In Bad Times, the Taxman Cometh, Taketh, and Keepth!


As governments, both federal and local see shrinking revenues, enforcement and collection activities increase.  Sometimes they hid their draconian plans in obscure places, such as farm bills and such.  I have warned that some of the next attacks would be on social security recipients and today I am going to point out some of these sneaky attacks. I think it is important that we understand how quickly we are losing our control over our own government’s activities and the IRS is a bell weather in those movements.

Small changes have been made invarious congressional acts, which then allow a clause in that bill to then be interpreted as “the government’s right” to do this or that.  I am not going to get into the discussion on whether the government has the right to collect income tax and how there is no law that gives them that right.  The tax revolutionists can handle that issue.  What I am going to discuss is how and what specifically “the government” and the IRS are doing and how they are doing it.

The most recent changes actually start back in April 30, 2001 — In news that is certain to shock and dismay some seniors, the Internal Revenue Service had announced its intention to garnish the Social Security checks of debtors who are at least six months in arrears. The program, began in October of that year, and was authorized by the 1996 Debt Collection Improvement Act (don’t you just love this terminology), which gave the Treasury sweeping powers to go after debtors, irrespective of age, including assigning accounts to private collection agencies, garnishing salaries, and withholding income tax refunds.

Social Security recipients who receive $750 per month or less are not be affected, but Treasury can withhold up to fifteen percent of all payments above that amount, except for payments to the disabled and others under the Supplemental Security Income program. At that time more than 230,000 IRS debtors, the majority of whom are senior citizens, were affected,  but there was a simple way they could protect themselves and their Social Security income. Most Social Security recipients could probably qualify for ‘Currently Not Collectible’ (CNC) status from the IRS because they don’t receive income above a Hardship level. By rule, the IRS must notify the prospective garnishees of the Service’s Intent to Levy; taxpayers are put on notice to contact the IRS to explain their situations. The first 55,000 delinquency notices were sent in March 2002, with a second wave mailed in April.  To qualify for CNC status, the taxpayer MUST respond to the notice, contact the IRS or a tax preparer for assistance, and explain the Hardship situation. Failure to do so put the affected taxpayer’s Social Security benefits at considerable risk. Only 10% of those affected followed the procedure.  However, even that number was not acceptable to the IRS.

What they needed to do was eliminate any expiration of obligation such as the “ten-year” rule for collection so that there was no out for the terrible cheating seniors on social security.  They also wanted to be responsible for collecting more than just taxes.  Treasury wanted to have the right to collect from social security recipients on defaulted student loans and other loans that were extended by various government programs.  So buried deeply in the so-called Farm Bill of 2008 which is actually codified as the The Food, Conservation, and Energy Act of 2008 (Pub.L. 110-234, 122 Stat. 923, enacted May 22, 2008, H.R. 2419, which was a $288 billion, five-year agricultural policy bill that was passed into law by the United States Congress on June 18, 2008. The bill was a continuation of the 2002 Farm Bill. It continues the United States’ long history of agricultural subsidy as well as pursuing areas such as energy, conservation, nutrition, and rural development. Some specific initiatives in the bill include increases in Food Stamp benefits, increased support for the production of cellulosic ethanol, and money for the research of pests, diseases and other agricultural problems.  But it also contained regulations to eliminate any sunsets on tax debts, student loan defaults, etc and authorized the Treasury the right to collect on these debts from social security recipients and cited the 1996 Debt Collection Improvement Act as authority to EXTEND their rights to student loans, etc.  In February, over 310,000 collection notices were sent to social security recipients informing them that their social security checks were going to be garnished. When I hear of these actions, the Sheriff of Nottingham comes to mind.  But alas where is Robin Hood and his gang of Merry Men!

In related news, not only does the tax man taketh, he keepth too! Hawaii’s Department of Taxation says some residents may not see state income tax refunds until the end of August, The Honolulu Advertiser reported. It was part of a plan by Gov. Linda Lingle to deal with a revenue drop-off by pushing costs into the next fiscal period, which begins in July. States often do not have a timetable for refunds because delays are based on cash flow. Most states typically issue refunds within 30 days. Delaying refund checks isn’t unprecedented, but it is something virtually no politician wants to do, because taxpayers are owed the money and in most cases want it fast. Delays in paying refunds and other state bills can trigger interest on those overdue payments, depending on state laws.

California’s massive budget shortfall of more than $20 billion last year prompted it not only to delay tax refunds but to issue billions of dollars in IOUs to vendors and others who were owed money. State Controller John Chiang called the delayed payments a “shameful chapter in the State’s history” when the IOUs ended last September. California still faces budget problems, but Chiang said that revenue is running ahead of projections so far this year, lessening the threat of a repeat.

