The Internal Revenue Service may have allowed thousands of people to claim $ 57 million in tax breaks last year that they should not have received, a federal observer said.
AMERICAN PEOPLE SHOULD AVOID REFUNDING ADDITIONAL PAPER TAX ON LINK, IRS SAYS
An audit of the Minister of Finance for the tax administration found holes in the work of the IRS with the so-called. Qualified business tax relief established under Donald Trump̵
The law allows certain owners of “passing” businesses – such as S corporations, partnerships and sole traders – to deduct up to 20 percent of their business income from their individual tax returns.
The Inspector General’s Office said it had found 12,980 declarations filed last year claiming about $ 57 million in “potentially wrong” business income deductions, although the IRS had developed more than a dozen rules to detect such defective declarations.
The January 13 report was heavily edited, and details of what exactly was wrong with the returns and how the IRS handled them seemed obscured. But it says that “no action was taken by the IRS during the processing to address these potentially erroneous allegations.”
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The auditors suggest that the IRS may have noticed incorrect deductions by taking a closer look at the income that was “marked”. For example, IRS employees ultimately refused to deduct qualified business income from about 85% of the 68 tax returns from 2018 that were reviewed, the report said.
But IRS employee Eric Hilton noted that the approximately 13,000 declarations submitted by the IG office represent only about 0.1% of the 9.4 million declarations for which business income deductions are claimed. More than 95 percent of these returns have been properly verified by the IRS, he added.
The tax agency has rejected three of the inspector general’s five recommendations to improve his ability to verify deductions by agreeing or partially agreeing with the other two, according to the report.
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Pursuing additional compliance measures would “reduce overall revenue potential” by diverting resources from other IRS activities, Hilton said.
“The IRS has found that taking action proposed during processing activities could harm taxpayers and increase risks,” wrote Hilton, IRS Commissioner for Small Business / Self-Employment, in response to the audit report.