpayers by using rules aimed at curbing abuses of corporate executives. She said most states have lagged the corporate world in properly reporting the benefits.
"These rules, which are designed to be fair, protect shareholders," she said. "By the state ignoring these rules, I think it encourages more personal use of the aircraft."
Source
Tax experts who reviewed an Associated Press analysis of more than 100 flights since 2003 said numerous trips could have triggered Internal Revenue Service rules that require adding the value of flights to the governor's wages, making them subject to taxes. The analysis shows nine flights since 2008 alone could be worth $19,019 in taxable benefits.
"The state appears to take the position that they assume that all of these are business flights," said Marianna Dyson, a former IRS fringe benefits lawyer and one of the nation's leading experts on the topic. By doing that, the state "ignored the rules applicable to the use of an employer's aircraft."
The governor's office contends the need to report any of Sanford's trips as income is preposterous because every flight is official business. "It's all working condition fringe benefits that we don't believe is taxable," said Sanford spokesman Ben Fox.
An AP investigation this summer showed Sanford traveled to numerous personal and political events even though state aircraft only are to be used for official business. While the governor has said he did nothing wrong, he has yet to explain how he properly used state planes for all those flights.
The governor on many occasions mixed official business — such as a meeting with newspaper editors — with a political event like a speech to a GOP group — and tax experts say those trips could require Sanford to pay taxes on some flights. It would be up to the IRS to decide, though an agency spokesman would not comment on how governors and states comply with fringe benefit laws.
Plus, Sanford likely needs to pay taxes on the flights taken by his children because they have no official role in state government.
The two-term governor's travel has been under scrutiny since he returned from a secret June rendezvous in Argentina with a woman he later called his soul mate. He has reimbursed the state $3,300 for travel related to a 2008 trip during which their longtime friendship became physical.
Ensuing AP investigations have shown Sanford flew in pricey commercial airline seats despite state requirements for low-cost travel; failed to disclose on ethics or campaign finance documents his use of private planes; and spent $63,000 for charter jets on European trade trips when commercial travel was available for a fraction of the cost.
Sanford's travel is being investigated by the State Ethics Commission, and lawmakers who've urged him to resign are considering whether to try to force him from office. The governor, who says he is trying to save his marriage, insists he's staying.
His spokesman was given detailed information on more than 100 trips with potential tax implications but refused to detail why each was not taxable.
"These claims defy common sense, and the governor stands where he stands — which is right there with literally hundreds upon hundreds of elected officials who also include their family on trips to public events, just as it falls squarely in line with former governors," Fox said.
Sanford, a legend of frugality for telling staff to use both sides of Post-It notes, took his children with him on yearly taxpayer-funded flights from the family's coastal plantation to Columbia to light the state's Christmas tree and to national governors conferences. Experts said the children's flights were nearly always subject to fringe benefit rules.
Bob Kamman, a fringe benefits expert in Phoenix who reviewed the AP research, which was based on flight logs and schedules, said at least 68 flights could be taxable.
He said business and personal travel can mix without tax consequences as long as the primary reason for a trip is business.
In August 2005, Sanford flew to the northwestern part of the state and spent less than two hours meeting with different newspapers before being driven to North Carolina for two nights and a day of "personal time" at a private lodge. The plane returned to Columbia without the governor.
"You have to draw the line somewhere on 'primarily personal' and 'primarily business,' and this is where it should be drawn, especially when the plane has to fly back to Columbia before picking him up again," Kamman said.
Other governors have faced similar scrutiny. An AP review in December estimated former Illinois Gov. Rod Blagojevich could owe more than $60,000 on non-business flights worth at least $225,000. Former Alaska Gov. Sarah Palin's settlement of an ethics investigation for trips taken with her children included a promise to pay any back taxes.
As with private employers, a state is supposed to report taxable benefits for its employees. But in South Carolina, the agencies that manage state aircraft and submit tax forms say the value of state aircraft use has never been reported. That's in part because the agencies rely on officials to verify they use the aircraft properly, and then assume that all of them do.
Failing to report benefits as income could subject the state to a penalty of 25 percent of what wasn't reported. For the flights since 2008, that tab could approach $5,000.
Dyson, the former IRS fringe benefit lawyer, said the idea was to protect taxpayers by using rules aimed at curbing abuses of corporate executives. She said most states have lagged the corporate world in properly reporting the benefits.
