Found on the H&R Block Facebook page:
Kathy Pickering provided testimony July 28 on behalf of H&R Block at a hearing in front of the House Ways and Means Subcommittee on Oversight. The hearing focused on the Internal Revenue Service’s implementation of new tax preparer regulations, including the new preparer tax identification number (PTIN) requirement and the creation of the registered tax return preparer (RTRP) designation.
Individuals who appeared in front of the subcommittee were:
David Williams, Director of the Return Preparer Office of the Internal Revenue Service
Jim White, Director of Strategic Issues for the Government Accountability Office
Kathy Pickering, Vice President of Government Relations and Executive Director of The Tax Institute H&R Block
Patricia Thompson, Chair of the Executive Committee of the American Institute of Certified Public Accountants
Paul Cinquemani, Director of Member Services, Business Development and Government Relations for the National Association of Tax Professionals
Lonnie Gary, Chair of the Government Relations Committee of the National Association of Enrolled Agents
David Rothstein, Researcher for Policy Matters Ohio, and Research Fellow for The New America Foundation.
Pickering opened her testimony by explaining how important tax preparer regulation is to H&R Block. She said: “[w]e support the IRS in their initiative to increase taxpayer confidence and raise the professional and ethical standards of the tax preparation profession while also increasing taxpayer compliance.” She commended the IRS for creating the Return Preparer Office and discussed H&R Block’s positive experience during its first year.
But, Pickering expressed concern for the future. She suggested that the IRS finalize all new requirements for tax preparers at least one year before the effective date to ensure late decisions would not impact the tax season. She noted that there was no defined enforcement plan in place yet to ensure compliance.
Pickering also expressed concerns about cumulative costs of compliance to tax preparers and businesses. In order to become an RTRP, a tax preparer will incur costs to obtain a PTIN, pass a competency exam and background check, and complete future continuing education requirements.
Bravo you say..
I know that not all eic/sch c are not frauds..i was profiling.
Rich and poor alike game the system. I suggest we fix the system.
All educational facilities must provide a # for their students that is registered with the IRS, then filings will have to match the master record on file before they refund the $1,000
btw, that was the main vehicle for the id theft last year.
"I believe a self employed eic client should not get refundable eic..then the fraud goes away
btw those eic sch c fraudsters have social security credits as well that will pay them more at retirement as well."
sci_encefic..., I've had lots of self-employed clients who were in the construction and home improvement industries before the housing flop. They did very well and paid a lot of taxes for many years, and suddenly their incomes plummeted. Some were even eligible for EITC and were embarrassed by it. I had one client who was so upset that he didn't have to pay quarterlies because his prior income was so low and he had overpaid that he sent some money in anyway. Don't paint all self-employed EITC recipients with the same brush. My clients paid tons of taxes that helped fund EITC over the years, and now it was their turn to benefit from their own beneficence.
Rather than Sch C, I see the most fraud in EITC coming from claiming kids who aren't yours and/or don't live with you. How many clients have you seen who bring "their" child's SS# written on a scrap of paper? People trade children's SS cards at the bus stop and in the tax office waiting room. The usual arrangement is that the real parent, who may have no earned income or more kids than needed to claim the max EITC, gets half the booty. The IRS actually did a study of this a few years back, tracking children who bounced around different taxpayers' returns each year.
Sch C returns that claim EITC but list no expenses are automatically flagged for audit I believe. Beyond that, the IRS has no statutory authority to withhold EITC refunds without good reason. A few years ago the IRS conducted a pilot program in one city where everyone claiming EITC had to prequalify before filing their returns. The results were amazing, but eventually the powers that be decided the process was too burdensome on the taxpayer and the idea was shelved. So don't blame the IRS for being lax. Congress just hasn't given the agency the power to do anything but pay first and ask questions later.
Having worked at a Sears HRB office - anyone ever notice how the offices are located just outside the major electronics and/or appliance areas of those stores. Smart marketing on their part plus the 2% give or take fee they charge to cash those refund checks.
EIC should be paid out in 12 equal monthly installments. It is, after all, welfare by another name.
Take the fraud amount lets say 2 billion..thats 400,000 fraud cases.
Now subtract the labor costs if you had to administer it thru a gov agency...labor costs at the gov level with health care benefits,pension benefits and you get 25 an hour times 35 hrs=875 week costs plus overhead..you see where i'm going? it would cost billions..
