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IRS to Hire Thousands of Armed Tax Agents to Enforce Health Care Laws

March 23rd 2003

" the IRS will need to hire between 11,800 and 16,500 new agents to enforce the bill."

Top IRS officials have been working with Democrats on Capitol Hill to determine how the agency will enforce President Obama’s new health care law. Republican lawmakers estimate the legislation will require the hiring of many thousands of new tax enforcement agents.

While it’s still not known exactly how many will be hired, here’s what’s clear: Under the new law, the IRS is required to fine taxpayers thousands of dollars if they do not purchase health insurance. In order for the government to enforce compliance, tax authorities will need information, for the first time, about people’s health care. Collecting that data will require more IRS personnel.

Consider what has happened in Massachusetts, which passed a similar health care bill in 2006. To enforce the individual mandate, the state’s Department of Revenue asks filers what kind of insurance they have, as well as details like whether their “sincerely held religious beliefs” are moving them to petition for an exemption from the requirement.

The form also asks workers whether their employer gives them “affordable” coverage, forcing some employees to decide between tattling on their workplace and submitting false information to tax agents.

Critics have slammed the new federal mandate for its harsh consequences (failing to buy health insurance could land you in jail) and have raised constitutional questions about its legality. And they point to the Obama administration’s recent efforts to ramp up IRS audits, especially of small businesses, as evidence that the mandate is likely to prove more onerous than previously thought.

The Obama administration’s plan to increase audits is in line with a long-term agency goal of ending the “tax gap,” bureaucratese for the amount of uncollected taxes each year. In 2001, the IRS estimated the gap at around $300 billion.

Critics call the agency’s estimates dubious and fear the tax agency will overreach in its efforts under Obama, who launched a tax task force last year in part with the goal of collecting more revenue.

A July 2009 report from the agency says the IRS is going to “increase audit coverage and better target returns for examination” including focusing on Schedule C audits that often target small businesses and the self-employed.

The document also says tax agents will share details with state enforcement agencies to increase enforcement efficiency.


To examine more Americans’ tax filings
, Obama is proposing more money for the agency. His latest budget proposes “over $8 billion in the Internal Revenue Service’s enforcement and modernization programs” to support “significant new revenue-generating initiatives that will target critical areas of non-compliance.”

The administration’s plans are exacerbating concerns of some critics with the health care bill’s mandate, in part because it will require a veritable new army of enforcement agents.

A March 18 report from House Ways & Means Committee Republicans estimates the IRS will need to hire between 11,800 and 16,500 new agents to enforce the bill.

The report slams the bill’s “plans to grant massive new powers to the IRS, backed up by billions of dollars in additional taxpayer fund for the hiring of thousands of new IRS agents, examiners, and other personnel.”

AND REMEMBER ...


Exclusive: IRS hires "hundreds" for New Wealth Unit

Friday Dec 11, 2009

IRS high-wealth unit to focus on business entities

WASHINGTON (AFP) - A new Internal Revenue Service unit set up to catch rich tax cheats hiding their wealth in complex business entities is rapidly taking shape with the hiring of hundreds of employees.

The IRS high wealth unit, part of a broader effort to combat international tax evasion, is focusing on "the entire web of business entities controlled by a high wealth individual," IRS Commissioner Doug Shulman told a tax conference this week.

Another IRS official told reporters "hundreds" of people have already been hired to staff the new unit, including some from within the agency.

"We have drawn top talent within the IRS that have expertise involving wealthy individuals as well as examination of their related entities," said Mae Lew, an IRS special counsel.

The high-wealth unit is focusing on trusts, real estate investments, privately held companies and other business entities controlled by rich individuals.

While use of sophisticated legal structures can be legal, in other instances they "mask aggressive tax strategies," Shulman said.

Tax authorities in Japan, Germany and the UK have also created similar units.

The U.S. House of Representatives on Thursday approved a $387 million boost for the IRS for the fiscal year that started October 1, in part to fund the high-wealth unit.


The Senate is expected to vote on the measure on Sunday.

NEW GLOBAL FOCUS, JOINT CORPORATE AUDITS

The IRS is also opening new criminal offices in Beijing, Panama City and Sydney to focus on funds flowing out of Europe and into Asia, in part because of a heightened focus on international enforcement in Europe.

The goal is to get those up and running during this fiscal year, which ends September 30, according to Barry Shott, IRS deputy commissioner for international issues for large and midsized business.

At the center of the agency's offshore effort is its legal cases against Swiss banking giant UBS AG. UBS agreed to turn over nearly 5,000 names of individual American clients and paid $780 million to settle a criminal case for aiding tax evasion.

The IRS has also begun initial steps to join forces with other governments to scrutinize corporate tax
filings to prevent "tax arbitrage" by companies seeking the best regime.

President Barack Obama has proposed tightening tax rules for U.S. multinationals, including one in which companies delay paying taxes on income earned offshore, a legal practice known as deferral that officials say is abused.

Some tax practitioners expressed worry about such coordination.

"With any new thing, you never want to be the guinea pig," Mary Lou Fahey, general counsel for the Tax Executive Institute, comprised of business executives, said.

Shott said a likely scenario will likely be two countries getting together and decide to examine a narrow issue. In the beginning it will operate like a pilot program where the corporation examined would agree to take part.

"With rare exception ... the taxpayer will absolutely know they are subject to a simultaneous examination," Shott said.

Still, he said there could be cases where the audit needs to be kept quiet, such as when a criminal probe is ongoing.

Initial partners would likely include Canada, the UK and Australia, Shott said.

http://www.reuters.com/article/idUSTRE5BA45320091211
Exclusive: IRS hires "hundreds" for New Wealth Unit

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