The American Dilemma and How We Can Fix It

Posts tagged ‘IRS’

READING, WRITING AND TAX FRAUD

There has been a lot of negative feedback directed at the White House for its omission in not sending a higher level individual to the rally that took place last Sunday in Paris.  Surely, we could have spared Vice President Biden or Secretary of State Kerry to attend.  If, God forbid, something had happened, they could easily have been replaced by someone equally incompetent.

While White House spokesman Josh Earnest, acknowledged that this was a small faux pas on the part of the administration, he preceded that with a variety of other explanations which bore all the validity of the explanation that “The attack on our facility in Benghazi occurred as a result of a spontaneous attack, caused by an offensive video.”

Let’s see,  “The President only found out about the rally as a result of hearing about it in the media and there wasn’t a sufficient amount of time to ensure that the proper security measures would be in place to guarantee his safety.”  So let’s think back to the funeral of Nelson Mandela which the president did attend.  There were several more days which intervened between his death and burial – and there was probably previous planning about security which would have been tethered together since he was an elderly man and his death, at some point, was expected.  So, despite what must have been greater security, do you remember the mentally ill man who, while Obama gave his eulogy, was gesticulating a translation in a pseudo-sign language style of his own invention?  Was the entirety of the Secret Service detail off in the red light district during the ceremony?

“The president was not invited to attend.”  If that is true it might speak volumes about the real state of Franco-American relationships – though it is surprising considering the fact that Presidents Hollande and Obama are both socialists.  Perhaps the French simply didn’t want the nation to be snubbed in the same way that the British were by Obama’s failure to attend Prime Minister Margaret Thatcher’s funeral.

While it seems unreasonable to expect this or any other president to expose himself to unnecessary personal risk, that didn’t seem to deter Germany’s Chancellor Angela Merkel or Israeli Prime Minister Benjamin Netanyahu, the latter being a much more likely target, from having the gumption to show up and march in the front line, arm in arm.  One could argue that with or without any American security, Obama might well be viewed by the Islamic radical terrorists as an ally rather than an opponent and would have been the safest of all world leaders present at the rally.  After all, he’s been busily freeing Guantanamo detainees and sending them back to the homeland where they can rejoin the fight to eradicate Western Civilization from the face of the map.  Well, at least we taxpayers are saving money since we spend three times more per year on one of the enemy combatants in Gitmo than we do on your basic murderer or rapist in one of our federal penitentiaries.

Now that several days have gone by since the Paris demonstration of solidarity, I think I may have hit on the real reason that Obama couldn’t bother to make it to France – other than the obvious that he was watching the playoff  games.  It is that he was fleshing out his latest idea that we should offer everyone the opportunity to attend community college, maintain an “average” average and have the taxpayers fund their education.  This may surprise some long time readers but I have to say that this might be the brightest idea that has sprung from Obama in the last six years – or perhaps ever.  Which is not to say that I am in complete agreement with it.  But let’s set aside partisanship and review this proposal on an objective basis.

I’m going to begin with an assumption that while an associate’s degree might not carry with it the potential earnings benefit of a four year bachelor’s degree, it should at the least offer its recipient at least half the potential of the more advanced parchment.  We’ll set aside the fact that about thirty percent of those holding newly conferred bachelor’s degrees are unable to find any work and more than sixty percent are holding positions for which they are overqualified for lack of suitable opportunities which would require their newly acquired expertise.  Those are mere anomalies.  There are at least a few examples of how acquiring a four year degree – or at least working toward that goal – can bring with it financial rewards.

The feds recently apprehended seven student athletes who attended the University of South Dakota who were involved in a tax fraud scheme which reportedly diverted $1.1 Million in fraudulent tax refund claims and which netted the group $400,000 which they withdrew from ATM’s before they were arrested.  Of these, six were members of the USD football team and one was a member of the university’s track and field team.  (He was probably the runner for the group).  So to those of you who criticize the quality of education that our kids get in college, I can only say, “Pshaw.”

As I write this, it occurs to me that perhaps the explanation that Obama was watching the football playoffs is indeed the real reason for his notable absence at the Parisian rally.  He might have been scouting for promising football players to add to the administration’s staff who could come up with innovative ways to pay for his community college proposal.  After all, most of those guys have four year degrees – and a fairly large percentage have felony convictions to round out their resumes.

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ROSSINI AND THE TAX MAN

As we are on the eve of that fateful day, April 15th which will usher in a total eclipse of the moon, the beginning of Passover (good Lord deliver us) and, of course, the deadline for filing our individual tax returns, it seems appropriate to ease the burden of all this weighty stuff by listening to a little soothing music.

