Things You Can Do After Tax Season To Make Next Year Easier

The best tax advice is to get an earlier start on filing income tax returns. Putting off completing your tax returns until April only increases the stress and anxiety of confronting all of the rules and regulations of the IRS. The strain of filing this year’s returns should serve as an incentive to make next year go a little smoother. To make that happen, incorporate a few organizational techniques, and aim for a goal to file your return by February next year.

mileageEspecially if you use your car frequently for business, you’ll find that the miles add up quickly.  Many taxpayers can legitimately claim the mileage deduction for their personal vehicles. However, the IRS wants a mileage diary at audit time. Many tax practitioners, afraid of accuracy penalties, are reluctant to include estimated mileage numbers on their customers’ tax returns.

The solution? Buy a small expense diary that will fit in an easy-to-reach cubby-hole near your dashboard. Attach a pen to the notebook. As soon as you buy the expense booklet, write down the mileage from the odometer, next to the date. Put the booklet and envelope in the glove box of your car.  You should also purchase a manila folder to keep by your computer.  Whether you prepare your own taxes or leave the task to a tax professional, the presence of the manila folder can remind you to either print out copies of mortgage statements or other transactions. If you receive statements or bills by mail, put them in the folder.  If there is a particular place where you empty your pockets or purse, make sure a second envelope or folder for receipts is nearby.

Your manila folder and glove compartment envelope can be used for any receipt, including prescription and over-the counter drugs or doctor receipts. Did you make a tuition payment online for your child’s college tuition? Print out a receipt right away, and stash it in the folder.

ReceiptsIf you occasionally make a purchase for your rental property, keep an envelope in the glove box to keep receipts. You can use the same envelope for gas receipts. Even though gas purchases are not deductible, gas receipts can provide substantiating evidence for mileage deduction claims. Did you take clothes or other donations to your church, or the Salvation Army?  Put the receipt you should have received in the envelope along with your gas receipts and receipts for rental purchases.  Maintaining receipts is essential in case the IRS questions your deductions.

Whenever you use the car for a deductible trip, copy down the odometer reader at the beginning and again when you return home. To cement the habit of keeping track of your mileage, copy the odometer reading every time you get in the car. Your log should include the date, the beginning odometer reading, the purpose of the trip, including names of people you’re meeting with if your trip is business related, and the ending mileage.

Once your system is in place, maintenance requires only a few seconds a day.  Writing down your mileage will become second nature. You’ll be surprised by how quickly your receipts add up as the year progresses.  And you’ll be able to look forward to a more lucrative and less stressful tax season next year!

Tax Fraud: How Do You Protect Yourself From Something You Don’t Know Exists?

You’ve always filed your income tax returns electronically in the past. Your returns were less vulnerable to calculation errors and you received your tax refund much quicker than you did filing paper returns. But this year, when you attempted to e-file your federal income tax return, the IRS rejected your submission, issuing a statement that a previously filed return using your Social Security number was already on file. How could such a thing happen?

Welcome to the world of identity theft, tax fraud style. Scammers filing falsified returns reap millions for their fraudulent efforts, spending the money from their ill-gotten gains long before the IRS – or their victims – become privy to the fact that a crime has even been committed. Many victims only learn that they’ve been targeted after receiving an audit notice from the IRS. In the meantime, fines, fees, penalties and interest from tax return fraud have accumulated, – and it’s largely up to victims to straighten out the mess.

tax fraud“Drops” and Bling

Ironically, the same e-filing system that cuts weeks from the time needed to process federal income tax returns and refunds also facilitates tax return fraud. Known as “drops” in many urban areas, this form of tax fraud identity theft involves using victims’ Social Security numbers, to file fraudulent electronic income tax returns claiming substantial tax refunds. This eliminates the need to attempt to forge victims’ physical signatures on paper tax returns.

Another ironic consequence of the dramatic rise in “drops” is a corresponding decline in street crime, particularly the drug trade. Many small-time drug dealers and even large volume drug traders find that executing “drops” is less legally hazardous, not to mention more lucrative. Another ironic consequence is a reduction in demand for assistance from food banks or even government food stamps: tax fraud artists don’t need the help. In fact, the expensive cars with pricey rims, the fancy clothes and the other “bling” flaunted by many tax fraud artists, fuels resentment amongst honest residents in low-income neighborhoods who struggle to make ends meet on a daily basis.