The present way is to get preparers to do it for free and with penalties if they don't do it well.
HRB heck most of us would suffer financially if the eic was not in the tax code.
I believe a self employed eic client should not get refundable eic..then the fraud goes away
btw those eic sch c fraudsters have social security credits as well that will pay them more at retirement as well.
But i temper my anger at the poor by remembering the billions taken by ceo's of fraudulent wall street,oil companies and Ins companies.
Basically corruption up and down the system...i won't blast the poor only.
We could certainly debate how people's behavior is actually changed by tax policy like the EITC. That is not the point, however. The point is that there is a fundamental unfairness to tax policy, and as you point out, need based help from the government is best administered by social services people, not the tax system.
We have a situation where a single person 22 years old making minimum wage will pay over $500 in income taxes. Another single 22 year old who has managed to squeeze out three children (and yes, they quite often all have different last names) making that same amount of money will instead get back $8000 from the government. That is an enormous injustice. And I do believe it does incentivize behavior that is socially destructive.
Thank you wishful for a reasonal discussion. For more info on just what and when EITC came about:
I forgot about the refundable credits on homebuyers and adoption.
There are a lot of misconceptions here about the EITC. Originally it was put into place to refund Medicare and SS tax payments to the working poor, and was limited to that amount. It was always seen by congress as a way to encourage work. Then Clinton overhauled welfare, imposing strict time limits and ending the "welfare queen" way of life. To make the new system work, he increased the EITC as a way to reward work over welfare, which was its historical purpose. (The first word in EITC is "earned," meaning one has to earn income to get it.) George W. Bush, of all people, increased the amount refundable, and the current congress has just raised it from there.
It's not exactly the same as welfare because one has to have earned income to get it. And for those who think people earn just enough to get to that "sweet spot" for maximum EITC and then quit for the rest of the year, it's just not so. Most recipients don't have the skills to command high salaries. Someone making say $8.25 an hour X 40 hours a week X 52 weeks a year earns $17,160, the "sweet spot" if one has a child or two. Try to make ends meet on that pay. Someone who can make $20 an hour ($41,600 a year) isn't likely to quit less than halfway through the year to collect free money that might bring their total household revenue to half what they could earn.
Fraud is of course rampant, just as with any program that offers free money. EITC is probably worse than most because the IRS has to pay first and ask questions later. Congress has not given it the authority to withhold payments without reasonable cause. (The homebuyer credit and now the adoption credit offered way more refundable amounts, and the rate/amount of fraud was much higher. The IRS is now permitted to ask for proof before making those payments, but not so with EITC.)
So yes, EITC is now a substitute for welfare, but with a requirement that someone work to get it instead of sit around the house. But no, recipients are unlikely to plan their income around the max EITC. Most would rather just make more money. Fraud is a big issue, one that I think won't be resolved until the EITC is removed from the tax system and put back into the social services agencies that used to qualify people for welfare benefits. They had to bring proof that they were eligible, and the social services people were trained to help them get the documentation they needed if they qualified, and to deny them if they were faking it. And all this certification happened before they got a dime. There was fraud then too, but not at the rate of 25-35% that now plagues EITC.
Yes. But most of the EIC pewople know just how much to earn to stay in the highest EIC refund, & aren't interested in any more because if any taxes were w/h they get all of that back + cnild tax credit + EIC. So some are getting a refund total that would probably work out that they have a total income of $25,000 or more & have no taxes, but got back more!!
Apparently you don't consider the difference between how these programs were sold by their political backers and what they actually incentivize. The supposed benefits you claim I don't understand are actually political propaganda. The EIC in fact encourages some very negative behaviors, as most tax professionals are well aware. Massive fraud is just one of them.
As far as earing some "real money", once a person starts earning some real money they no longer qualify for EIC, so there's a strong discouragement from being too productive. Some people know exactly how much they have to earn to get the maximum and they stop working once they reach that threshhold.
And tax preparers also know the kind of lifestyle it encourages, given how many of the 3 child recipients are unmarried and their children all have different last names. Not many 3-child married couples get EIC.
As far as getting off welfare, how does giving someone a check for $5800 that they didn't work to earn get them off welfare? It's still welfare, whether people have the courage to call it that or not.
All the thin-skinned liberals can click the 1 star rating now.