The overture to Gioachino Rossini’s two act opera, “La Gazza Ladra,” (The Thieving Magpie) seems especially appropriate – particularly as it relates to the third of the events enumerated above.  I make that statement not so much because of the wonderful music but because of the title of the piece.

Those last minute tax preparers will probably identify with the sense of urgency that the music builds as it rushes to its final climax.  And, of course, we must not overlook the famous “Rossini crescendo” which the composer incorporated into virtually all of his work.

So sit back, enjoy, get a pot of coffee going, pull out all the papers you’ve stored in shoe boxes and know that you’re engaged in a patriotic duty as you get ready to figure out how much money you are going to send to the IRS so that Ms. Lois Lerner can enjoy a comfortable retirement.

THE SINS OF THE FATHER

“Thou shalt not bow down thyself to them, nor serve them: for I the LORD thy God am a jealous God, visiting the iniquity of the fathers upon the children unto the third and fourth generation of them that hate me.”

Exodus 20:5 (KJV)

There are some conservative American Christians who believe that the government is conducting a systematic attack on their beliefs.  They point to an increasing volume of anecdotal evidence to support this claim.  But in light of recent events, perhaps they will have to re-examine their view.

It would appear that at least one governmental agency has taken the admonition in the above Scriptural verse to heart and has decided to act as God’s instrument to fulfill it.  It may come as a surprise to most of us but that agency is the IRS.  Perhaps IRS has misread the verse from Exodus and believes that it is the Supreme Being – or at least the Supreme Enforcer of Righteousness.

Most people when they hear from the IRS are, like Queen Victoria, “Not amused.”  There is nothing very funny about anything that agency does – or threatens to have the ability to do.  That sentiment has long preceded the obvious politically motivated refusal to give conservative organizations a tax exempt determination.

But even the IRS has reached a new low – leading one to believe that somewhere there really is a bottomless pit.  Thanks to an act of Congress, the former time limit of ten years that the agency had to collect taxpayer debts has been lifted.  And the IRS has wasted no time taking advantage of its newly extended abilities to reach into the taxpayers’ pockets.

The problem isn’t that the agency is collecting monies that a specific taxpayer has failed to fork over to them.  The agency feels that it is perfectly correct to collect those funds from the descendants of the taxpayers who originally incurred them.

Now this may astound you but there are apparently some “errors” which occur in the course of governing this great country.  In fact, there are quite a few of them which occur regularly.  In previous posts I made reference to how the IRS annually sends refunds to people who fraudulently claim that the government owes them money.

From sending millions in over 200 separate refunds to a single address in Florida or similarly sending half a million bucks claimed on 100 returns to one address in Bulgaria, the agency has shown its abilities in mastering the fine art of ineptitude.  But the current rampage against the taxpayer comes not from the IRS’ own inadequate procedures but rather from another federal entity.

If you’ve been amazed at how inept the roll out of Obamacare has been, it should be no surprise that the same agency which was responsible for that debacle, HHS is also the source for other mistakes which the IRS is trying to set right.  And the particular division of HHS which apparently screwed up is none other than the Social Security Administration.

SSA not only administers retirement benefits into which all Americans are forced to pay through payroll deductions or, in the alternate, on their tax returns.  But it also administers disability payments to workers who are (purportedly) unable to work due to physical impairment or mental issues.  The second of these two programs has been fraught with fraud.  Even SSA acknowledges that.

But while the erstwhile crooks who con the taxpayers out of their hard earned dollars by making false disability claims has increased substantially in recent years, there have always been some who made false claims or received benefits after they no longer qualified.  It is these people who are currently being targeted by IRS.  Or more correctly, it is their children who are being forced to make restitution for these “overpayments.”

Let’s think about this for a moment.  Purportedly, a person received payments to which he or she was not entitled – let’s say 40 years ago.  Then, for lack of anything better to do, someone in SSA noticed that their agency had made a $350 mistake.  And they decide that going after this will help relieve the national debt.  So they inform IRS that there is a balance due them for the mistake which they originally made.

But there’s a problem.  The individual who received this overpayment died ten years earlier.  Not to be deterred by this, the IRS has figured out that their child, who was four when this problem started, is still alive and has a refund due on her return.  So the IRS flags her return and deducts the overpayment to her parents from her return and sends her a notice, explaining why her refund is $350 short of what she was expecting.