How Victims are Targeted

Have you ever provided your Social Security number to anyone? Then you are potentially a target for tax fraud identity theft. Many legitimate transactions: opening a bank account, applying for a mortgage or filling out a job application require individuals to supply Social Security Numbers. Unscrupulous employees harvest Social Security numbers from such transactions, which they use themselves or sell to the highest bidder. Tax fraud artists also comb death notices, create Trojan viruses or phishing email attempts or simply rummage through trash for the information they seek.

Funds from these fraudulent returns are commonly issued on proprietary debit cards issued by companies providing e-filing services, making it easy for fraud artists to access their ill-gotten gains. Paperwork backlogs and personnel shortages within the IRS exacerbate the issue. Especially during the busy tax filing season, the emphasis of the IRS is on processing returns and refunds as quickly as possible. By the time the IRS initiates inquires on questionable returns, money from fraudulently obtained refunds has often long since been spent.

Protecting Yourself from Tax Return Fraud

The best way to protect yourself from tax return fraud is by limiting access to your Social Security number. A bit of vigilance will protect you from many fraudulent attempts to obtain your Social Security number. Don’t carry your Social Security card unless you need to provide a copy for a job application or a similar purpose. Protect sensitive information on your computer by maintaining up-to-date antivirus and antispyware software and firewalls.

Think twice before responding to unsolicited “pre-approved credit” offers received online or in the mail. Never supply sensitive personal or financial information unless you have initiated the transaction or conversation – or unless you are 110 percent sure that the person on the phone or the website you’re dealing with is the real deal. If you receive questionable communication requesting (or demanding) sensitive financial or personal information from a company you’ve done business with, contact the company directly to check verify that it is indeed them requesting the information.

If you receive unsolicited email, social media or text messages claiming to be from the IRS, there is a 100 percent probability that they’re fake. The IRS only initiates communications with taxpayers by regular mail or by telephone – period. Do not respond directly to such communications in any way. Instead, report suspicious IRS-related communications to phishing@irs.gov or call 1-800-366-4484.

If You’ve Been Victimized by Tax Return Fraudtax_fraud

The first indication that you’ve been victimized by tax return fraud often comes in the form of an inquiry from the IRS about discrepancies in your return. You may be questioned about returns issued in your name which you never received or wages earned for companies you’ve never even heard of. You may also be assessed additional taxes or tax return offsets for years that you didn’t file a tax return at all. Another telltale sign is a notice from the IRS that multiple returns have been filed during a single year using your Social Security number.

Once you become aware that you’ve been targeted by tax return fraud, you must act quickly to limit the damage. File a complaint with the Federal Trade Commission and a police report with your local law enforcement agency. Contact one or more of the three major credit reporting bureaus (TransUnion, Equifax or Experian) to have a fraud alert placed on your credit report. Close any credit card or other accounts that have been compromised or opened without your knowledge. Also, check your earnings report annually with the Social Security Administration to endure that there is no fraudulent activity.

If your federal tax refund has been stolen or you have other unresolved tax-fraud related issues, contact the IRS Identity Protection Specialized Unit at (800)908-4490. You can protect yourself from further tax return fraud attempts by filing “Form 14039 – Identity Theft Affidavit” with the IRS. It’s likely that you’ll be required to file a paper return for the present tax year and it may take months to resolve your case, as well as restore any refunds to which you’re rightfully entitled.

However, the IRS will issue you a unique IP PIN that will replace your Social Security number and which will allow you to e-file future federal income tax returns safely. Do not use this IP PIN for any other reason – including state income tax returns.

IRS Hacked, 104,000 Taxpayers Impacted and Nearly $50 million Stolen: What Should You Do to Protect Yourself?

The IRS announced on Tuesday (5/26/2015) that identity thieves had attempted to access the accounts of 200,000 taxpayers through the IRS’s “Get Transcript” online application. The scary part is that the IRS has admitted that more than 104,000 of those attempts were successful. The hackers’ operation started in February and ran through mid-May. All in all, the IRS was tricked into sending nearly $50 million in refunds for fraudulent returns.

