Friday, April 11, 2014

Protecting Taxpayers from Incompetent and Unethical Return Preparer

Senate Finance Committee, Protecting Taxpayers from Incompetent and Unethical Return Preparer: (detailed coverage here):

      In search of an honest accountancy
      Were Napoleon Bonaparte alive today, he would surely call Britain a “nation of accountants” rather than a “nation of shopkeepers”. With around 330,000 professionally qualified accountants, the United Kingdom has more accountants than the combined total of lawyers, doctors, surgeons, engineers and architects. This vast social investment has failed to deliver good corporate governance, meaningful company accounts, or worthwhile audits. But it has produced a tide of sleaze and the destruction of tax revenues. Accountancy firms are a ripe case  for Ed Miliband’s quest for responsible capitalism.

      Newsweek:  How to Cheat on Your Taxes, by David Cay Johnston (Syracuse):
      There's never been a better time to cheat on your taxes. Or a better way.
      As millions of Americans rush to file their tax returns on time, trying to be ever-so-careful in hopes of avoiding an audit or, far worse, prosecution, they will find it instructive, and infuriating, to learn about Jerry Curnutt.
      Curnutt can show people how to cheat on their taxes and not get caught. His trick won't work if you are a wage earner, but those rich enough to invest in real estate partnerships have escaped paying billions of dollars in the past decade by using this technique.
      Now Curnutt's mission in life, at age 76, is to get states and the IRS to go after these cheats. ...
      [T]he tax-cheat ploy Curnutt uncovered is remarkably easy. On Form 1065, the one partnerships file, just leave Line 10 on Schedule K blank, or report a smaller figure than the real one.
      Why does that one line go unnoticed when the IRS selects tax returns for audit? IRS software scans only for what it is told to look for. (Think of those Star Trek episodes in which the Enterprise scans a planet for life, detects none and then discovers life forms the scanners were not tuned to notice.)
      This week, news broke that the IRS effectively fails to audit massive partnerships, like hedge funds and private equity funds, even though corporations of the same size are under constant IRS audit. A short video, "Tax Analysts Video Examines Audit-Proof Businesses," explains how partnerships escape audits.
      Curnutt knows this because he is a tax detective. He retired from the Internal Revenue Service in 2000 as one of its top snoops, overseeing all investment partnerships. Using his desktop computer, Curnutt discovered a simple way to cheat that no one at the IRS had noticed. Call it Curnutt cheating.
      For his brilliant sleuthing, the IRS gave Curnutt commendations and multiple cash awards, each for about $1,000. It sent him around the country to conduct 64 training sessions so IRS auditors could learn how to efficiently spot these cheats. He also trained state tax auditors from California, Indiana, New Jersey and New York.

      Washington Post:  A Week Before Tax Day, IRS Misses Crucial Windows XP Deadline