Jewish & World News

Worried the Internal Revenue Service might target you for an audit? You probably should be if you own a small business in one of the wealthy suburbs of Los Angeles. You might also be wary if you're a small-business owner in one of dozens of communities near San Francisco, Houston, Atlanta or the District of Columbia.

Dealt some drugs? Stole some cash? There's a line on your income tax form to declare it. As ridiculous as it sounds, the federal government requires that money acquired through illegal means be reported and taxed just like legitimate income. It's right there on the official IRS tax instructions: "Income from illegal activities, such as money from dealing illegal drugs, must be included in your income on Form 1040, line 21, or on Schedule C or Schedule C-EZ (Form 1040) if from your self-employment activity."

The IRS has been doling out billions of dollars in fraudulent tax refunds to identity thieves, according to a report released Thursday. The agency failed to prevent 1.5 million potentially fraudulent tax returns from being processed last year -- resulting in refunds totaling more than $5.2 billion, according to an audit conducted by the Treasury Inspector General for Tax Administration.

Congressional staffers owed about $10.6 million in unpaid taxes in 2010, a slight increase from the previous year and a growing slice of the roughly $1 billion owed by federal and postal workers nationwide. The figures come as Republican efforts to pass legislation allowing federal agencies to fire tax delinquent federal employees have slowed and as the White House continues to crack down on improper payments made by agencies to delinquent government contractors and federal beneficiaries. About 98,000 federal, postal and congressional employees owed $1.03 billion in unpaid taxes at the end of fiscal 2010, according to records provided by the Internal Revenue Service. The total number of delinquent employees dipped slightly from 2009, but the amount owed jumped by $32 million. The figures are “totally unacceptable and disrespectful to hardworking American taxpayers,” said Rep. Jason Chaffetz (R-Utah). “If you’re on the federal payroll, the very least you can do is pay your taxes.” ...

Filing taxes takes too long, costs too much money and is far too overwhelming a process for taxpayers. That's the message from national taxpayer advocate Nina Olson, the watchdog charged with monitoring the Internal Revenue Service.

It was every businessperson's nightmare. Arriving at Harv's Metro Car Wash in midtown Wednesday afternoon were two dark-suited IRS agents demanding payment of delinquent taxes. "They were deadly serious, very aggressive, very condescending," says Harv's owner, Aaron Zeff.

As if U.S. tax forms aren't complicated enough, Congress is expected to include in its final health care reform bill a requirement that nearly all Americans have health insurance -- and prove it on their tax returns or face a fine. The Internal Revenue Service would be tasked with enforcing this new health insurance mandate, prompting some in the tax preparation business to say this is going to add a whole new burden to the tax agency. "Just the audits of this is going to be huge because our system is a voluntary compliance system," said Terry Jones a private certified public accountant. "The IRS can audit, of course, and this is a whole new area opening up that the IRS is going to have to be on top of." In addition, the health care reform bill likely would require the IRS to dole out taxpayer dollars -- subsidies -- to low-income Americans to help them pay for health insurance, administer tax credits to small businesses to help them offer health insu...