I’m not sure this program will prove to be anything near the windfall either for IRS or SSA that pursuing and shutting down fraudsters who collect around $50 MM per year in bogus refunds receive would prove to be.  Frankly, I doubt it.

As this will do little to contribute to federal revenues, I can only assume that the IRS is adhering to the principles espoused in our quote from Exodus.  It will be interesting to see if some religious group decides to file suit to block this program, citing the once venerable precept of “Separation of church and state.”  Meanwhile, it appears that the sins of the father will indeed be heaped upon the children.  We’ll have to stay tuned to see for how many generations that will last.

FORM AND SUBSTANCE (MY MORNING AT THE IRS)

Once upon a time in America before there was such a thing as “e-filing” and people actually had jobs, we were consigned to self-report our annual financial activity to the IRS using plain old paper.  Those were dark, primitive days indeed.  With only a month to go until the Ides of April, I reflected back on those barbaric days and remembered an experience I had with that tax collection agency.

For once I decided to be proactive. I was not going to wait for the booklet to arrive in the mail. I was going to get the forms I needed to file my income tax return and get it done before midnight on April 14th.  Despite the blustery winter weather I was not going to be deterred.  I was on a mission.

As I prepared to leave the office I realized that I might be able to provide a benefit to my like-minded employees. So I explained that I was headed to the IRS to pick up tax forms and would be happy to get any that my employees needed. Several people spoke up and said that they would appreciate my doing that for them.

When the list was compiled, there were 7 different forms (and Instruction Books) and a total of 37 copies that were required. I headed out on a snowy early March day to the IRS office at 230 S. Dearborn Street in Chicago.

In  the IRS’ lobby there was a large sign that indicated forms were available on the 17th floor. I went to the elevator, my list in my pocket.  Exiting the elevator – another large sign had an arrow directing me to the room where forms were available. I followed the arrow and went into the room.  Much to my surprise and delight, other than the two IRS employees who were behind the counter, I was the only person there.

I went up to the counter and pulled the list from my pocket. I waited patiently as the two employees discussed their dates over the weekend.  I waited politely at the counter – figuring that one of them would eventually deign to assist me.  After five minutes, the female IRS employee came over to the counter and said, “Can I hep you?”

I said, “Yes, please. I would like to get the forms and instruction booklets on this list.” I gave my handwritten list to her.

“Do you has a number?”

“A number?,” I asked.

“Yes. I can’t hep you unless you has a number.”  She pointed to the entrance of the room where by the side of the door I saw a rack of hard plastic numbers hanging on the wall– the kind you used to see in a butcher shop or bakery.

I said, “No, I don’t have a number but I’ll go get one.”

I came back with a number (1) and when I returned to the counter this woman looked at me as though I were new to the room.

“Do you has a number?”

“I do.”

She looked at the electronic display above the plastic cards and called, “Number 1.”  I handed her my number and my list.  She pressed the button under the counter to advance the number to “2”.

As she turned from me she took perhaps three steps and then returned to the counter.

She said, “I can’t fill this order.”

Thinking that the forms had not yet been printed I said, “When do you expect to get the forms in your office?”

She said, “We got the forms. But you only allowed to get five different forms and a total of 25 copies on one day.”

In a perverse way this made sense to me. I could see how it would be inconvenient if a person came in to get a large number of forms – thus holding up everyone else. But since I was the only customer I was willing to have her fill the first 25 items on the list and then wait in line, take another number and wait my turn for the rest.  I explained my plan and asked if that would be okay.

“No. You kin only get a total of 25 copies of the forms per day.”

My usual gentility and patience started to fade dramatically. So I said, “What if you fill the first 25 items on my list. I then go back to my office and ask my 71 year old secretary to walk a mile and a half in the cold and hand you the list to get the remaining forms. Would you give them to her?”

“Yep.”

“Now don’t you think that’s a little silly?,” I asked.

I don’t know if I struck a chord with her over my 71 year old secretary or what exactly motivated this woman, but without answering me, she turned away with my list and about 10 minutes later returned with my complete order.  Plus I got a bonus.  In addition to all the forms that I had requested she provided three additional ones. They were entitled, “FORMS TO REQUEST FORMS.”

I used to be critical of former Treasury Secretary Tim Geithner’s failure to pay his own taxes correctly. I mean, after all, he was the head of the Federal agency that has the IRS within its domain.

But as I thought back on this situation I realized that Sec. Geithner was probably innocent of any fraudulent activity.  The reason he failed to complete his return properly was – HE COULDN’T GET THE FORMS!

