Tax Scofflaws Get Millions In Contract Awards From IRS

Corporations that owed back taxes illegally received nearly $19 million from contracts with the Internal Revenue Service in 2012 and 2013, a government watchdog reported Wednesday.

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The IRS is prohibited from contracting with corporations that owe the government taxes, but that didn’t stop the agency from awarding 17 delinquent companies $18.8 million for 57 contracts, according to a Treasury Inspector General for Tax Administration report.

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“Federal contractors who abuse the tax system cause significant loss of tax revenue, while at the same time benefitting from taxes paid by compliant individuals and corporations,” the report said. “When the IRS conducts business with contractors that do not pay their federal taxes, it conveys a conflicting message in relation to its mission to ensure compliance with tax laws.”

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One corporation also received three contracts worth more than $67,000 even though it had a felony conviction.

The Consolidated Appropriations Act of 2012 “prohibited the IRS from using appropriated funds to enter into a contract with a corporation that has certain federal tax debt and/or felony convictions,” the report said.

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IRS officials told the inspector general they either didn’t remember receiving the guidance the Department of the Treasury issued on Feb. 2, 2012, regarding the new law, or they didn’t understand it “because they received no training on these new requirements.”

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In any case, “TIGTA found that the IRS did not have effective controls in place to prevent the award of contracts to corporations with certain federal tax debt and/or felony convictions,” the report said.

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Investigators estimated that the IRS didn’t require corporations to report tax debt or felony convictions for 94 percent of all awarded contracts. In fact, the IRS doesn’t have a definition for federal tax debt and doesn’t proactively check to ensure prospective contractors are in compliance with appropriation law, investigators found.

Via: Daily Caller

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IRS Approved $2.3 Billion in Fraudulent Alimony Deductions

The Internal Revenue Service (IRS) authorized $2.3 billion in alimony deductions for divorced persons last year that did not match with their ex-spouses’ income, according to an audit by the Treasury Inspector General for Tax Administration (TIGTA).

The audit, released last week, found that nearly half of all alimony deductions in 2010 were improper.

“In Tax Year 2010, a total of 567,887 taxpayers claimed alimony deductions totaling more than $10 billion,” TIGTA said. “An alimony income reporting discrepancy occurs when individuals claim deductions for alimony which they did not pay or individuals do not report alimony income they received.”

Persons who pay alimony are allowed to deduct their payments on their tax return to reduce their tax burden. However, the payments must be accounted as added income for the recipient of the alimony.

TIGTA examined 567,887 returns with an alimony deduction claim in 2010, and found that 266,190—or 47 percent—had income from claimed alimony deductions that were not reported or were inconsistent.

“There is a discrepancy of more than $2.3 billion in deductions claimed without corresponding income reported,” the audit said.

TIGTA noted that the IRS does not have a system in place to address improper alimony claims.

“Apart from examining a small number of tax returns, the IRS generally has no processes or procedures to address this substantial compliance gap,” the audit said.

Via: WFB

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