"These rules, which are designed to be fair, protect shareholders," she said. "By the state ignoring these rules, I think it encourages more personal use of the aircraft."
Source
Saturday, November 28, 2009
Reputed mobster Rudy Fratto charged with tax evasion in new federal case
Reputed mobster Rudy Fratto has been charged with tax evasion in a new federal case, the IRS Criminal Investigation Division said Tuesday. Fratto, 65, of Darien, has previously been identified by authorities as a lieutenant in the mob's Elmwood Park street crew. New information filed in federal court alleges that Fratto failed to report nearly $200,000 in income in 2005. Fratto this year was among the targets in a civil racketeering claim filed by Joseph Fosco, son of the late Teamsters treasurer Armando Fosco, who alleged that Fratto, reputed Chicago Outfit figure John "No Nose" DiFronzo and others tried to extort $400,000 from him. Lawyers for the men have contested the suit. An attorney for Fratto was not immediately available Tuesday to address the new criminal case.
Sunday, November 15, 2009
GETTING PERSONAL: Madoff Investors Face Tax Deadline
NEW YORK (Dow Jones)--For many investors caught in the Bernard Madoff fraud, the ensuing tax woes just aren't going away.
While some investors are entitled to refunds of taxes they paid on money they never got, many still haven't seen a cent from the Internal Revenue Service. Others have not left the starting gate on claiming refunds.
The IRS has issued some refunds, but the "vast majority" of Madoff's victims have not gotten them yet, according to Ron Stein, founder of Madoff-help.com, and president of Good Harvest Financial Group in Huntington, N.Y., a fee-based financial planning and investment advisory firm.
Source
While some investors are entitled to refunds of taxes they paid on money they never got, many still haven't seen a cent from the Internal Revenue Service. Others have not left the starting gate on claiming refunds.
The IRS has issued some refunds, but the "vast majority" of Madoff's victims have not gotten them yet, according to Ron Stein, founder of Madoff-help.com, and president of Good Harvest Financial Group in Huntington, N.Y., a fee-based financial planning and investment advisory firm.
Source
Wednesday, October 28, 2009
Noted Fraud Investigator Fights Big IRS Penalty
Noted Miami fraud investigator Lewis B. Freeman has sued the Internal Revenue Service to challenge a $4.8 million civil penalty he says the agency wrongly assessed against him. The IRS imposed the penalty for Freeman's alleged involvement in promoting an abusive tax shelter involving pre-tax employee parking benefits.
The federal-court lawsuit by the veteran forensic accountant and lawyer asserts he had "no role" in any illegal scheme. In an interview with Forbes, Freeman said he sued because his administrative appeal within the IRS could not be completed before the quick deadline specified by federal law for bringing such lawsuits.
"This is like an episode from 'The Twilight Zone,'" he said. Freeman's firm, Lewis B. Freeman & Partners Inc., is frequently hired in fraud cases and often serves as a court-appointed receiver or trustee. The slogan on its Web site is "We make the numbers clear." Quick with a quip, Freeman himself is regularly quoted by journalists as an expert on fraud and white-collar crime. He readily agreed that the mere existence of the litigation was embarrassing to him.
The big question is whether it becomes a lot more than that. The IRS, which as a matter of policy declines media comment on litigation involving taxpayers, has not yet had time to answer Freeman's complaint in court.
As the story was told by Freeman's complaint in U.S. District Court, Miami, and by his lawyers, five years ago Freeman was one of four shareholders in an unnamed corporation that provided counseling to companies on employee benefits. One topic concerned so-called 132(f) plans, named after the tax code section that allows tax breaks for commuter mass transit and parking costs. That section permits employees to divert a portion of their pay for commuter-cost reimbursement; the employee gets the money tax-free and the employer does not have to pay the Social Security and Medicare taxes it would owe on regular salary.
Source
The federal-court lawsuit by the veteran forensic accountant and lawyer asserts he had "no role" in any illegal scheme. In an interview with Forbes, Freeman said he sued because his administrative appeal within the IRS could not be completed before the quick deadline specified by federal law for bringing such lawsuits.
"This is like an episode from 'The Twilight Zone,'" he said. Freeman's firm, Lewis B. Freeman & Partners Inc., is frequently hired in fraud cases and often serves as a court-appointed receiver or trustee. The slogan on its Web site is "We make the numbers clear." Quick with a quip, Freeman himself is regularly quoted by journalists as an expert on fraud and white-collar crime. He readily agreed that the mere existence of the litigation was embarrassing to him.