SIZE MATTERS

If you start your own business or work for one that someone else just began, the importance of individual accountability moves out of classroom theory into real world fact.  When you’re doing the work, paying the bills, trying to develop new customers, your life is literally on the line.  And if you have one or two employees helping you it is pretty obvious who is pulling his weight and who is not.

Things go well and a few years later you’ve been able to add a few more employees, and then yet more.  All of a sudden it’s harder for you to monitor how your employees are meeting their goals – and it is easier for them to shirk some of their responsibilities because a larger staff means greater anonymity.  This is a case where size really does matter.

Speaking from experience, the larger the staff size grows arithmetically, the number the problems increase geometrically.   So how do we address this issue?

The normal procedure is that we move from being a hands on supervisor and we start developing policies and procedures.  We take from our experience and write down ways that can enhance the good ones and we look to avoid repeating those that led to poor results.

Then we start to build an infrastructure of employees whom we trust to be able to oversee certain parts of our business to which we cannot devote our full attention.  The successful business owner/manager will, as part of this process develop ways to measure how effectively his employees, both supervisors and those she supervises are doing.

Accountability is essential in this process.

But what if you have an organization that does not have accountability?  What if your employees get paid their regular check whether they do an exceptional or poor job in performing their duties?  In private industry you ultimately have a company that is going to lose market share and if the problem grows large enough, you have a company that ceases to exist.

In government you have the IRS.

A recent story in Yahoo News describes how a huge organization like the IRS can let Billions of dollars get refunded through an identity theft scheme.  Apparently, this is not all that complicated to concoct as their estimate is that 1.5 million fraudulent claims for refunds are going to be processed by that agency.  The story suggests that the IRS may have paid out more than $5 Billion in fraudulent refund requests in 2011 alone.

When people are motivated they will always find ways to “game” the system.  Sadly, that is the nature of some of us and probably always will be.  I do not expect that the IRS, any other government agency or even for-profit corporations will be able to detect and catch all fraud.  But look at these examples of how egregious some of these refund requests were.  Even a novice bookkeeper should have caught some of these.

“In one example, investigators found a single address in Lansing, Mich., that was used to file 2,137 separate tax returns. The IRS issued more than $3.3 million in refunds to that address. Three addresses in Florida, the epicenter of the identity theft crisis, filed more than 500 returns totaling more than $1 million in refunds for each address.”

“In another troubling scenario, hundreds of refunds were deposited into the same bank account — a red flag for investigators searching for ID thieves who may be filing for refunds for multiple people. In one instance, the IRS deposited 590 refunds totaling more than $900,000 into one account.”

“We found multiple reasons for the IRS’s inability to detect billions of dollars in fraud,” J. Russell George, the Treasury Department’s inspector general for tax administration, said in a statement. “At a time when every dollar counts, these results are extremely troubling.”

For a real life look at how inefficiency runs rampant within this tax collection agency, I refer you to an earlier post.  Everything described in that post happened exactly as I described, (because I am not sufficiently creative to make any of it up).

https://juwannadoright.wordpress.com/2011/12/08/my-morning-at-the-irs/

This story gives new meaning to the old phrase, “Hi, I’m with the IRS and I’m here to help you.”  From the size and amount of the fraudulent refunds being issued, I guess they are fulfilling their mission – at your expense and mine.

YOUR TAX PESOS AT WORK

Between J. P. Morgan Chase’s $2 Billion trading loss and the video below which I have linked for your viewing enjoyment – I guess this is a weekend to write about financial matters.

The video is from an Indianapolis news station and details their investigation into how the IRS is sending our tax dollars to illegal immigrants based on fraudulent returns in which they are claiming credits for children who live in Mexico.

This is not meant to be an indictment or statement about illegal aliens, but rather, a statement about the people who run our tax collection system – all one hundred thousand of them.

As you will see, this fraud costs the Treasury approximately $4.2 Billion per year.  But that is not the most disheartening aspect of the problem.  What is discouraging is that the IRS has been aware of the problem for years – and has done nothing to stop it.

For those who think that the solution to all our problems is enacting even more regulations, perhaps you may reconsider your position after you see how those who run the government turn your tax dollars into pesos.

Incidentally, when you click on the link you will see a popup asking whether you would like to subscribe to the site that provided the video.  You do not need to do so in order to view this piece – merely “X” out of the box.

http://us2.campaign-archive1.com/?u=d09acbc15543c8083c507e85c&id=6bf9a2273b&e=6661d79a70

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