Obama Wins Re-election, Pledging to Reform Tax Code

President Barack Obama delivered his acceptance speech early Wednesday morning after winning re-election in a hard-fought campaign against Republican rival Mitt Romney as the U.S. faces the risk of another plunge into recession with the expiration of the current tax rates coupled with deep automatic spending cuts.

 

In his acceptance speech at McCormick Place in his native Chicago, Obama promised to work with both parties to solve the country’s lingering economic problems. “You elected us to focus on your jobs, not ours,” he said. “And in the coming weeks and months, I am looking forward to reaching out and working with leaders of both parties to meet the challenges we can only solve together: reducing our deficit, reforming our Tax Code, fixing our immigration system, freeing ourselves from foreign oil. We’ve got more work to do.”

Obama indicated he might even call on Romney to help after the election.

“I just spoke with Governor Romney and I congratulated him and Paul Ryan on a hard-fought campaign,” said Obama. “We may have battled fiercely, but it’s only because we love this country deeply and we care so strongly about its future. From George to Lenore to their son Mitt, the Romney family has chosen to give back to America through public service and that is the legacy that we honor and applaud tonight. In the weeks ahead, I also look forward to sitting down with Governor Romney to talk about where we can work together to move this country forward.”

After winning his 2008 election by defeating Sen. John McCain, R-Ariz., Obama had also sought to involve his rival, consulting with McCain before the inauguration about potential nominees to national security jobs in his administration. But McCain remained a leading critic of Obama’s policies after the President took office.

Like Obama, Romney emphasized in his concession speech the need to put aside politics to solve the country’s problems. “The nation, as you know, is at a critical point,” Romney told a crowd of supporters in Boston. “At a time like this, we can’t risk partisan bickering and political posturing. Our leaders have to reach across the aisle to do the people’s work.”

Obama will need to work with congressional leaders on both sides of the aisle during the lame-duck session of Congress, which starts next week. They hope to keep the economy from going off the so-called “fiscal cliff.” The combination of across-the-board automatic tax increases and deep cuts in defense spending and discretionary spending threatens to lead to another recession. Throughout his campaign, Obama has pledged to avert tax hikes for the middle class, but has called for raising taxes on incomes above $250,000, while Republicans in Congress have steadfastly resisted any tax increases.

The so-called Bush tax cuts are due to expire at the end of the year after Democrats and Republicans had extended them for two years at the end of 2010. In addition, the alternative minimum tax has not yet been patched, threatening to ensnare millions more taxpayers. The current tax rates for estate taxes and dividends are also slated to return to pre-Bush levels. The payroll tax cut on Social Security withholding taxes is due to expire at the end of the year, along with dozens of other tax breaks.

Speaker of the House John Boehner, R-Ohio, was also re-elected Tuesday night and will retain his leadership in a Republican-dominated House. He reiterated his opposition to tax increases after learning that Republicans would continue to control the House. “With this vote, the American people have also made clear that there is no mandate for raising tax rates,” he said.

Democrats, meanwhile, have retained their majority in the Senate. Leaders of both parties in Congress are expected to meet with the administration in the days ahead to try to avert some of the automatic tax hikes and spending cuts while trying to stay within the parameters of the deficit reduction deal they negotiated during their last battle over raising the debt ceiling, which is again approaching its limit around the end of the year. Republican vice presidential nominee Rep. Paul Ryan, R-Wis., who chairs the House Budget Committee, is expected to play a role in those negotiations.

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IRS Is Inappropriately Closing Taxpayers’ Delinquent Accounts

Some IRS employees are closing delinquent taxpayer accounts without following the proper procedures and without managerial approval, according to a new government report.

 

The report, from the Treasury Inspector General for Tax Administration, found that delinquent taxpayer accounts were closed as currently not collectible without IRS managerial approval and without any detection. Some taxpayers try to resolve their delinquent account by working with an assistor at one of the IRS’s walk-in offices, called Taxpayer Assistance Centers. If the taxpayer has no ability to pay, the taxpayer account could be closed as currently not collectible.

An analysis of two samples of taxpayer accounts closed in the IRS’s Taxpayer Assistance Centers as currently not collectible discovered that the accounts were not worked according to procedures.

Because the cases lacked documentation, such as financial statements and case history notes, however, TIGTA could not determine whether the correct decision was made to close the cases as currently not collectible. The total assessed balance for the statistical sample of 136 taxpayer accounts was approximately $2.5 million, of which nearly $800,000 involved incorrect closing codes, which could result in lost revenue.

TIGTA’s analysis of 136 currently not collectible cases also found that closed cases were not correctly input in the IRS’s databases. Some had the incorrect closing codes while others had closing codes that were either higher or lower than warranted based on case documentation.

TIGTA’s audit was initiated because of a referral from TIGTA’s Office of Investigations. TIGTA sought to determine whether controls over balance-due accounts closed as currently not collectible in the IRS Field Assistance Office were sufficient to ensure that all of the actions were appropriate.

“If taxpayer accounts are closed inappropriately, taxpayers may be burdened and the IRS may not be able to collect taxes owed when a taxpayer’s income increases,” said TIGTA Inspector General J. Russell George in a statement.

TIGTA recommended that the IRS ensure that assistors follow established procedures; clarify internal guidelines requiring management approval of cases in the Accounts Management Services System history section; conduct a risk analysis to determine the risk of not segregating duties; and implement security reviews and reports that can be used to evaluate the assistors’ use of system command codes.

The IRS agreed with the recommendations and is planning remedial action. “We will remind our employees and managers of the procedures to be followed in evaluating the collectability of balance-due accounts and reinforcing expectations for adequate documentation of decisions made and approvals granted in updating accounts to CNC [currently not collectible] status,” wrote Peggy Bogadi, commissioner of the IRS’s Wage and Investment Division, in response to the report. “We are also initiating a comprehensive review of existing procedures and internal controls, and will perform an assessment of risks present and the effectiveness of controls in mitigating those risks.”

In response, the IRS did acknowledge that in recent years it has “noticed an increase in the number of taxpayers who seek assistance at [Taxpayer Assistance Centers] when they are unable to pay their taxes owed,” and that this increased volume has “illustrated a need to reinforce existing procedural controls.”

“There are 187 TAC locations staffed by just one or two employees,” the IRS’s response added, which can “present significant challenges” and has occasioned a “security review process” in these TACs.

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