The IRS has started an investigation in the breach and has temporarily closed down the “Get Transcript” application, a service that allows taxpayers gain access to their information. Taxpayers who need access to old tax returns to apply for mortgage or college loans can now request them by snail mail.

irs_data_breachThe IRS is notifying the 200,000 taxpayers whose accounts were tampered with that their Social Security numbers and other personal financial information is in the hands of hackers. It is also offering complimentary credit monitoring to the 104,000 whose “Get Transcript” accounts were accessed to ensure their private information is not used by criminals to fill in bogus bank loans and credit card applications.

This is by no means the first time the IRS has been the victim of online crime. According to a report published by the U.S. Government Accountability Office in January 2015, identity thieves cheated the IRS out of $5.8 billion in falsely claimed refunds during 2013 alone.

Who Stole from the IRS?
According to Peter Roskam, Illinois republican and chairman of a House subcommittee that supervises the IRS, the IRS Commissioner John Koskinen said to him in a telephone call that the theft originated from within Russia. The IRS’s investigation is still ongoing and IRS officials have neither confirmed nor denied Roskam’s statement.

John Koskinen, the IRS commissioner, did say to the press that he was confident they weren’t dealing with amateurs. “These actually are organized crime syndicates that not only we but everybody in the financial industry are dealing with.”

How Did Identity Thieves Steal $50 Million from Taxpayers?
When you think of hackers stealing money from big corporations or government agencies you probably have the image of shady programmers strong-arming the security protocols of their victims’ servers with their sophisticated code; but this isn’t what happened here. Strictly speaking the IRS wasn’t hacked. The identity thieves didn’t need to hack their way into the IRS, because they had all the answers to the IRS’s identification confirmation questions.

As Peter Roskam put it, the identity thieves “went into the front door of the IRS and unlocked it with the key.” The hackers had already obtained personal information on taxpayers, such as their date of birth, address and Social Security information, from previous hacking heists. With that information thieves were able to clear the IRS’s multi-step authentication process, including several personal verification questions that usually only the taxpayer can answer.

What Should You Do?
First, don’t panic. Your personal information is already out there. A motivated hacker can easily obtain it for a few dollars. But this doesn’t mean you should sit on your hands. Consumers can, and should, make things harder for criminals. You could compare it to your home’s front door. No matter how much you spend on security, a professional burglar could break in, but that doesn’t mean you should leave the door open or that you shouldn’t invest in a decent security system.

Here are four things you can do right now to protect yourself after the IRS breach:

1.) Change your passwords again. This is an obvious but often overlooked measure after major breaches. Don’t use your name or words that can be found in a dictionary. The first thing hackers do is use programs that test every word in the dictionary. Instead, create your own secret codes by using anagrams or substituting letters from common words with numbers.

2.) Turn on multi-level authentication. Only use sites that offer you the option of confirming access by receiving a one-time code either via a phone message or email.

3.) Lie on security questions. With the advent of social networks and our propensity to over-share, most security questions are easy to hack. Finding out where someone went to high-school or their mother’s maiden name just isn’t that difficult anymore. Instead of offering truthful answers, provide a second password as your answer. This will make it much harder for hackers to guess your security answers.

4.) Monitor your credit. There are no fail proof security measures against identity theft. You can try to make it harder for criminals but the chances are you will fall victim to identity thieves sooner or later. You can minimize the damage of these attacks by regularly monitoring your credit by scanning your credit history with the three major credit reporting agencies.

Charitable Giving

As taxpayers are aware, charitable donations are deductible. Information concerning charitable giving has been provided directly from the Internal Revenue Service (IRS) and is included below.

Rules for Giving

A full discussion of the rules for charitable contributions is contained in Publication 526, which is available on the IRS website. It’s a good idea to read this information before making year-end charitable deductions and prior to claiming deductions for charitable giving on your 2014 federal income tax return. It’s especially important to understand the rules concerning cash and non-cash donations, including calculating the value of your gift.

For tax filers completing their own returns, it’s essential to read  Publication 561 to learn how to determine valuation for non-cash gifts, preferably before you have made the gift.  The IRS has provided several tips to making charitable donations.

A Few Tipsgiving

These are a few guidelines the IRS is providing before you fill out Schedule A and the section for charitable donations:

* Not all charities are created equal! Both qualified and unqualified charities exist. A list of qualified charities is available on the IRS website. The IRS cautions taxpayers that  “sounding like” a viable charity does not qualify a charity.

* You can deduct contributions to churches, synagogues, temples, mosques and government agencies even if they do not appear on the list of qualified charities.

