Tax Attic

Jerry Coon

Jerry Coon

Earlier this month, we celebrated an important 100-year anniversary. On February 7, 1913, the Sixteenth Amendment to the Constitution was ratified. All amendments to the Constitution are important, of course, but this particular amendment was huge. In effect, it opened the door to the eventual explosive growth of our federal government. Up until February 7, 1913, the federal government had trouble consistently raising money. They placed excise taxes on many items that were commonly used such as whiskey and tobacco and instituted fees where they could. However, more money was needed. It’s safe to say that problem was permanently fixed on February 7, 1913. Here is the complete text of the 16th Amendment: “The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.” Those thirty words changed the world. They empowered Congress to “lay and collect taxes on incomes” and Congress has taken that empowerment very seriously. The tax collections business did get off to a very meager start as they collected just seventy-one million dollars in 1914 with one taxpayer, John D Rockefeller, paying two million dollars by himself. The tax code was about fifteen pages long. I have a framed copy of the first tax return on my office wall. It is four pages long and that includes the instructions. Let’s just say that things have expanded since three-quarters of the states voted to ratify the 16th Amendment back in 1913. Today our federal government has revenue of over two trillion dollars a year; the tax code is well over one thousand pages long; and the average federal tax return is just slightly longer than four pages. Six states voted against the amendment. I wonder if the other forty-two could have looked 100 years into the future before they voted, would they have voted yes or no on the 16th Amendment? I bet a few would have passed on the opportunity to institute a national income tax.

Identity Theft continues to be an issue through-out the United States. It’s hard to watch television or listen to radio for any length of time without seeing or hearing an advertisement that is selling identity theft protection. Having a credit card stolen is one thing, and that’s bad enough, but having someone file a false income tax return using your Social Security Number is a horse of a different color, so to speak. The Internal Revenue Service has been allocating resources to this large problem in ever-increasing numbers. According to a recent press release, in late 2012, they had allocated 3,000 employees to working directly on identity theft-related issues. In addition, 35,000 IRS employees have been trained in helping victims of identity theft. “As tax season begins this year, we want to be clear that there is a heavy price to pay for perpetrators of refund fraud and identity theft,” said IRS Acting Commissioner Steven T. Miller. “We have aggressively stepped up our efforts to pursue and prevent refund fraud and identity theft, and we will continue to intensely focus on this area. This is part of a much wider effort underway for the 2013 tax season to stop fraud.” The IRS is serious about finding and prosecuting those who attempt to steal a taxpayer’s identity. They have opened 1,460 Criminal Identity Theft Investigations since October 1, 2011 with 560 occurring since the 2013 fiscal year began on October 1, 2012. The IRS successfully identified 20 billion dollars of fraudulent refunds and kept them from being issued. That’s impressive. Taxpayers believing they are a victim of identity theft should call the IRS’ Identity Protection Specialized Unit at 1-800-908-4490. Identity Theft Affidavit Form 14039 should be completed and sent to the Unit. The form can be accessed by going to www.irs.gov. The taxpayers should also call the local police; file an identity theft report; and send a copy of that report along with Form 14039. The IRS will open an investigation and they are apparently following up on those investigations. As part of their procedures, taxpayers with identity theft issues are issued a six-digit Identity Protection Personal Identification Number (IP PIN). The taxpayers must use this number when filing their federal income tax return. A return filed under the taxpayers’ name and social security numbers will not be processed and will be presumed to be a fraudulent return if the six-digit IP PIN is not included on the return. The IRS recently announced that they will be issuing another fresh group of IP PINs to taxpayers with recently identified fraud issues. I believe that some version of the IP PIN program could stop all fraudulent returns from being filed. If the IP PIN is issued directly to the taxpayers and the only people with the IP PIN are the IRS and the taxpayers, fraudulent returns could become a thing of the past very quickly. It’s worthy of noting that the IRS will mail the IP PIN to the taxpayers. They do not use email to communicate with the taxpayers. However, people trying to steal a taxpayers’ identity will use email to try to get private information. These false emails may look real but we must keep in mind that the IRS does not use email to contact taxpayers with an information request. It does not matter how real the email looks, including perhaps even with a real-looking IRS emblem, that email is false. It’s an attempt to get private information for identity theft purposes. The IRS requests that these false emails be forwarded to phishing@irs.gov and they will take it from there. Identity theft and the resulting refund fraud cost the American taxpayers billions upon billions of dollars. We can all help the IRS in their quest to catch these thieves by contacting the IRS when we see these problems developing. This is Jerry Coon signing off.

 

 

Jerry Coon is an Enrolled Agent

and Registered Tax Return Preparer.

He owns Action Tax Service on

Northland Dr in Rockford.

Contact Jerry through his website:

www.actontaxservice.com.

 

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