Tag Archives: Internal Revenue Service

Senators to Saverin: Don’t come back. Ever. – Economy

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Senators to Saverin: Don’t come back. Ever. – Economy.

Eduardo Saverin‘s decision to leave the United States with his money, but not his citizenship, has apparently touched a nerve in the Senate.

Sens. Chuck Schumer and Bob Casey held a press conference Thursday morning on Capitol Hill where they outlined legislation that would prevent the Facebook co-founder from ever returning to the United States.

Saverin, who now lives in Singapore, renounced his U.S. citizenship earlier this year. He will become astronomically wealthy on Friday when his former venture is listed on the NASDAQ. By renouncing his citizenship, Saverin is likely to avoid capital gains taxes on his Facebook shares.

Schumer called Saverin’s decision “outrageous” and labeled his tactics a “scheme.”

“Saverin has turned his back on the country that welcomed him and kept him safe, educated him, and helped him become a billionaire,” Schumer said. “This is a great American success story gone horribly wrong.”

Saverin and his representatives insist the Brazilian native did not renounce his citizenship for tax reasons.

In statement to CNN on Thursday, Saverin said it was “unfortunate” that his choice had led to a debate “based not on the facts, but entirely on speculation and misinformation.”

“I am obligated to and will pay hundreds of millions of dollars in taxes to the United States government,” Saverin said. “I have paid and will continue to pay any taxes due on everything I earned while a U.S. citizen.”

Still, it seems likely that the move will help Saverin escape some of the hefty taxes he’d have to pay on his Facebook stake, though it’s not known exactly how much of the company Saverin currently owns.

He owned 5% of the company’s outstanding shares as recently as 2009, according to “The Facebook Effect,” by David Kirkpatrick, but he has sold off some of those shares since then. He was not listed among those owning 5% or more of the company in Facebook’s pre-IPO regulatory filings.

The Brazilian-born Facebook co-founder became a U.S. citizen in 1998 and has been living in Singapore since 2009, but the United States requires its citizens to pay income taxes no matter where they live. Saverin, who provided some of Facebook’s initial financing, has not played an active role in the company for many years.

Schumer and Casey are calling their bill the “Ex-PATRIOT Act.”

The proposal says that if a wealthy American seeks to renounce their citizenship, it will be presumed they have done so for tax purposes, unless the individual can convince the IRS otherwise.

If the person is unable to convince the IRS, they will be subject to 30% capital gains tax on future U.S. investments no matter where they live. Furthermore, they will not be allowed back into the United States. “Period,” Schumer said. “They could not set foot in this country again.”

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IRS estimate: 17 percent of taxes owed went unpaid

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IRS estimate: 17 percent of taxes owed went unpaid – Yahoo! Finance.

WASHINGTON (AP) — People and businesses underpaid their taxes by an estimated 17 percent in the most recent year studied, failing to send the government a massive $450 billion that it was owed, according to an Internal Revenue Service report released Friday.

The study covered 2006, the most recent data the IRS said was available. The amount of underpaid taxes far exceeded the size of the entire federal budget deficit at the time.

After IRS audits and other enforcement efforts, non-compliance in 2006 shrank to 14 percent. That left the final amount of unpaid taxes at $385 billion, the agency said.

Friday’s report immediately became fodder for lawmakers arguing that any effort to overhaul the tax code — which seems a long-shot in an election year — must include closing the gap between what is owed and actually paid.

“The best way to increase compliance is to reform the tax code to make it simpler,” said Michelle Dimarob, spokeswoman for House Ways and Means Committee Chairman Dave Camp, R-Mich. She said that would cause fewer errors and “greater certainty, which is key to job creation.”

“In an era when we’re squeezing the federal budget for every dollar of savings, we have to make every effort to recover these lost funds,” said Senate Finance Committee Chairman Max Baucus, D-Mont.

By either measure, the total of unpaid taxes in 2006 was larger than that fiscal year’s budget deficit of $248 billion. Federal fiscal years begin in October of the previous year.