* Cash donations and gifts are those paid in cash, but also by check, fund transfer, payroll deduction and credit card. The bank record or letter from the recipient provides sufficient documentation to fulfill the IRS requirement for maintaining records for claiming charitable cash deductions on your federal income tax return.

* Donations of household items (furniture, electronics, appliances, linens, window treatments, draperies, area rugs, etc) are deductible ONLY if they are in reasonably good shape. Non-cash donations valued at  more than $500, must be verified with a qualified appraisal retained with your tax records.

* Receiving charities should provide a thank-you letter for each contribution (money or property) of $250 or more. If the charity does not voluntarily supply such a letter, request one.

* Donations of airplanes, boats and cars are subject to specific rules. Check the IRS website for details  (www.irs.gov) and additional pertinent information.

It’s unlikely that the IRS would challenge your return solely on the basis of charitable deductions totaling less than four figures. Nonetheless, following these tips will help to keep you on the right side of filing guidelines — regardless of the size(s) of your donation(s).

How Has The IRS Fresh Start Initiative Adapted To Help Taxpayers?

Since its inception in 2011, the IRS Fresh Start Initiative has changed to meet the needs of taxpayers.  Its scope has expanded in several ways to cushion the blow of back taxes and penalties.

●        Taxpayers unable to pay their entire federal tax bills can apply for an Offer in Compromise (“OIC”) to reduce their tax burdens.  Essentially, the OIC allows taxpayers to settle their delinquent federal tax bills for less than the full amount that they owe. An OIC also streamlines the process of investigations and shortens the time that taxpayers spend repaying the IRS.  Taxpayers with complicated tax returns should employ the assistance of a  tax relief professional to negotiate a fair OIC agreement.

fresh start●        Taxpayers who do not qualify for an OIC can negotiate manageable monthly payments through an IRS installment agreement. Previously, taxpayers who owed more than $25,000 in back taxes were subject to an invasive income examination process to determine the amount of their monthly payments. The IRS Fresh Start Initiative has raised that limit to $50,000, making it possible for more taxpayers to negotiate a streamlined installment agreement. However, taxpayers owing less than $50,000 may still wish to consult with a financial professional to ensure that a prospective installment agreement is mutually beneficial, not just for the IRS.

●        One method the government uses to recover back taxes and penalties is the filing of liens against taxpayers’ property.  This could mean real estate, business assets, and vehicles.  A tax lien against property can make it difficult to get credit and can also result in  property being auctioned off.  Originally, tax liens would be filed automatically for taxpayers with delinquent federal taxes of at least $10,000.  The IRS Fresh Start Initiative has raised the lien-triggering amount to $50,000, although the IRS still has the latitude to file liens for taxpayers who owe less.

The IRS Fresh Start Initiative was introduced as a way to make it easier for taxpayers to compromise with the government when paying back taxes and penalties.  The changes made to the program since 2011 help the taxpayer settle disputes quickly, avoid inconveniences, and save money.

Payment Alternatives When You Owe the IRS

If you cannot pay the full amount of taxes you owe, don’t panic. You should file your 2014 tax return on time and pay as much as possible. This will help reduce the penalties and interest that may result from a late tax payment. If you can’t afford to pay what you owe in full, there are available alternatives.

IRSPayment Plans

A payment plan may be an option. You can request a short-term payment plan up to 120-days. There is no user fee for a short-payment plan.

You can also request a longer term monthly payment agreement. A one-time $120 user fee applies to monthly payment plans; the fee is reduced to $52 if you make your payments by direct debit.

Individual taxpayers who owe more than $50,000 and businesses that owe more than $25,000 are required to submit a financial statement with their request for a payment plan.

Offer in Compromisetaxes

An Offer in Compromise is an agreement between you and the IRS to settle your tax debt for less than the full amount you owe. The offer program provides eligible taxpayers with a path toward paying off their tax debt and getting a “fresh start.” Not everyone will qualify for an offer. Use the IRS Offer in Compromise Pre-Qualifier Tool to see if the Offer program is right for you.

Other Options

If you do not find an option that works for you, other alternatives, including a temporary suspension of IRS collection efforts, may be available. Contact the IRS immediately to discuss these other options.

