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Amid Tax Protests, IRS Chief Details Efforts to Aid the Cash-strapped

April 15, 2009 at 6:00 PM EDT
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IRS Commissioner Doug Shulman discusses efforts to alleviate the tax burden on Americans facing financial distress this year and explains why it will be hard to reform the tax code.

JUDY WOODRUFF: Our lead story. This is Tax Day, April 15th, the last day to file tax returns or extensions without incurring penalties. It’s also been a day for protesters to demand lower taxes and smaller government and for President Obama to speak up about his tax policies.

NewsHour correspondent Kwame Holman has our report.

KWAME HOLMAN: The rallies, dubbed “tea parties,” generally were organized by conservatives and held nationwide.

In the rainy District of Columbia, scores of protesters gathered just steps from the White House to make their sentiments known. Many at the rallies said they were nonpartisan, as in New Haven, Connecticut.

PROTESTOR: We are not mad at Republicans or Democrats. It’s, to us, not a Republican or Democrat thing. It’s politicians.

KWAME HOLMAN: That was echoed in Florida, where groups carried signs through the streets to denounce big government spending.

PROTESTOR: Our children are going to be paying enormous taxes to pay off this debt.

KWAME HOLMAN: And in Cincinnati, Ohio, even dogs carried protest signs.

The gatherings were modeled on the Boston Tea Party in 1773, when American colonists dumped highly taxed British tea into Boston Harbor. And the modern-day tea parties seemed to echo today at the highest levels.

U.S. PRESIDENT BARACK OBAMA: I know that April 15th is not exactly everyone’s favorite date on the calendar.

KWAME HOLMAN: President Obama used his own tax event to highlight his tax reforms. He said they’re designed to help those hardest hit by the recession: working families.

BARACK OBAMA: This tax cut will reach 120 million families and put $120 billion directly into their pockets, and it includes the most American workers ever to get a tax cut. This is going to boost demand, and it will save or create over 500,000 jobs.

KWAME HOLMAN: The president also vowed again to revamp the tax code.

BARACK OBAMA: It’s going to take time to undo the damage of years of carve-outs and loopholes. But I want every American to know that we will rewrite the tax code so that it puts your interests over any special interests.

And we will make it easier, quicker, and less expensive for you to file a return so that April 15th is not a date that is approached with dread each year.

KWAME HOLMAN: For many taxpayers, filing already is quicker, at least, as more and more file returns online.

JUDY WOODRUFF: Late today, the Obamas released their joint tax return for 2008. They reported making $2.7 million last year, nearly all of it from the president’s book royalties. That was down from more than $4 million the year before.

Now, Jeffrey Brown has more about the approach the IRS is taking this tax season in the midst of a major recession.

Helping struggling taxpayers

Douglas Shulman
IRS Commissioner
We've given our frontline employees, those who actually deal with taxpayers every day, more flexibility to work through issues like a missed payment... to suspend collection if somebody's trying to get their finances in order

JEFFREY BROWN: And joining me for that is Douglas Shulman, commissioner of the Internal Revenue Service. Appointed in 2008, he's in his second year of a five-year term.

Welcome to you.

Those tax protests we saw or the fact that we're in a recession, do these things show up in a discernible way yet in terms of collection, either people not paying or procrastinating more?

DOUGLAS SHULMAN, commissioner, Internal Revenue Service: Well, I don't think the tax protests show up, but we're clearly in a difficult economy. There's people who are trying to figure out whether to pay their medical bill, their rent, their heat, or pay their tax bill. And so we're seeing a lot more taxpayers in difficult times, and we're here to work with them.

JEFFREY BROWN: What are you -- you announced during the tax season that you would work with people. What has that meant? What have you done differently?

DOUGLAS SHULMAN: Well, there's two things I would mention. One is, there's the recovery act, and the recovery act has a number of tax provisions. The president has asked every agency to execute that very well and to make sure we're working with American taxpayers.

And so the Make Work Pay credit, we're making sure there's more money in Americans' paychecks. Net operating loss carry-backs, if you're a small business and you paid taxes in the past, you can actually get a refund this year if you have a loss. The COBRA provisions, if you've lost your job, the government will actually subsidize health insurance.

So we're making sure we're staffed up and we execute that well. We also have set up some special programs at the IRS. And the way to think about this is we've given our frontline employees, those who actually deal with taxpayers every day, more flexibility to work through issues like a missed payment, if someone's on a payment plan, to suspend collection if somebody's trying to get their finances in order, to actually remove a tax lien if someone's trying to sell their house and their mortgage in upside-down.

And so we've given people more flexibility -- given our employees more flexibility to work with the Americans people.

Response from taxpayers

Douglas Shulman
IRS Commissioner
In one respect, the American people are counting on their government to get them out of this recession, so we actually need to collect the money it takes to fund the government.

JEFFREY BROWN: And has there been a measurable response from people in need?

DOUGLAS SHULMAN: Well, it's still early in the filing season for us, because we're getting returns in and we're going to process it through. I've gotten a lot of reports from our employees that people have asked for special payment plans, that people have been quite appreciative, and so we'll know more later in the year, but, anecdotally, people have been quite appreciative.