Federal deficits have since mushroomed out of control, hitting a record $1.4 trillion in 2009 and barely receding to $1.3 trillion last year. President Barack Obama and Republicans in Congress have agreed to some spending cuts but have remained deadlocked over how to curb the gigantic budget shortfalls that are projected indefinitely.

Altogether, the IRS estimates it was owed nearly $2.7 trillion in taxes in 2006.

The agency said that out of the $450 billion taxpayers underpaid that year, the largest share — an estimated $376 billion — came from underreporting of income.

The IRS pointedly noted that compliance increases when third parties like employers report income information to the government and when they withhold taxes that are owed.

The report said that with wage and salary information reported to the IRS on W-2 forms, only 1 percent of that income was misreported. But an estimated 56 percent of income was underreported when the government requires little or no information, such as income earned by some small businesses, renters and businesses selling property.

The IRS has made efforts to improve compliance, such as increasing oversight of professional tax return preparers and increasing the information that must be reported to the agency by stock brokers, mutual fund companies and for some business transactions.

Even so, tax analysts said there was no reason to believe that today’s compliance rate has changed significantly from the 2006 figures.

That is chiefly because significant portions of the underpaid taxes are believed to come from businesses and individuals who report information about their income that is difficult for the IRS to verify.

“It’s hard to get to that,” said Clint Stretch, a tax policy expert for Deloitte Tax LLP. “Nobody wants a bunch of IRS police hammering on small business people.”

John Buckley, a Georgetown University law professor and former Democratic congressional tax aide, said that if IRS budget cuts continue, “It’s quite probable we’ll see a decline in compliance rates.”

The IRS’s roughly $12 billion budget was reduced by about $300 million this year.

The overall 2006 compliance rates were roughly similar to 2001, the last year the IRS had examined.

In that year, 16 percent of taxes were unpaid initially, while enforcement efforts lowered the non-compliance rate to 13 percent.

That meant that in 2001, $345 billion in taxes were uncollected initially and $290 billion remained unpaid even after IRS audits and other enforcement efforts.

“Despite increasing complexity and an ever-changing tax code, compliance has remained steady,” said IRS spokesman Frank Keith.

The dollar amounts of unpaid taxes were larger in 2006 chiefly because the size of the economy and the amount of taxes owed had grown, agency officials said.

Wyoming GOP probes IRS problems, bookkeeping errors, former director’s actions

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Wyoming GOP probes IRS problems, bookkeeping errors, former director’s actions.

CHEYENNE, Wyo. – Wyoming Republican Party officials say they’re investigating years of unfiled Internal Revenue Service paperwork and sloppy bookkeeping by party employees, as well as possible misconduct by a former executive director.

The investigation started in September, after top party leaders said they were blindsided by a penalty of more than $10,000 from the IRS that was imposed after previous party workers didn’t file required tax paperwork dating back to 2008.

About the same time, party officials also discovered documents on a party office computer, raising questions about whether former Executive Director Evan Ridley sold party donors’ financial information and public voter registration lists to a Washington, D.C., political consulting firm he was moonlighting for, according to party Treasurer Doug Chamberlain.

Wyoming Republican Party Chairwoman Tammy Hooper, along with Chamberlain and other top party leaders, said they’re appealing the IRS penalty and are now working to discover any other party miscues.

They also said they’re working to create new financial and employment rules to make sure the problems don’t happen again.

Ridley didn’t return multiple phone calls seeking comment.

IRS trouble

The IRS penalty, which with interest totaled $10,365 as of Nov. 30, came after the party failed to file W-2s in 2008, didn’t submit income tax returns in 2008 and 2010, and didn’t file payroll tax forms in 2009, party leaders said.

During that time, the party paid all of its federal taxes, leaders said.

Hooper and Chamberlain, both of whom took office after the missing paperwork was due, said they were surprised by the penalties and had no idea anything was wrong.

Both said they’re still unsure why party employees failed to file the paperwork, even after the IRS repeatedly mailed letters of warning to the state Republican Party office.

