Don't Mess With Taxes

Sen. Max Baucus, chairman of the Senate Finance Committee, has been swamping us with his thoughts on how to overhaul our tax system.

He started with his thoughts on how to improve the corporate tax system, specifically as it relates to taxes on the international earnings of multinational companies.

Next came Baucus' proposals to overhaul more administrative style tax functions, such as simplifying the filing system and fighting tax fraud.

Although some of the tax reform material that Baucus has been distributing is in legislative language, it is not proposed legislation ... yet.

The Montana Democrat notes that the documents are "discussion drafts prepared by his staff that "are intended to spur a conversation about areas where Republicans and Democrats may be able to reach agreement on how to fix the broken tax code."

Talking tax reform: In addition to spurring talks among his Capitol Hill colleagues, Baucus also is looking for more participants in the tax reform conversation.

He's asking stakeholders (Capitol Hill speak for those who would be affected by the changes) and you, me and our fellow U.S. rank-and-file taxpayers to comment on the drafts.

Yep, Baucus and his staff promise to do their best Dr. Frasier Crane impersonations and listen to our tax reform ideas.

In fact, Baucus' tax administrative proposal specifically includes a section titled "Other Reforms," in which the Senate tax-writing committee chair asks for public comments on "all aspects of the staff discussion draft as well as other areas of tax administration practice and procedure."

He even lists some tax areas that aren't addressed in the tax administration discussion draft, but which Senate Finance staffers consider "of particular interest." A synopsis of each follows.

Streamlining and Reducing the Number of Information Returns: Tired of tax paper? So is Baucus' staff. They are looking for our help in finding ways to reduce the number of 1099 forms that the IRS requires be issued. What issue is critical in the information return process? Is there a universal filing threshold appropriate?

Roll-Over of Small Information Return Errors: What do you think about establishing a process to permit taxpayers to roll small errors forward into the subsequent year? The Senate Finance majority staff is looking for ways that these minimal money mistakes, say between $25 and $150, would still be reported and corrected, but in a manner that avoids issuing corrected documents and filing amended returns.

Correctable Taxpayer Errors: The IRS already can correct obvious math errors it finds on returns. Given advances in technology that make access to prior year tax records easier, Baucus staff is considering whether similarly clear errors that can be confirmed by other return information should also be automatically correctable by the IRS. What do you think about an error correction expansion?

Role of IRS Appeals: Should there be a taxpayer right to review by the IRS Appeals office before the tax agency issues a tax deficiency notice? Would such a right protect taxpayers and create a more efficient dispute resolution environment?

Penalties: The chairman's staff says it wants to reform the current tax penalty structure "to ensure that penalties are used appropriately to effectively promote taxpayer compliance." Ideas on how that could be accomplished? Let them know.

Electronic Filing: The Senate Finance staff would like thoughts on whether, and how, to penalize a taxpayer who violates a requirement to electronically file a return by instead filing a paper return.

Death Master File Access: While Baucus wants limits on this info to fight tax fraud, he and his staff realize that there are some legitimate reasons, such as for such as forensic or genealogical research, for folks to have immediate access the file. What do you think limits should be and for whom?

Taxpayer Privacy: Security of taxpayer data is paramount, says the Finance Committee staff. That said, they also note that taxpayer information can provide valuable information for other efforts, such as administering other government programs and, when anonymous, researching the effects and effectiveness of tax and other government policies. There are exceptions for these cases. How else should the tax code's privacy protections be updated so that they are effective but useful for improving tax and other government policies?

Protecting Taxpayer Rights: It's been 15 years since the official Taxpayer Bill of Rights (TBOR) was updated. It time for another retouching? The National Taxpayer Advocate also has recommended making TBOR an official part of the Internal Revenue Code. Do you agree with her?

You can read more about these areas in the Senate Finance Committee's Summary of Staff Discussion Draft: Tax Administration.

After perusing that nine-page document, if you want to help shape the direction of tax reform then send your comments on the summary items or any other tax issues to [email protected].

While Baucus' staffers will take your suggestions whenever you send them, they would really like to get your thoughts by Jan. 17, 2014.

As a journalist, I know I really like to have deadlines to meet. But I will offer this piece of professional writing and tax-related advice: don't wait until Jan. 16 to pull your tax reform thoughts together.

Tax reform, tax moves: What with all the tax reform talk being bandied about (at least on the Senate, not House, side), it's no surprise that I covered some of it last week at my other tax blog.

Over at the Bankrate Taxes Blog, I focused on Baucus' suggestions to fight identity theft related tax fraud. He proposes such things as using truncated Social Security numbers on W-2s instead of the full nine digits and more limited access to the Social Security Administration's Death Master File, a public resource abused by ID thieves who use deceased individuals' info to file false tax returns.

Also last week at Bankrate.com, I blogged about some year-end investment tax issues to pay attention to as 2013 winds down.

You can read my additional tax thoughts at that personal finance website on most Tuesdays and Thursdays. Or you can find a synopsis here on the ol' blog the following weekend.

You also might find these items of interest:

• Senate tax reform proposal supports IRS oversight of tax pros
• Some Senators shun secrecy, share tax reform suggestions
• Tell Congress what you think of it as brazenly as you wish