The Chairman’s Report July 8, 2022

Millions of Destroyed Tax Forms Deal Reviled IRS Fresh Black Eye -

• In March of 2021, the IRS shredded 30 million paper-filed information returns as a solution to the pandemic-related backlog.
• The IRS explained the documents were destroyed because their computer systems could not process them and needed to free up computer space for new documents for the 2021 tax filing system.
• Adam Markowitz, vice president of Howard L. Markowitz PA CPA, said the destruction of the tax forms won’t end up on most taxpayers’ radars, but there could be some documents that were destroyed that were very important for certain taxpayers.“The general public already hates the IRS,” he said. “This certainly isn’t going to help.”
• Grover Norquist, president of the conservative advocacy group Americans for Tax Reform, said a commonality between the destroyed forms and past IRS controversies is they came to light because they were discovered by outside entities.“They’re killing their credibility,” he said. “‘Trust us’ doesn’t work when you have lied through omission.”  Failing to disclose the destruction of the tax forms is “not the way to ask for a raise,” Norquist added.
• Rep. Bill Pascrell (D-N.J.), chair of the House Ways and Means subcommittee charged with oversight of the IRS, said he wanted IRS Commissioner Charles Rettig gone.“I’m not going to recognize him as the director because he’s not acting like one. What are you going to do? After the problem jump up and down and say, ‘We need $20 billion’?” Pascrell told Bloomberg Tax. “We already put money in there. I don’t know how they’re spending it.”

MAY 17, 2022 GAO REPORT

• In recent years, the IRS audited taxpayers with incomes below $25,000 and those with incomes of $500,000 or more at higher-than-average rates. However, audit rates have dropped for all income levels — with audit rates falling the most for taxpayers with incomes of $200,000 or more.
• IRS officials blamed the decline in audit rates on staffing decreases and the fact that it takes more staff time and expertise to handle complex higher-income audits. According to IRS officials, those types of audits are usually more complex and require staff review. Lower-income audits are typically more automated, allowing the IRS to continue performing such audits even with fewer staff.
• “Auditing requires auditors to properly respond to taxpayers with increasingly complex business and investment activities,” wrote Douglas O’Donnell, deputy commissioner of services and enforcement at the IRS, in response to the report. “Greater complexity requires greater sophistication and skill as well as applying more time to perform the necessary review of information and to properly apply the law. The more complex the audit, the more time is required of our most experienced auditors and others involved (e.g. international and valuation) and Chief Counsel. The IRS has lost many thousands of employees to attrition, including those with the most sophisticated skills. We have been unable to replace them due to shrinking appropriations.”
• House Ways and Means Oversight Subcommittee chair Bill Pascrell, D-New Jersey said, “The findings by the GAO on IRS auditing rates are another five-alarm fire bell for our national tax system,” Pascrell said in a statement Tuesday. “Over the last decade, accountability for the wealthiest tax cheats has plummeted so far it almost hits the floor. Looking at the numbers, a tax filer making less than $25,000 a year is more than twice as likely to be audited as someone with between $200,000 and $500,000 in income. I worry well-off taxpayers are not going to be pursued at the rate things are going.”

CONCLUSION

• Lower and middle income earners are much better off under the FAIRtax than under the current income tax thanks to the prebate that completely untaxes spending up to the poverty level.  You take care of your family’s basic needs before you pay a dime to the federal government.
• The FAIRtax eliminates federal withholding and payroll taxes.  Workers bring home the full amount of their paychecks.
• Since you control what you buy, how much you spend and when you spend it, the FAIRtax gives you back control of when you pay your taxes and how much you pay.
• The FAIRtax clearly shows how much tax you pay on every retail receipt.  The true cost of the federal government will no longer be hidden from us.
• The FAIRtax is incredibly simple.  It doesn’t require tens of thousands of pages of incomprehensible laws, regulations, rulings and court decisions to define and explain it.
• The FAIRtax is collected by the states and remitted to the federal government.  No administration or enforcement is required at the federal level, so instead of sucking up billions more of our tax dollars, the IRS is completely eliminated.
• The FAIRtax completely eliminates tax returns.  No more keeping receipts.  No more personal or business audits.  No more sensitive personal data in government computers that can be hacked or leaked for political purposes.
• The FAIRtax dramatically decreases the cost of doing business.  There will be no more tax liability and compliance costs being passed on to consumers in the prices of every product and service we buy.
• The FAIRtax levels the playing field between American and foreign manufacturers in the world market.  Foreign products will no longer enjoy a price advantage over comparable American products because the prices of American products will no longer contain the embedded costs of the income/payroll tax system.
• Congress can no longer grant special favors to their friends and punish their enemies by manipulating the tax code.  That will have to be done with legislation that is much more open to public scrutiny.
• The FAIRtax actually taxes the wealthy.  With no exemptions, deductions and loopholes, it’s mathematically impossible for people not to pay their fair share.