Repealing the Estate tax, a big deal or just more noise?

As previously discussed (here), the Joint Committee on Taxation (JCT) has conducted a study of the source of tax revenues for 2016.  As detailed in the JCT study, the Estate and Gift Tax revenues are expected to be 0.59% of the total tax revenue.  See Figure A-3, pg. 25 of the JCT report, as follows:

Furthermore, Figure A-1, pg. 23 of the JCT report reflects that since 1950, the revenues from the Estate Tax has generally declined.  See Chart below:

What is interesting about these charts (A-1 and A-3, above) is that despite the hullabaloo about repealing the estate tax, see this Washington Post article about the most recent attempts by Republicans in the House voting to repeal the estate tax, the estate tax barely makes a blip in total income received by the IRS and since 1950.

Why does the estate tax represent such a small portion of tax revenue?  The simple answer is that the majority of people are exempt from paying estate and gift taxes.  Most people are exempt from estate and gift taxes because the law allows most people to five away either: 1) during their life up to $1,000,000 or 2) at death (as of 2016) is $5,400,000.  Also, annual gifts do not impact the lifetime gift exemption or at death exemption.  The annual gift exemption (as of 2016) is $14,000.  Also if you are married, (with tax planning) you can double the amount of gifts that are exempt from the gift and estate taxes.  Additionally, if you are married, you can transfer your wealth to your spouse (with tax planning) tax free at your death.

So then why is repealing the estate and gift tax so important to Congress?  Simply put, it is an election year and the Congress men and women need their wealthy donors to know that they are watching out for them.  That's the argument of the Washington Post article.  See also the Tax Policy Center's estimate that only about 2 out of 1000 people who die are affected by the estate tax.

See Forbes for arguments in favor and against the estate tax and/or its repeal.  See also USA Today arguing that the claims for harming small business and forcing the rich to sell assets are unfounded, or this USA Today article claiming that the estate and gift tax "punishes success".

If you know an individual who is liable for estate and gift taxes and have specific and credible evidence of their estate tax or gift tax liabilities, contact our office to help you evaluate your information and whether you can claim a tax award from the IRS.  The IRS pays between 15-30% of taxes, penalties and interest collected for unpaid estate tax liabilities.

The IRS wants IRS whistleblower lawyers and their clients to assist in IRS in the enforcement of the law.

IRS whistleblower lawyers have brought a large number of previously unrecognized tax issues to the attention of the IRS.  A prior report by the Treasury Inspector General of Tax Administration (TIGTA) determined that the cost of assessing and collecting tax is approximately 40% less that what the cost would be without the inside information from IRS whistleblowers.  A number of good tax issues have been brought to the IRS attention by IRS whistleblower lawyers and their clients and the success of the program is up to the IRS.  Some of the more recent large tax issues are -

1.  Offshore Accounts (IRS has instituted several “amnesty” type programs and is expected to reach $5 billion in collection since this issue was brought to its attention of the IRS by a Whistleblower).

2.  Employee v. Independent Contractors - many businesses aggressively classify their employees as independent contractors to avoid billions of dollars of payroll taxes.  A significant number of IRS Whistleblower lawyers and their clients have brought these matters to the attention of the IRS and in response the IRS decided again the best way to handle this tax issue is again to offer an amnesty program.

Identity theft.  This area of the law has gotten lots of attention from the news media for the underlying theft issue, but there are hundreds of millions of dollars of tax that are not being paid by the thieves on the income and the IRS is looking for whistleblowers to bring to its attention large identity theft matters.

4.  Gift Tax.  Most of the population is aware that the very wealthy are transferring great wealth to their children.  This is often done through legitimate tax planning.  However, this can be done through a common means of simply transferring real estate to family members at no cost.  In fact valuable real estate can be transferred at no cost (i.e. a gift) and there are no reporting requirements.  That is, no 1099s, or any other information type returns, are issued to report the land transfers between family members.  In fact, a number of whistleblowers have simply scoured the recorder of deeds, either locally or on the internet, finding land transfers of wealthy individuals to family members that are actually identified as “gift deeds” or simply reflect that the land is being transferred for $1 or the love and affection of the grantee (i.e. the children). 

The IRS recognize that this last issue exists due to the information brought to its attention by IRS Whistleblower lawyers and their clients and have determined that it will put its resources into this issue.

As part of a new initiative in finding gift tax evaders, the Internal Revenue Service asked a federal court for permission to order a California state tax agency to hand over its computer database of everyone who transferred real estate to relatives for little or no consideration.

In response, the federal district court judge gave the IRS permission to serve a “John Doe” summons on the California State Board of Equalization demanding the names of residents who transferred property to their children or grandchildren for little or no money. The IRS wants those names as part of a crackdown on what it believes is the widespread failure to file required gift tax returns when real property is passed between family members.

The IRS has already received information about intra-family property transfers from county or state officials in Connecticut, Florida, Hawaii, Nebraska, New Hampshire, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Tennessee, Texas, Virginia, Washington state and Wisconsin.

In an affidavit filed in the California case in October, Josephine Bonaffini, the Federal/State Coordinator for the IRS’ Estate and Gift Tax Program, said the agency has so far examined 658 taxpayers identified as transferring property to relatives and concluded that 238 of them should have, but didn’t, file Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return. Twenty of those delinquent filers have already been assessed extra tax because they had exceeded the amount each person is allowed to transfer gift tax free, she said. Through 2010, that lifetime gift tax exemption was just $1 million. For 2011 and 2012, it has been raised to $5 million. Anyone can give anyone else property or cash worth up to $13,000 a year without that gift counting against the lifetime exemption, but gifts above that $13,000 “annual exclusion” amount must be reported on a Form 709 so the IRS can keep track of how much of his or her lifetime exemption each taxpayer has used up.

With a normal summons (i.e. Form 2039), the IRS seeks information about a specific taxpayer whose identity it knows. A John Doe summons, by contrast, allows the IRS to get the names of all taxpayers who are members of a certain group it has reason to suspect might have broken the law. In the past the IRS has used John Doe summons to seek lists of American taxpayers who have used aggressive tax shelters and of those who have unreported offshore accounts at Swiss Bank UBS and at HSBC’s bank in India.

Again, the IRS whistleblower program is and will continue to be a great success as it brings facts and issues to the IRS

The Tax Whistleblower Law Firm (1-877-404-1040) consisting of former IRS lawyers assist whistleblowers in filing acceptable claims into the IRS Tax whistleblower program by providing well developed facts, issue and law, evaluating the continued confidentiality of the client, as well appealing administratively and judicially the determination by the IRS.