Statement: Congress passes tax bill ensuring thousands of dollars in tax breaks, fails to address common-sense approach to combat fraud
The grand bargain on tax extenders contains great news for honest taxpayers. This bill now means that the 1 in 7 taxpayers who were at risk of losing beneficial tax breaks can once again claim those breaks on their 2015 returns and plan for similar scenarios for 2016 and beyond.
Homeowners, parents, teachers, students, retirees and more would have seen their tax bills increase by hundreds or thousands if these tax breaks weren't renewed.
Two vital elements that assist working families - the Child Tax Credit (CTC) and Earned Income Tax Credit (EITC) - were made permanent. Additionally, the American Opportunity Tax Credit (AOTC), which helps make higher education more affordable, was also made permanent.
Making each of these provisions permanent reduces complexity and provides much needed certainty for individual taxpayers who benefit from these credits.
Unfortunately, by failing to address increasing fraud pertaining to refundable credits on self-prepared returns, and failing to implement minimum standards for paid return preparers – some of whom exploit these credits – this bill also harms honest taxpayers while greatly benefitting fraudsters.
Treasury's latest financial report indicates that EITC improper payments remain well above 20 percent – some $14 to $17 billion annually. And the Treasury Inspector General for Tax Administration has identified the need for Treasury to estimate CTC improper payments. The exploding fraud on self-prepared returns last year was the key reason for convening the first-ever IRS-Tax Industry security summit. However, in this bill Congress chose to not require any additional safeguards from providers of self-preparation software when making these refundable tax credits permanent. Rather, they've extended a flawed policy – due diligence that covers some tax filers but not others – to CTC and AOTC.
Similarly, with the majority of EITC returns being prepared by non-credentialed return preparers - those not subject to a background check, testing or continuing education requirements - it is shocking to know that Congress chose not to require return preparers to meet minimum competency standards. H&R Block has led the way for 60 years on competency standards for return preparers to provide protection to all tax filers who choose assistance with their tax returns - often their largest financial transaction of the year.
"As the world's largest consumer tax services provider with both paid preparer and self-preparation businesses, we know it is critical to fight fraud on both fronts," said Bill Cobb, H&R Block’s president and CEO. “This bill represents a positive new step for individual taxpayers but, unfortunately, it keeps the flood gates open for fraudsters.”