The big question is whether it becomes a lot more than that. The IRS, which as a matter of policy declines media comment on litigation involving taxpayers, has not yet had time to answer Freeman's complaint in court.
As the story was told by Freeman's complaint in U.S. District Court, Miami, and by his lawyers, five years ago Freeman was one of four shareholders in an unnamed corporation that provided counseling to companies on employee benefits. One topic concerned so-called 132(f) plans, named after the tax code section that allows tax breaks for commuter mass transit and parking costs. That section permits employees to divert a portion of their pay for commuter-cost reimbursement; the employee gets the money tax-free and the employer does not have to pay the Social Security and Medicare taxes it would owe on regular salary.
Source
Thursday, October 15, 2009
IRS Urged To Create Federal Registry For Tax Preparers
Martin Vaughan Of DOW JONES NEWSWIRES WASHINGTON -(Dow Jones)- State tax officials urged the Internal Revenue Service Wednesday to create a national, public registry of tax preparers in an upcoming IRS proposal to more strictly regulate the profession.
IRS officials questioned the state regulators as to which types of preparers the registry should cover and what kinds of penalties might apply for violations of ethical or competency standards.
The Wednesday public meeting was to help the IRS gather input as it prepares to make recommendations to the Treasury Secretary by the end of the year on new standards for tax return preparers.
One question the agency faces regarding the standards is whether, in addition to registering with the IRS, tax preparers should be required to pass a test or meet continuing education requirements.
Karen Hawkins, director of the IRS Office of Professional Responsibility, which oversees tax preparers, said the answer might be yes, based on findings by government investigators of widespread incompetence and abuse.
"The data seem to encourage some kind of testing regime to ensure competency," she said. She was referring to a 2008 undercover investigation of 28 preparers by the Treasury Inspector General for Tax Administration, or TIGTA, which found substantial errors on a majority of returns prepared for TIGTA agents.
Hawkins also queried the state officials about what recourse states had to revoke licenses of tax preparers when they were found to have violated standards, even if no criminal conduct was suspected.
IRS Commissioner Doug Shulman probed state officials as to whether lawyers and certified public accountants should also be required to register, and to meet any other requirements imposed.
Jamie Woodward, acting commissioner of the New York Department of Taxation and Finance, said New York lawmakers exempted CPAs and lawyers from a year-old New York program to oversee return preparers.
Currently, taxpayers may be represented before the IRS by CPAs, lawyers, or enrolled agents - tax return preparers who have passed an exam and are licensed by the IRS. But there are no federal requirements governing who may prepare a tax return for someone else, leading to a huge industry of independent tax preparers who are not licensed by the IRS and may have no tax training.
Source
IRS officials questioned the state regulators as to which types of preparers the registry should cover and what kinds of penalties might apply for violations of ethical or competency standards.
The Wednesday public meeting was to help the IRS gather input as it prepares to make recommendations to the Treasury Secretary by the end of the year on new standards for tax return preparers.
One question the agency faces regarding the standards is whether, in addition to registering with the IRS, tax preparers should be required to pass a test or meet continuing education requirements.
Karen Hawkins, director of the IRS Office of Professional Responsibility, which oversees tax preparers, said the answer might be yes, based on findings by government investigators of widespread incompetence and abuse.
"The data seem to encourage some kind of testing regime to ensure competency," she said. She was referring to a 2008 undercover investigation of 28 preparers by the Treasury Inspector General for Tax Administration, or TIGTA, which found substantial errors on a majority of returns prepared for TIGTA agents.
Hawkins also queried the state officials about what recourse states had to revoke licenses of tax preparers when they were found to have violated standards, even if no criminal conduct was suspected.
IRS Commissioner Doug Shulman probed state officials as to whether lawyers and certified public accountants should also be required to register, and to meet any other requirements imposed.
Jamie Woodward, acting commissioner of the New York Department of Taxation and Finance, said New York lawmakers exempted CPAs and lawyers from a year-old New York program to oversee return preparers.
Currently, taxpayers may be represented before the IRS by CPAs, lawyers, or enrolled agents - tax return preparers who have passed an exam and are licensed by the IRS. But there are no federal requirements governing who may prepare a tax return for someone else, leading to a huge industry of independent tax preparers who are not licensed by the IRS and may have no tax training.
Source
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