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The Internal Revenue Service last year may have allowed thousands of people to claim $ 57 million in income tax deductions that they should not have received, says a federal watchdog.
AMERICANS MUST RETURN FILE PAPER TAX IN THE MIDDLE OF THE BACKGROUND, says IRS
An audit by the Treasury Inspector General for Tax Administration has found holes in the IRS’s handling of the so-called qualified corporate tax enterprise introduced under Donald Trump’s 2017 tax reform package.
The law allows certain owners of “pass-through” businesses – such as S-corporations, partnerships and sole proprietorships – to deduct up to 20 percent of their business income from their individual income tax returns.
According to the Inspector General’s office, 12,980 returns were found last year, claiming approximately $ 57 million in ‘potentially erroneous’ deductions for business income, although the IRS has developed more than a dozen rules to file such erroneous documents. track.
The January 13 report was heavily edited, and details of what exactly was wrong with the proceeds and how the IRS handles them appear to be black. However, it is said that “no government action was taken by the IRS during the processing to address these potentially erroneous claims.”
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Auditors suggested that the IRS could spot incorrect deductions by looking more closely at the returns that were ‘marked’. For example, IRS officials ended up denying 85% of the 68 qualifications of the 2018 tax year that qualified, the report says.
But IRS official Eric Hylton noted that the approximately 13,000 returns that the IG office singled out accounted for about 0.1 percent of the 9.4 million returns that claimed deductions for business income. More than 95 percent of the proceeds have been properly screened by the IRS, he added.
The tax agency rejected three of the five inspection generals’ five recommendations to improve the ability to verify the deductions while agreeing or partially agreeing with the other two, according to the report.
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Pursuing additional compliance measures would reduce the overall revenue potential by diverting resources from the IRS’s other activities, Hylton argued.
“The IRS has determined that taking the steps proposed during the processing activities could harm taxpayers and increase the risks,” Hylton, the IRS’s commissioner for small businesses / self-employed, said in a response to wrote the audit report.