Asking for more from the IRS

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May 16, 2022 View in browser   By Bernie Becker SOME MATTERS LEFT UNSAID: The IRS definitely answered some questions late last week about its decision to destroy some 30 million forms that it uses to verify information on tax returns. But that doesn't mean that everyone is satisfied with those answers, or that people aren't looking for some more clarity. Among the questions the IRS tried to handle in its statement: Was getting rid of those 30 million forms just a one-time thing? (If nothing else, the tax collector said that what happened to forms for the 2020 tax year wouldn't be repeated for 2021 and 2022.) How much was this caused by the pandemic and the agency's outdated technology? (They definitely played a big role, the agency says.) And how much were taxpayers hurt by these destroyed forms? ("There were no negative taxpayer consequences as a result of this action," according to the statement.) Tax practitioners in particular had been up in arms over the loss of millions of so-called information returns — which include W-2 forms that inform people of their income; 1098 forms (which tell taxpayers about interest paid on student loans or mortgages, among other things); and 1099 forms (which contain information about interest received from savings accounts or payments from dividends). The American Institute of CPAs responded to that IRS statement on Friday by saying, in effect, "thanks, but we'd like to hear more." "The IRS' recent statement provided some of the answers, but American taxpayers deserve to know why this decision was made and how it might impact them," said Ed Karl, AICPA's vice president of taxation. Nina Olson, the former national taxpayer advocate, also said the IRS needed to be more forthcoming about what happened, noting that the agency didn't lay out how or why the service's notoriously behind-the-times technology led to this situation. The statement, Olson added, "doesn't say what the IRS is doing to make sure this never happens again." MORE ON THAT IN A BIT, but first welcome to a "really, there's no need for early summer weather" version of Weekly Tax. A monumental day for those who really want close to count: Today marks 108 years since the formation of the American Horseshoe Pitchers Association, the first ever oversight body for the pitching of horseshoes, was formed in Kansas City, Kan. (The group merged seven years later with the National Horseshoe Pitchers Association, which still exists today.) Toss us over some great scoops. Email: bbecker@politico.com, bfaler@politico.com and teckert@politico.com. You can also reach us on Twitter at @berniebecker3, @tobyeckert, @brian_faler, @POLITICOPro and @Morning_Tax.   STEP INSIDE THE WEST WING: What's really happening in West Wing offices? Find out who's up, who's down, and who really has the president's ear in our West Wing Playbook newsletter, the insider's guide to the Biden White House and Cabinet. For buzzy nuggets and details that you won't find anywhere else, subscribe today.     Want to receive this newsletter every weekday? Subscribe to POLITICO Pro. You'll also receive daily policy news and other intelligence you need to act on the day's biggest stories. A RANGE OF OPINIONS: To be clear, not everyone felt even quite that charitably about the IRS statement. And one of the more unwelcoming responses came from Rep. Bill Pascrell (D-N.J.), who chairs the House Ways and Means subcommittee that oversees the IRS. Pascrell said in a statement that the document destruction should essentially be the last straw that forces President Joe Biden to remove IRS Commissioner Chuck Rettig. "The IRS is vital to public confidence in our nation and its Trump-appointed leader has failed," Pascrell said, after noting that lawmakers had "shown immense patience" with the agency and before complimenting the service's staff for having "performed admirably while under immense pressure." Pascrell called just the agency's response to the 30 million destroyed document just the latest lackadaisical reaction from the IRS under Rettig's watch, and suggested that the public's confidence in the agency can't and won't recover until someone else is in the commissioner's seat. Worth noting: No matter what, Rettig will be leaving as IRS chief in just under six months, when his five-year term as commissioner expires. This might not totally be the point here. But history suggests that it will take months for the Senate to approve Rettig's replacement as commissioner, leaving the IRS with an acting chief at what continues to be a challenging time at the agency. (For whatever it's worth, Rettig was confirmed 10 months after his predecessor, John Koskinen, left office.) KEEP AN EYE ON THIS, TOO: Of all the parts of the IRS's statement, it's that