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February 2, 2005
Getting the Most of Your Tax Dollar
As millions of self-employed and micro-business owners prepare their 2004 taxes, the word in Washington, D.C., this week is that President Bush and Congress are thinking about those tax returns, also – and how to make sure the government gets its tax money. The Treasury department revealed this week that Bush will ask for $500 million more for IRS enforcement activities in his proposed 2006 budget.
“Increasing enforcement not only catches tax cheats, but discourages others from avoiding paying their taxes,” Treasury Secretary John W. Snow said.
The administration feels that the extra money allotted for enforcement of the tax code will pay for itself in tax revenue that would be lost without the extra monitoring. Additionally, the extra funds could be used to reduce the record budget deficit.
With concerns about a growing deficit and upcoming negotiations for the 2006 budget, Congress will be taking time out this legislative session to discuss ways to tighten loopholes in the tax code and encourage compliance.
A second way the IRS could find money to reduce the deficit is if it enacts one of the IRS Taxpayer Advocate’s recommendations. The January 19, 2005 issue of Washington Watch reported that the Taxpayer Advocate provided her annual report to Congress with ways to alleviate tax burden. In that report, she recommended for the second year that the IRS create a withholding requirement for independent contractors. The NASE does not feel this is the right approach to dealing with concerns of the tax gap or lost revenue and will continue to monitor the situation.
NASE Members can help fight this proposal by letting the NASE know what they think of the withholding requirement at the online Legislative Action Center at http://advocacy.NASE.org. Click on “Tell Your Story”, then “National Taxpayer Advocate Recommendation to Congress.”
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State of the Union
President Bush will offer his first State of the Union of his second term Wednesday night. The NASE expects him to focus on two of his top issues: the war on terror and Social Security reform. Check next week’s Washington Watch for a full reaction to Bush’s address.
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