Add Wrong? You're Screwed.
James M. Peaslee writes in the WSJ about a revenue provision in the health-care bill, voted on by the House Ways and Means Committee earlier in the summer, mandating that the IRS slap penalties on honest taxpayers who make mistakes in their taxes -- penalties the IRS has had the power to waive:
Predictably, the result was some taxpayers getting hit with penalties they didn't deserve.Last June, the Small Business Council of America sent some compelling tales of woe to Congress, including one in which a 72-year-old owner of a coin operated car wash set up retirement plans for his seven employees and got socked for his good deed with a $900,000 penalty for not reporting the plans properly. The company and its owner are now headed for bankruptcy. In another case, a penalty of $100,000 each was imposed on the six minor children of an owner of a small business in Utah for not filing the right tax forms.
In response, some members of Congress sent a letter to the IRS asking it to suspend collecting the penalties in similar cases while Congress debated what to do.
However, Congress should not be surprised by these stories. The IRS was only enforcing the law exactly as Congress wrote it.
In another example of bad lawmaking, in 2007, Congress stuck into a supplemental appropriations bill a major change in the way penalties are computed for people in the business of preparing tax returns. Congress acted without consulting with the IRS. The IRS chief counsel at the time, Donald Korb, said publicly that the service had been "blindsided" by the change.
The change created a conflict of interest for tax professionals. It subjected them to a higher penalty standard than their clients, which encouraged them to give tax advice that protected the tax preparer more than the taxpayer. The IRS and tax professionals tore their hair out trying to sort through the mess until 2008, when Congress changed the law again.
There are lessons here for Congress. Don't take away the ability of the IRS to waive penalties. Also, don't tinker with penalties without thinking through the effect on the overall penalty regime.
so... who writes this crap and inserts it into a bill like this anyway?
law of unintended consequences, written by those for whom the consequence never applies?
Check.
SwissArmyD at August 24, 2009 11:31 PM
Remember this if you look upon Federal health care as a "good thing". You're sick? The clerk is not sick. Fill out this form. Used a decriminalized drug and it crippled you? Sorry, not covered. Next?
Radwaste at August 25, 2009 1:08 AM
You continue to amuse me with your double standard; personal responsibilitarian until it comes to those who have.
muggle at August 25, 2009 4:47 AM
Amy Alkon
http://www.advicegoddess.com/archives/2009/08/25/add_wrong_youre.html#comment-1664644">comment from muggleYou continue to amuse me with your double standard; personal responsibilitarian until it comes to those who have.
Those who have what? The guy who paid for his employees' health care and made a mistake is an evil-doer? My taxes were wrong this year, too; my tax preparer apparently made an error, but in favor of the IRS, and I got money back from them when they calculated it instead of getting fined. I wasn't dishonest. I just stopped using my expensive and very conservative former Coopers & Lybrands guy in New York and went with the cheaper people in Burbank that my neighbors use, and are happy with. Should I be fined for something like this? Or just be a little more careful in where I try to save money?
I hate that our taxes are so complicated, that I have to hire a preparer and worry that they really what they're doing, know every complexity of the highly complex tax code as it relates to me (and that I don't really have any good idea of whether they do until they make an error).
Amy Alkon at August 25, 2009 5:38 AM
Don't feed the trolls.
It's even better when you are a small business. Here in CT, I am required by law to collect sales tax and remit it to the state. The laws regarding what rate something gets taxed at are so vague that even the department of revenue services doesn't understand them.
But guess who's on the hook for guessing wrong - me.
I am an uncompensated agent for the state operating under the threat of ruinous fines for making a trivial mistake trying to obey laws that the people tasked with enforcing them can't even understand.
Because our legislature in this state runs like eighth-grade student government.
brian at August 25, 2009 6:42 AM
Everyone should read The Fair Tax by congressman John Linder and Radio host Neal Boortz.
It is actually a tax that is constitutional and fair to everyone, versus the current one that discrimanates against higher earners.
David M. at August 25, 2009 7:05 AM
Congressmen don't actually write the laws, nor do they read them. It is far past time to vote every incumbent out, and continue to do so, until the system responds to us.
MarkD at August 25, 2009 8:54 AM
In agreement with MarkD:
Fellow small people, the law applies to you and I, or not, according to the needs of our rulers. Many, or most, see the Constitution as an unfortunate or outdated limitation to good government. Our wise rulers get together in committee and specify how we should live the good life, exempting themselves of course.
Please vote out all incumbents, every one, so we can have a chance at freedom. Those who are "better than us" will lose power. Those who are upright and good will have the consolation that they were present when the people took back their freedom, and they can run again after a vacation as a private citizen.
Andrew_M_Garland at August 25, 2009 11:15 AM
As I recall the Ways & Means Committee is chaired by the unapologetic tax-dodger Charlie Rangel; you know, the congressman who, when asked by someone about that unpaid tax problem, told them to mind their own goddamned business? That, SwissArmy, is one of the people in charge of writing this crap.
Firehand at August 25, 2009 12:19 PM
"My taxes were wrong this year, too; my tax preparer apparently made an error, but in favor of the IRS, and I got money back from them when they calculated it instead of getting fined."
Amy, you need to fire your tax guy. Your tax guy should always make a "mistake" in favor of you and never, never, never for the IRS.
You got lucky this time because the IRS found the mistake for you but don't expect this generosity every time.
Chang at August 25, 2009 2:16 PM
I am always amazed the more government burecrats arent just shot.
lujlp at August 25, 2009 2:39 PM
It seems that Rep. Rangel not only can't remember to pay taxes, he can manage to lose track of a checking account with somewhere between $250,000 and $500,000 in it.
http://www.nypost.com/seven/08272009/news/regionalnews/tax_chief_charlie_a_tax_cheat__too_186678.htm
Yeah, happens to me all the time, too...
Firehand at August 27, 2009 7:01 PM
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