JEFFREY BROWN: Of course, this doesn't mean a free ride for anybody. You're saying, if you're in trouble, real financial need, you have to get in touch with the IRS and try to take some -- maybe something can be worked out?

DOUGLAS SHULMAN: Yes, we have to walk a very fine line this year, Jeff. In one respect, the American people are counting on their government to get them out of this recession, so we actually need to collect the money it takes to fund the government.

JEFFREY BROWN: You feel more pressure now than ever, I suppose?

DOUGLAS SHULMAN: Well, what we need to do is collect the money to fund the government. And so if you can pay, you need to pay, and we need to have enforcement programs and service programs, but we also need to understand taxpayers, take each one as they come. And if someone's in real dire straits and they literally can't meet basic living expenses, then we're here to work with them.

Challenges to tax collection

JEFFREY BROWN: All right, now, speaking of the collection side, one measure that you've been taking is on the tax havens, so-called. How big a problem is that for tax collection?

DOUGLAS SHULMAN: Yes, we've been very focused on off-shore tax evasion, wealthy individuals parking assets overseas and then not paying the taxes that they owe.

There's a lot of estimates out there; none of them are very reliable. It's definitely a multibillion-dollar problem, and it's one that we're going to be focused on, Jeff, as a fundamental matter of fairness.

In this tough economy, where people are trying to pay for groceries and are struggling to meet bills, they need to know that this government, this administration is going to make sure that people who have the wealth to park assets overseas are going to pay their taxes.

JEFFREY BROWN: So you've offered what sounds like kind of a limited amnesty. Explain what you're doing.

DOUGLAS SHULMAN: Well, we have settlement programs that we run all the time, because our main goal is to get people in the system for the long term. And so we have a carrot and a stick approach.

The stick is we beefed up our enforcement. The president has committed to having a robust enforcement budget for the IRS in international initiatives. We've had some very public prosecutions. We've made it clear that, if you're hiding assets, we're going to come try to find you and, if we find you, we're not going to hesitate putting you in jail.

The carrot is we've told people, if they come in, pay the taxes they owe, pay a hefty penalty, they can avoid going to jail. And so we just announced this program a couple weeks ago. We've seen some response, and we expect to see quite a bit more.

JEFFREY BROWN: Do you need the carrot? I mean, given that these are no doubt wealthier people who are using tax havens, is this a sign that you can't otherwise go after them? I mean, why not go after them with the full force of the law? Why offer any carrot?

DOUGLAS SHULMAN: Well, we're certainly going after people with the full force of the law, but any time you run a big enforcement agency, you're trying to get the balance right. And my real goal is to get people into the system.

So if people have been out of the system and they're hiding their assets, if they come in truly voluntarily, and they pay their back taxes, and they pay a substantial penalty, that will free up resources so we can continue to pursue enforcement and service programs in other places.

And so our goal is to get people in, get them to pay their taxes, and get them right with the government.

Simplifying the tax code

JEFFREY BROWN: There has been a lot of talk -- as you know, it's been in the spotlight for a while now -- internationally, the G-20 meeting recently. This was an important focus there.

But I think people always have the sense that wealthy people and corporations are always a step ahead of the law. There's always loopholes. Is it your sense that, in fact, tax haven countries, tax haven banks are getting the message and that you can actually reach them in a way you couldn't before?

DOUGLAS SHULMAN: Yes, we've seen some tangible progress. One, you mentioned the G-20. I think countries are cooperating more than ever before. I have dialogue with my counterparts. Obviously, the treasury secretary has dialogue with his counterparts, and the president does, as well.

You've seen some real progress in the last even few weeks. There are some countries that have bank secrecy laws that have announced that they're going to try to change those laws legislatively in their country.

People have announced that they're going to abide by international treaties of information exchange with the IRS. You've seen a number of banks announcing that they're going to exit the business of soliciting U.S. customers to park their assets overseas.

And so I think we're seeing some real tangible results, and we're going to continue to beef up our programs and go after people.

JEFFREY BROWN: All right, one last thing I have to ask you briefly. President Obama said today that he would like to see the tax code simplified. We have heard that from many presidents.

I think -- a day like today, when everybody has to put in their form, we know what that means, how complicated the system has become. Do you think there is a real chance? Why is it so difficult? Is there a real chance to actually simplify the tax code?

DOUGLAS SHULMAN: Well, my favorite fact is that the tax code is four times as long as "War and Peace." It's clearly incredibly complex.

Simplifying it is difficult. This president is committed to trying to do so.

What I will tell you, at the IRS, we recognize it's difficult, and so we're going to run service and education programs for people wrestling with that code, especially average, everyday Americans who have to pay money to have their taxes prepared.

We're going to try to make it as easy and simple for them to prepare their returns, but we're also going to run tough enforcement programs for those who are trying to evade the law.

JEFFREY BROWN: All right, Douglas Shulman, IRS commissioner, thank you very much.