In Brief: Cracking down on tax return fraud, Reform bill blues & Regulating across oceans


Cracking down on bad form

American taxpayers might have a new ally in their battles with bad preparers. Nicola T. Hanna, recently appointed U.S. attorney for central California, which includes Los Angeles, says his office intends to stamp out fraud through unscrupulous tax returns.

Return-preparer fraud is one of the biggest issues for the Internal Revenue Service. “Corrupt tax return preparers compromise the tax system, harming their clients, other taxpayers and the… government,” said Hanna, who was appointed in January by Attorney General Jeff Sessions.

This month, Hanna’s office and the IRS Criminal Investigation Division jointly announced a series of cases targeting tax return preparers who allegedly defrauded the IRS by filing fraudulent returns, such as by trying to inflate refunds by falsifying deductions.

“The defendants recently charged by my office are accused of breaking a fundamental trust with their clients,” said Hanna, a former partner at the Gibson, Dunn & Crutcher law firm.

But taxpayers duped by preparers won’t get a pass from the IRS. “Even if a tax return preparer makes an error on an individual’s tax return, it is still the taxpayer’s responsibility to pay the correct taxes,” Hanna noted.

In one case, an Irvine, California, tax preparer allegedly obtained the receipts of tax refund checks worth just over US$10,000 issued in the names of two victims of identity theft. Another allegedly sought inflated tax refunds on behalf of family members and friends by obtaining the names and Social Security numbers of children whom she falsely listed as dependents.

File and forget

Remember the tax cuts? It seems voters might not. Only four months ago, the U.S. Congress passed the Tax Cuts and Jobs Act, offering US$1.3 trillion in lower taxes.

After an initial fillip for President Donald Trump and congressional Republicans, public support for the tax reform bill has been steadily declining. In a new NBC News/Wall Street Journal survey conducted jointly by Democratic and Republican pollsters, only 27% approved of the law, while 36% disapproved.

Republicans complain that the law’s declining popularity is a result of the president’s sudden shift to tariffs, with threats of trade wars. “Republicans have a lot of work in front of them to make sure people understand the benefits of the tax bill,” David Winston, a pollster, told the Washington Examiner.

Regulating across the ocean

Google is not the only U.S. company struggling with the European Union’s General Data Protection Regulation, which comes into force on May 25.

The new rule essentially says the consumer “owns” his or her personal data, which no one else can use without permission. In the U.S., consumers generally have to “opt out” from business wanting to use their information. Google and the EU are at odds over the company’s plan to continue to “process” personal data, which the bureaucrats say contravenes the spirit of the GDPR.

Even if a U.S-based business has no employees or offices within the boundaries of the EU, the GDPR may still apply. And, according to a survey by cloud services company NetApp, U.S. companies are simply not ready for it.

The survey found that only 52% of U.S. businesses are confident they know where their data is stored, while 40% think that GDPR could threaten their existence and 52% think it could lead to reputational damage.

GDPR compliance will be expensive. According to PwC, 68% of U.S. companies expect to spend between US$1 million and US$10 million to meet its requirements. And the EU imposes significant penalties on companies that fall short: up to 4% of a company’s global annual turnover, or €20 million (US$24 million), whichever is greater.