Tax Reform Circulated in US Senate

A list of proposed tax reform options was circulated to member of the US Senate Finance Committee and lobbyists this week.  Most of the proposals contained in the nine-page draft were modest administrative changes, and included:

• Allow the U.S. Internal Revenue Service to fill out simple tax returns for some taxpayers.
• Give the IRS authority to regulate tax preparers. A federal judge in January denied a part of the IRS tax preparation reform initiative.
• Repeal the individual and corporate alternative minimum tax, a levy meant to ensure the payment of at least some tax, but which often requires duplicate tax calculations. This was one of few options on the list that would represent a major change in U.S. tax policy.
• Repeal two provisions that mostly curb the availability of tax breaks to high-income taxpayers - the personal exemption phase-out, known as PEP, and the phase-out of itemized deductions, known as Pease. These would be significant changes.
• Bolster taxpayer protections to combat identity theft for tax refund fraud.
• Improve third-party reporting on taxpayers' liabilities to cross reference their tax bills.
• Revoke passports for seriously delinquent taxpayers.
• Root out and penalize Medicare providers who are delinquent on their taxes.
• Enhance IRS whistleblower protections.
• Improve the audit process for individuals who owe taxes.
• Limit access to personal information like Social Security numbers from, for instance, the Social Security Administration's Death Master File, which is sometimes targeted by fraudsters.
• Require life insurance companies to report certain transactions and improve information reported by financial institutions on financial accounts.

The draft is a preliminary document.  It will remain to be seen whether legislation will incorporate any or all of these proposals later in the year.