Daily Deduction

from the Tax Policy Center

Tax Mistakes, Collections, and Breaks

By :: May 19th, 2014

New Jersey won’t tell its residents if it made a tax mistake. About 2,000 of the state’s taxpayers — one percent — paid too much in 2013 state income taxes due to an error on an estimated payment voucher. It’s a small enough share that the state won’t issue a refund unless a taxpayer specifically asks. The total dollar amount of wrongly billed taxes has not been tabulated by the state, the Star Ledger reports.

Affordable Care Act subsidy mistakes now could mean huge tax confusion later. An estimated 1 million ACA enrollees may have received incorrect ACA subsidy payments. And the IRS faces an enormous backlog in verifying reported income submitted by ACA enrollees, income which may have been inadvertently over- or under-stated. Federal contractors can’t start tackling the backlog until the summer (after they’ve reviewed citizenship documentation of ACA enrollees). ACA subsidies are still being paid, incorrect or not, in the interim. It is all supposed to get sorted out in the next filing season.

Congress may once again require that private debt collectors collect back taxes. A provision in the Senate’s tax extenders’ bill (delayed for now) calls for the reinstatement of collection agencies to recover funds owed by taxpayers if they are unreachable or not found within a year by the IRS. National Taxpayer Advocate Nina Olson told Congress that private debt collection lost money the last two times it was tried. The Washington Post reports that “from 2005 to 2009… private agencies collected about $98 million… [and] were paid $16.5 million in commissions… it cost the IRS an additional $86 million to administer the program.”

The European Union thinks Boeing’s tax breaks are unfair. For the past ten years, the US and the EU have had a formal trade dispute over aid to the aircraft industry. Most recently, the US has claimed that European governments ignored a global trade court by agreeing to lend money to aircraft manufacturer Airbus to build its new A350 jet. In response, the EU plans to challenge Boeing’s share of an $8.7 billion federal tax break to Washington State’s commercial aerospace industry.

A year in the life of the federal budget: The CBO presented a snapshot of federal spending and taxes in 2006 at the National Tax Association symposium late last week. The snapshot extends prior CBO distributional analysis by including spending.  

On the Hill this week:  The Senate Finance Subcommittee on Social Security, Pensions and Family Policy holds a hearing Wednesday on strengthening Social Security for future retirees.

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