line about how no taxpayers faced negative consequences that might have staying power. The next sentence from the IRS notes that taxpayers wouldn't face any penalties because of the destroyed documents. But taxpayer advocates will tell you there are surely other negative consequences that could grow out of this situation. Olson raised two potential situations in an email to Weekly Tax — a taxpayer who lost all their records because of some sort of disaster, or a survivor of domestic violence who had to leave without his or her records. It's certainly possible that those taxpayers could ask the IRS for a transcript that includes information returns to help reconstruct their income situation, and the agency wouldn't have them, Olson said. ABOUT THOSE WINDFALLS: It's been difficult to totally nail down where Prime Minister Boris Johnson's Conservative government stands on the idea of enacting a windfall tax on energy giants in the U.K. Both Johnson and Rishi Sunak, the chancellor of the exchequer, have said they don't want to take any potential solutions off the table as the government looks to battle rising inflation and energy costs, but neither sound terribly enthused about the idea of a windfall tax, either. Next up: The opposition Labour Party will call for a vote on a windfall tax this week, the BBC reports. Ed Miliband, a former Labour leader and current shadow minister, told the network that it was "obscene" that Conservatives haven't enacted a windfall tax on its own yet, while Rachel Reeves, the shadow chancellor, maintained that Johnson's government was in "complete chaos" over what to do about that kind of proposal.   DON'T MISS DIGITAL FUTURE DAILY - OUR TECHNOLOGY NEWSLETTER, RE-IMAGINED:  Technology is always evolving, and our new tech-obsessed newsletter is too! Digital Future Daily unlocks the most important stories determining the future of technology, from Washington to Silicon Valley and innovation power centers around the world. Readers get an in-depth look at how the next wave of tech will reshape civic and political life, including activism, fundraising, lobbying and legislating. Go inside the minds of the biggest tech players, policymakers and regulators to learn how their decisions affect our lives. Don't miss out, subscribe today.     Around the World LET'S ROLL THE DICE: Macau, a Chinese enclave that is a global gambling hub, is considering cutting taxes on gaming, Bloomberg reports. Right now, Macau taxes casinos at a rate of around 40 percent of their gaming revenue, which adds up to one of the most aggressive tax systems on gambling in the world. The city is thinking about reducing gambling taxes in large part because of the Covid-caused lockdowns in China, and would consider a cut of as much as 5 percent if it allows them to bring in more gamblers from other parts of the globe. In all, gaming provides about four-fifths of revenue for Macau, and a crackdown on high-rollers by the Chinese government has also hurt the industry, while Beijing has also been nudging Macau to diversify its economy. Still, a 5 percent tax cut on gambling revenue would likely lead to a boost of more than double that in earnings for the industry, according to outside analysts. Around the Nation NOT POTENT ENOUGH: Legitimate marijuana dealers in California say a proposed temporary tax cut won't do much to help the struggling industry , The Associated Press reports. Gov. Gavin Newsom has proposed scrapping a cannabis cultivation tax, which costs $161 per bud and is loathed by the industry. In exchange, Newsom also wants to give a slight boost to California's excise tax on retail marijuana sales from 15 percent to 19 percent in three years. Industry advocates have been warning Newsom since at least last year that the legal cannabis sector needed help urgently, both because of higher taxes and other problems, like competition from a still thriving illegal market. The situation presents a tough quandary for Newsom and the Democrats who run the California legislature — reducing revenues that are generated by legal cannabis sales would also undercut funding for youth programs and other initiatives. Another potential wrinkle: The state excise tax on marijuana sales might go up anyway, as soon as 2024, if collections don't hit certain thresholds. Quick Links WSJ: "Jeff Bezos Criticizes Joe Biden in Twitter Spat Over Inflation." Pro Tax: "NFTs fall under gaze of global tax enforcement team." Philadelphia Inquirer: "'It's wrong': Philly property assessments double in some working-class neighborhoods." Did You Know? The earliest versions of horseshoes date back to around 400 BCE.   Follow us on Twitter Toby Eckert @tobyeckert Bernie Becker @berniebecker3 Brian Faler @brian_faler Aaron Lorenzo @aaronelorenzo   Follow us

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