An added twist, Chamberlain said, was their discovery in recent days that the party already paid the IRS more than $2,500 in penalties and fees for the missing paperwork: $938.59 in 2010 via a check signed by then-Treasurer Donna Robitaille, and $1,572.08 paid electronically by Ridley during his last day as executive director in late August.

Robitaille didn’t return a phone call seeking comment.

None of the state party’s past or present leadership could explain why the paperwork lapse occurred, nor why it wasn’t noticed and fixed earlier.

Amy Larimer and Bruce Brown, who served as the party’s executive director and treasurer, respectively, in 2008 and 2009, both said last month that they weren’t responsible for sending the forms in and didn’t know why it took so long to discover they hadn’t been sent in.

Hooper suspected the errors may have taken place and weren’t corrected for so long because party workers were either volunteers or staffers who had no accounting backgrounds.

“I don’t think they realized the severity of an IRS penalty,” Chamberlain said.

Hooper said the party is appealing the $10,000-plus IRS penalty. That amount, equal to 10 percent of party employees’ combined salaries during 2008 and 2009, was the maximum penalty the IRS could have imposed, Chamberlain said.

Since the party has paid all of its taxes, hasn’t tried to defraud the government and is working in good faith to fix the problems, the party shouldn’t have to face the maximum penalty, Hooper said.

Executive concerns

Top party leaders are also looking into possible misconduct by Ridley, who now works in the Washington, D.C., press office of U.S. Sen. Mike Enzi, R-Wyo.

After Ridley left as executive director, Chamberlain and other state GOP sources said party officials were surprised to discover work invoices on his party office computer from the Washington, D.C., consulting firm of Weber Merritt. They also found an invoice from a tech company Ridley hired to copy the entire hard drive of the computer, Chamberlain said.

A state Republican Party source said Ridley’s office computer contained detailed lists of party donor information, including their donation history, addresses, phone numbers and credit card numbers.

In addition, a party source said Ridley’s computer contained voter registration lists from the Wyoming secretary of state’s office that, under state law, can’t be used for commercial purposes.

Such information about voters and donors could be sold to political consulting firms for thousands of dollars, according to political fundraisers and consultants, though Chamberlain said to date no evidence has been found indicating Ridley took any such action.

When party legal staffers asked Ridley to explain the invoices, Ridley refused to answer, Chamberlain said.

Phone calls to Weber Merritt weren’t returned.

Chamberlain emphasized that, to date, the party has found no direct evidence that Ridley did anything illegal.

Chamberlain said that in early November, he called the U.S. attorney’s office and the FBI, laying out the facts about the tax miscues and Ridley and asking if any aspect of his story warranted a criminal investigation. Both agencies replied that they saw nothing that appeared to be criminal or worthy of an investigation, Chamberlain said.

U.S. Attorney’s Office spokesman John Powell confirmed that an assistant U.S. attorney told Chamberlain that, based on the information Chamberlain presented, no federal laws were broken.

An FBI spokesman said that under standard bureau policy, he couldn’t comment on the phone call and could neither confirm nor deny whether an investigation was taking place.

Fixing the problems

Hooper and Chamberlain said they and other top party officials are continuing to search party records to see if there are any other errors that need to be rectified.

They said they’re also working on reforms to ensure the problems they’ve already uncovered don’t happen in the future.

Hooper said she’s formed a three-member committee composed of Chamberlain, prominent GOP donor Bill Scarlett and former Wyoming House Speaker Roy Cohee to find ways to streamline and improve the party’s financial system.

“We’re going to leave no stone unturned,” Chamberlain said.

Some changes are already in place. From now on, Chamberlain said, all of the party’s accounting duties will be handled by the party’s Utah-based accountant, Mike McCauley, instead of volunteer officials or party staffers untrained in tax law. In addition, all party checks now have to be countersigned by a second official, he said, and future executive directors, as a condition of their job, will be banned from moonlighting.

McCauley said he looked over the party’s books in recent weeks after the IRS penalties were discovered. He said he found that the party’s bank accounts hadn’t been reconciled, though when he brought the records up to date he was able to account for all the money and didn’t find anything else that would violate the law or IRS rules.

“There was nothing there that would cause me concern,” McCauley said.

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