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Tax Changes on Hold in Congress

The tax laws are constantly in flux and you need to remain vigilant and aware of how changes in tax law, regulations and interpretation may affect your tax obligations. The political process that brings about these changes is typically messy and convoluted, but the recent scandal involving the Internal Revenue Service (IRS) over the scrutiny of some political organization's 501(c)(3) applications received has further roiled the waters of tax law.

A couple of important matters for tax law enforcement are seemingly in limbo in the Congress, as Republicans are refusing to approve bills that would provide the IRS with additional authority to gather information regarding taxpayers financial transactions and other tools that would be used to collect currently uncollected taxes.

For the IRS and Congress, increasing tax compliance allows greater tax revenues without the need for formal tax increases. Congress had favored this method, and recently the Foreign Account Tax Compliance Act (FATCA) has been a successful example of how increased enforcement of existing tax laws recovered an additional $9 billion of revenue.

A proposed change would have given the IRS information from mortgage loan servicers. Such details would include the property's address, when the mortgage was issued and the loan balance. This would allow the IRS to better determine the accuracy of the claimed mortgage interest deduction of some taxpayers. However, this proposal may be unable to go through due to the current dispute.

This and other changes, such as allowing Medicare payments to doctors who owe back taxes to be seized by the IRS and a longer statute of limitations for investigations of property transactions where a taxpayer may have underestimated their profit, appear to be unlikely to be enacted this session.

The IRS is likely, however, to bring these proposals back, as the next scandal involving the IRS could deal with uncollected taxes.
Source: Politico.com, "After IRS scandal, GOP rejects tax crackdown," Brian Faler, July 27, 2014

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