IRS-Tax-DebtRegardless of which option you choose, it is important to know that the IRS has a minimum of 10 years to collect your taxes from the date they were assessed. Many people don’t know that there are ways this time period can be suspended. For example, by law, the time to collect may be suspended while the IRS is considering your request for an Installment Agreement or Offer in Compromise. If your request is rejected, they will suspend collection for another 30 days, as well as during any period the Appeals Office is considering your appeal request.

If you live outside the U.S. continuously for at least 6 months collection will be suspended while you’re outside the country. Should you be in the middle of a bankruptcy, there is an automatic suspension for a time period because of the automatic stay plus 6 months. Also, if you request a Collection Due Process hearing, collection will be suspended from the date of your request until a Notice of Determination is issued or the Tax Court’s decision is final.

Congress Extends “Temporary” Tax Cuts

As 2014 drew to a close, Congress voted to extend 54 “temporary” tax cuts for the 2014 tax year. The Senate vote finally passed the week after Congress was supposed to adjourn for the year, producing a collective sigh of relief among taxpayers. The numerous cuts will benefit a wide range of taxpayers, ranging from large businesses and corporations to struggling homeowners. The list below describes eight of the most popular deductions that were extended.

tax-cuts

  • Tuition deduction. Whether you itemize your taxes or not, this tax cut allows you to deduct up to $4,000 in tuition, fees and related expenses for post-secondary education for yourself or your dependents.
  • Mortgage insurance premiums. If you are required to pay mortgage insurance to your lender, this deduction allows you to deduct the cost of your premiums if you itemize your tax return.
  • Mortgage debt exclusion. The mortgage crisis has forced many homeowners into foreclosure or a short sale. If your house was sold for less than you owe, the bank will often forgive the debt. However, the IRS considers the amount forgiven to be taxable income. This deduction allows you to exclude the forgiven amount from your income.
  • Teachers’ deduction. Whether a teacher itemizes their tax return or not, this tax cut allows him or her to deduct up to $250 in out-of-pocket expenses for classroom supplies.
  • Commuting costs. Commuters can reduce their pre-tax income based on their commuting costs. People who drive to work and pay to park may deduct $250 per month. Commuters using mass transit may deduct $130 per month.
  • Sales tax. If you itemize your tax return, this measure allows you to deduct the state and local sales taxes you’ve paid in 2014 instead of state income taxes. This deduction especially benefits individuals living in one of seven states that do not have a state income tax.
  • Energy credit. You can deduct up to 10 percent of the cost of qualified energy-efficient products (between $50 and $500) purchased for your home in 2014. This deduction does not apply to new homes. The qualified product must have been bought and installed into your primary residence in 2014.
  • IRA withdrawals for charity. If you are over 70 1/2 years old, you may make a tax-free charitable contribution from your IRA up to $100,000. The contribution will not count as a deduction, but it will decrease your taxable income.

congressAs advantageous as these tax breaks may be in preparing your 2014 tax returns, don’t get used to them. They technically expired as of December 31, 2014, which means Congress will go through the same process at the end of this year. And while these cuts benefit millions of individuals, analysts estimate the extensions will add $42 billion to the national debt over the next 10 years.  Don’t be surprised if Congress allows many, if not all of these tax breaks to expire as a result.

 

Beginner’s Guide To General Tax Info For Married Couples

So you’re newly married and looking for general tax info, but you’re not sure of how to start. Look no further. We’ve prepared a beginner’s guide for filing tax returns for married couples.

Married couples may file either jointly or separately. Advantages and disadvantages vary for each filing status according to your joint debt load, your income and other factors.  Most married couples benefit financially by filing jointly These benefits include the following:

  • The unemployed spouse can have a fully-funded, tax free traditional Individual Retirement Account
  • A legally recognized marriage can protect the estate
  • Married couples are entitled to higher charitable contribution deductions.

In addition, there are several drawbacks to married couples filing separately, including:

  • The Alternative Minimum Tax exemption for married couples filing separately is half the amount allowed for married couples filing jointly.
  • Adoption credits and exclusions are usually not allowed.
  • The capital loss deduction limit is $1,500 for married couples filing separately, versus  $3,000 for married couples filing jointly.

Married couples living in community property states must divide expenses for state taxes. Mandatory community property states are  Arizona, California, Idaho, Louisiana, Nevada, Mexico, Texas, Washington, and Wisconsin. Alaska is an opt-in community property state.

