President's Budget would make extreme FTF cases a felony

[Demosthenes]

MAKE REPEATED WILLFUL FAILURE TO FILE A TAX RETURN A FELONY

Current Law

Current law provides that willful failure to file a tax return is a misdemeanor punishable by a term of imprisonment for not more than one year, a fine of not more than $25,000 ($100,000 in the case of a corporation), or both. A taxpayer who fails to file returns for multiple years commits a separate misdemeanor offense for each year.

Reasons for Change

Increased criminal penalties would help to deter multiple willful failures to file tax returns.

Proposal

Any person who willfully fails to file tax returns in any three years within any five consecutive year period, if the aggregated tax liability for such period is at least $50,000, would be subject to a new aggravated failure to file criminal penalty. The proposal would classify such failure as a felony and, upon conviction, impose a fine of not more than $250,000 ($500,000 in the case of a corporation) or imprisonment for not more than five years, or both.

The proposal would be effective for returns required to be filed on or after January 1, 2009.

[Demosthenes]

I have nothing to do with this provision, but I think it's interesting.

IMPROVE INVESTIGATIVE DISCLOSURE STATUTE

Current Law

Generally, tax return information is confidential, unless a specific exception in the tax Code applies. In the case of tax administration, the Code permits Treasury and IRS officers and employees to disclose return information to the extent necessary to obtain information not otherwise reasonably available, in the course of an audit or investigation, as prescribed by regulation. Thus, for example, a revenue agent may identify himself or herself as affiliated with the IRS, and may disclose the nature and subject of an investigation, as necessary to elicit information from a witness in connection with that investigation. Criminal and civil sanctions apply to unauthorized disclosures of return information.

Reasons for Change

Treasury Regulations effective since 2003 state that the term “necessary” in this context does not mean essential or indispensable, but rather appropriate and helpful in obtaining the information sought. In other contexts, a “necessary” disclosure is one without which performance cannot be accomplished reasonably without the disclosure. Determining if an investigative disclosure is “necessary” is inherently factual, leading to inconsistent opinions by the courts. Eliminating this uncertainty from the statute would facilitate investigations by IRS officers and employees, while setting forth clear guidance for taxpayers, thus enhancing compliance with the tax Code.

Proposal

The taxpayer privacy law would be clarified by stating that it does not prohibit Treasury and IRS officers and employees from identifying themselves, their organizational affiliation, and the nature and subject of an investigation, when contacting third parties in connection with a civil or criminal tax investigation.

The proposal would be effective for disclosure made after enactment.

[Demosthenes]

Here's another related provision.

PERMIT DISCLOSURE OF PRISON TAX SCAMS

Current Law

Generally, tax return information is confidential, unless a specific exception in the tax Code applies. None of the exceptions currently in the Code permits the IRS to refer inmate tax violations to prison officials for imposition of administrative sanctions. Thus, if the IRS has information about tax violations by inmates, the IRS cannot disclose return information to prison officials to impose administrative sanctions for tax-related misconduct. Where the Code permits a government entity to receive return information, the recipient generally must observe prescribed safeguards that require secure storage, restricted access, reports to IRS, and shredding or other proper disposal. See, e.g., IRS Publication 1075. Criminal and civil sanctions apply to unauthorized disclosure of return information.

Reasons for Change

There are an increasing number of fraudulent refund claims filed by prisoners. Tax violations by inmates create a broad perception regarding non-compliance and are a significant tax enforcement problem. Prison officials could take administrative steps to curtail such conduct if the IRS were authorized to disclose information about fraudulent tax schemes advanced by inmates. Criminal prosecutions or injunction suits against prisoners are resource-intensive and often not as effective at curtailing tax violations by inmates as through administrative sanctions imposed by prison officials.

Proposal

The IRS would be authorized to disclose certain limited return information about tax violations by inmates so that specified Federal prison officials could punish and deter such conduct through administrative sanctions. The safeguard provisions as well as criminal and civil sanctions would apply.

The proposal would authorize disclosures after December 31, 2008.

[Doktor Avalanche]

/signed

Yes, I completely agree with this and think it's a long time coming.