The delays come as some states continue to face deep budget holes, even as economists say the nation as a whole has begun recovery. In a recent report, the budget officers group and the National Governors Association said state fiscal conditions “have continued to worsen,” and that state revenues can be expected to lag one to three years behind a national recovery from recession. This fiscal year, the report said, 36 states have cut nearly $56 billion in spending, and 30 states have cut funding to public and higher education.

How bad can it get you ask?  Well consider this out of Sacramento this week!  I kid you not! From the http://www.sacbee.com/ Bob Shallit reports this following story.

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. The really odd part of this: The letter that was hand-delivered to Zeff’s on-site manager showed the amount of money owed to the feds was … 4 cents. Inexplicably, penalties and taxes accruing on the debt – stemming from the 2006 tax year – were listed as $202.31, leaving Harv’s with an obligation of $202.35. Zeff, who also owns local parking lots and is the president of the Midtown Business Association, finds the situation a bit comical. “It’s hilarious,” he says, “that two people hopped in a car and came down here for just 4 cents. I think (the IRS) may have a problem with priorities.” Now he’s trying to figure out how penalties and interest could climb so high on such a small debt. He says he’s never been told he owes any taxes or that he’s ever incurred any late-payment penalties in the four years he’s owned Harv’s. In fact, he provided us with an Oct. 22, 2009, letter from the IRS that states Harv’s “has filed all required returns and addressed any balances due.” IRS spokesman Jesse Weller isn’t commenting “due to privacy and disclosure laws.”  I really think I need a DRINK RIGHT ABOUT NOW!

But the reach of the taxman isn’t just domestic.  Consider this.

GENEVA (AP) — Embattled UBS AG has warned that Switzerland’s financial industry is at risk unless lawmakers approve a tax treaty with the U.S., and that other Swiss banks may be next to face pressure from American regulators. In a letter to parliamentarians, the banking company said the U.S. Internal Revenue Service has collected information on the cross-border activities of about 20 Swiss banks and may press for a crackdown on American tax evaders at these institutions as well.

UBS urged parliament to approve an August treaty signed by the U.S. Treasury Department and Switzerland’s executive Federal Council on improving cooperation in tax evasion matters. “The risks are very considerable for the Swiss financial center and the economy as a whole if parliament were to withhold its approval,” UBS said in the letter first reported Friday by Zurich daily Tages-Anzeiger and obtained by The Associated Press. The bank confirmed its authenticity. The Swiss government is scrambling to salvage the treaty after a Swiss court ruled in January that parts of it were illegal. It has asked parliament to sign off on the deal, which would temper Switzerland’s strict banking secrecy law to meet Washington’s demands for greater access to files on suspected American tax cheats. “Apart from UBS, many other Swiss banks were involved in cross-border business with American clients,” the Zurich-based bank said, referring to offshore accounts for wealthy U.S. customers.

“The IRS has obtained information on about 20 Swiss banks” as part of a recent amnesty program, UBS said. “It is quite possible that the IRS wants to obtain information on other customers of these banks. Refusal by Switzerland to meet its obligations under international law could send a signal that would escalate these cases.” A spokesman for UBS declined to comment on which banks might be involved. UBS also warned that Switzerland risked ending up on a blacklist of uncooperative tax havens if lawmakers refused to bless the deal, which was reached after months of tense negotiations between Washington and Bern. Swiss companies doing business in the United States could then be subject to additional scrutiny by the IRS, it said. Marlies Baenziger, a lawmaker for the center-left Green Party and member of the parliamentary finance committee, said the letter showed UBS was trying to intimidate parties into approving the treaty.

The nationalist Swiss People’s Party, the country’s largest, announced earlier this week it would oppose the deal in parliament. U.S. authorities last year agreed to drop their demand for details of 50,000 of UBS’ American clients, if the Swiss divulged the names of 4,450 believed to have been involved in large-scale tax evasion or fraud. In a separate deal, UBS paid a $780 million penalty as part of a deferred prosecution agreement that included disclosure of an additional 150 names.

As I have pointed out in many previous articles, these illustrations vividly point to the fact that we have allowed banksters and CONgress to completely fracture the economic systems of the world.  It is a FUBAR situation (F’d up beyond all recognition).  It is time that “We, the people” retake control of our political process and reset our government to work for the benefit and protection of all.  Here’s Uncle Willie’s thought for the day:

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Author: redhawk500

International business consultant, author, blogger, and student of life. After 35 years in business, trying to wake the world to a new reality. One of prosperity, abundance, and most importantly equal opportunity. it's time to redistribute wealth and power.

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