Tax filing requirements vary for same-sex married couples. They may file joint federal tax returns due to the defeat of the Defense of Marriage Act. However, they may or may not be entitled to file joint state tax returns. Joint returns are allowed in states that recognize same-sex marriage. For same sex married couples who live in states that do not recognize their marriages as legal, states may require one of three possible scenarios:

  • File separate returns by allocating income according to a schedule.
  • Complete pro forma federal returns and use that information.
  • Allocate income based on a ratio.(Alabama only)

If you are unsure of what to do, test the waters by enlisting the aid of a tax professional.

 

General Tax Info To Help Take Some Of The Stress Out Of Next Tax Season

It is important for small businesses to understand that the federal government is cracking down on business owners who try to evade reporting requirements.

At one time, it was possible for small business owners to increase their income by operating small, cash-only enterprises. They skirted the IRS reporting requirement for large bank deposits by making frequent deposits of less than $10,000 each.  No longer.

The tactic is called structuring and it is strictly illegal, and the the government has a powerful new weapon to prevent it. The law now allows the government to seize bank accounts merely on suspicion of wrongdoing — and frequent, small deposits arouse scrutiny. Family-owned businesses and even individuals saving for their children’s college education can be targeted.

An October 2014 article in The New York Times includes several points concerning the new law that all citizens — not just business owners — should be aware of:

  • Making small bank deposits, even frequently, is perfectly legal.  It is the attempt to skirt tax reporting requirements that is against the law. However, it is up to the individual to prove that he or she has done nothing wrong.
  • A bank statement is all that is needed for banks to file suspicious activity reports. Last year banks filed more than 700,000 such reports.
  • Fighting bank account seizure in the courts can require individuals to accrue legal costs of $20,000 or more. Many middle class individuals simply cannot afford that sum — and simply give up, even when they are totally innocent.

It is still important to use bank accounts to obtain FDIC protection. However, to avoid being caught by an accusation of structuring, middle income earners should adhere strictly to the law:

  • Always make deposits of at least $10,000 so that the bank will have to file the necessary reporting paperwork with the IRS.
  • Collect smaller amounts of money in a safety deposit box until you have accumulated enough cash to make a deposit that will trigger the reporting requirement
  • By adhering to the law, you may be saving your business or your financial future.

The IRS recently reported that it is scaling back on future seizures, focusing on cases where there seems to be a clear indication of illegal structuring rather than on ordinary individuals. Nonetheless, it’s better to play it safe. Avoiding even the appearance of structuring is well worth the increased taxes you pay on large bank deposits.

Credit Administration Needs Better Oversight

The Treasury Inspector General for Tax Administration says that a quarter of all of Earned Income Tax Credit payments made in 2012 were not proper payments. Is this announcement from the Inspector General  IRS tax news or an indication of more deeply rooted problems? Either way, it appears the agency needs better oversight in administering EITC credits, which benefit so many low and moderate-income taxpayers and their families.

A Change In Payment Protocols Is Needed

Many EITC payments were made to people who were not entitled to them, while some legitimate recipients received the wrong amount. The total amount of improper EITC payments totaled an astonishing $14.5 billion of the $63 billion in credits paid, according to the report. It appears that the EITC represents one of the biggest risks for placing billions of dollars in the wrong hands.

The federal watchdog agency that monitors the Internal Revenue Service (IRS) operates under the Improper Payment Elimination Recovery Act of 2010. Its most recent report notes that agency oversight is seriously lacking. The amounts of those incorrect payments, unacceptably high at 25%, are significant and considerably above the government expectations for an error rate of 2.5%. Lax oversight is a major contributing factor to the total shortfall, estimated to total between $124 billion to $148 billion.

A Change In The System

A high level of mismanagement also occurs with the Additional Child Tax Credit, intended to assist larger low-income families in reducing their tax burden. Improper credits by the IRS totaled 25% to 30% of the program’s total payouts. These improperly administered credits amount to between $5.9 billion to $7.1 billion in total.

Auditors from the watchdog agency contend that the IRS needs to make significant changes in their existing systems. Clearly the present protocols have failed in preventing errors and improper payments

The watchdog agency recommended expanding IRS authority to allow the agency to make corrections in tax returns it receives to prevent improper payment of refundable tax credits. This change alone could avoid improper payments totaling more than $1.7 billion, according to the auditor.  While the IRS reported agreed with the watchdog agency’s recommendations, recent budget cuts continue to make it difficult — if not impossible — to effectively enforce compliance.