According to their research, the revenues for January and February 2013 recorded a 12.9 % growth in tax revenues in 49 states, in comparison with the tax revenues of January and February of 2012.    The biggest growths were seen in personal income tax collections, which was said to be rising by 23.6% sales tax by up to 8%.

This is the fourth year in a row that the tax revenues by the states recorded a boost, the highest being still in December of 2012. This is a very welcome change to the IRS and the federal tax authorities especially after the 2 years of decline in tax revenues brought about by the economic recession of 2007 to 2009. During this troublesome time economically, states had to create drastic measures, spending cuts and increases in taxes as well as seeking financial help from the federal government for recovery. The tax increases badly hurt the growth of tax revenues for that period but the last four years have been nothing but beneficial in revenue boosts.

Many business owners see this most recent boost record to be extended towards the rest of 2013. But the research group warned however: “March is the most important month in the quarter and these early results may not reflect the full quarter” so it’s primarily a wait and see, still.

The boost in 2012 revenues was said to be caused by the last minute measures made by several investors and business owners on their investments. The measures were made in preparation for the impending end of tax cuts made in President George W. Bush’s administration. The business owners likely expected severe tax rises in 2013.

But despite this current growth in the economy, Rockefeller said this was a “slower” development pace of recovery in comparison with the recovery growths of recessions in history. They added “State tax revenues are recovering, but not as quickly as the broader economy is improving. This reflects the fact the fact that states do not tax the broad economy; their tax systems are much more reliant on narrower and more volatile forms of economic activity.” More than 1/3 of the tax revenues came from individual income taxes.

This report incidentally came at the height of discussion on state tax reforms in different states including Louisiana governor’s proposition to totally remove personal and corporate taxes and gaining everything back by increasing the sales tax in his state. This was welcomed with mixed reactions as it did in other states looking for major tax reform.

In the 2012 growth report, the highest tax growths were recorded in Arizona, New Mexico, Texas and Oklahoma in the Southwest, and in Alaska, California, Oregon, Nevada, Washington, and Hawaii in the Far West.

Meanwhile, New Jersey, Minnesota, Michigan, Wyoming, Alabama and South Dakota recorded tax declines in the last quarter of 2012.

GAO, an investigative arm of the US Congress, has recently revealed a new practice in tax evasion by citizens owning offshore accounts. They said these tax evaders are misusing the tax amnesty on offshore accounts in 2009. These tax evaders have been turning in their offshore accounts for taxing and labeling them as “new accounts” to pay only for its current accounts and avoid having to pay for taxes on the previous years as well as penalties for delinquency in paying taxes. The GAO called this “discreet disclosure” of offshore accounts.

The GAO used the tax files on offshore accounts from 2003 to 2008 to determine the bulk of taxable offshore accounts that the IRS must have missed over the years. The GAO also noted that from 2007 to 2010, the IRS has estimated that there was twice the number of first time offshore accounts reporting to 516, 000. It was not cleared, however, by the GAO whether this increase in reporting of offshore accounts was the drastic move to avoid having to pay taxes.

In 2009, the IRS opened the Offshore Voluntary Disclosure Program. This amnesty program allowed the offshore account owners to turn themselves in, voluntarily, for taxable accounts and avoid charges but they will be required to pay a fraction of their total account balance in fees.

The amnesty program came on the same year the Swiss Bank UBS AG agreed to pay the US to settle charges on helping Americans keep their accounts off the radar of the IRS and avoid having to pay taxes for it. The settlement cost amounted to $780 million.

Since the amnesty program started, the IRS has collected over $5.5 billion in taxes from over 38,000 citizens who availed of the amnesty program and turned themselves in.

The IRS is currently looking into the details of the GAO report and looking for ways to use the data to improve their collection measures and catch offshore tax evaders. In a statement, the acting commissioner of the IRS, Steven Miller, said “The IRS agrees that we must continue to explore additional methods for effectively identifying quiet disclosures”.

This rise in the intensity of the IRS in tax collection is part of the department’s and the federal government’s effort to boost tax collection and strengthen tax policies in the light of the recovering economy.

Just last week, the Congress committee on Finance has made a bold announcement on demanding increased effort from the IRS to combat identity theft and tax frauds on refunds. There has been a significant rise in tax-related identity theft recorded and the solons seek to strengthen the current IRS policies on the matter.

Meanwhile, recent reports on revenues for the last four years have recorded a positive growth in state taxes. Analysts and government policymakers are seeing this as a sign towards full recovery from recession but they are still not taking any chances at slowing down.

Committee Chairperson Max Baucus (D-Montana) has expressed deep concern at the gravity of the problem. In his opening statement, he said that the problem is growing in ‘epic proportions’. The statistics from the Internal Revenue Service (IRS) Taxpayer Advocate further backed this claim up, stating that the cases of tax frauds by identity theft has ballooned up to a whopping 650% over a period of five years, from 2008 to 2012.

The biggest problem that stems from this trend in tax frauds is the growing amount in fraudulent tax refunds that are released per annum to identity thieves. In 2011 alone, the Treasury Inspector General for Tax Administration (TIGTA) has reported an estimated 1.5 million fraudulent returns went undetected, and could have released a total of US$ 5.2 billion in fraudulent tax refunds. This amount could have doubled up if not for the more than 900,000 fraudulent returns that were detected and stopped the giving out of what could have amounted to US$ 6.5 billion in fraudulent tax refunds, a statistic that was released in a Congressional hearing by the IRS last year.

The Senate Committee also identified some of the most common ways how identities are stolen for fraudulent tax transaction purposes. The online databases on the Death Master Files as well as other departments allow these thieves to access Social Security Numbers (SSNs) as well as other related information (Name, Birthdate, Date of Death, zip codes) to get further access on tax refunds. Baucus further said, “We know tax fraudsters have easy access to taxpayers’ Social Security Numbers through online databases, hospitals and other businesses that store personal information. We need tougher controls on access to private information, but it needs to be done efficiently without adding more paperwork”.

The Committee acknowledges the effort as well as the ready capacity of the IRS to stop these tax crimes. Currently, the IRS uses a three-pronged approach to combat this widespread tax problem: prevent tax refund fraud, provide taxpayer services to victims of identity theft, and convict those who are found guilty of tax fraud.

However the Committee is further urging the IRS to maximize whatever tools they already have to battle this problem. Baucus said “the IRS needs to improve the way it handles tax identity theft once cases are identified. The IRS needs to speed up prosecution through better communication with federal, state, and local law enforcement.”

Currently, there are more than 35,000 employees in the IRS that are deployed to the job of handling tax fraud cases as well as identifying possibly fraudulent tax transactions. There is also a move to upgrade certain tax policies including requiring and permitting the sending of truncated SSN forms. This proposal has been supported by the American Institute of Certified Public Accountants but added that the IRS should extend legislation to allow truncated SSN forms to all taxpayers and not just one from employer to employee.

Wally, who has been serving the 34th precinct, was relieved from duty following the arrest. In his Bronx apartment, the authorities have confiscated a list of the names, birthdates and social security numbers of children born in 2007.

The police officer allegedly promised his tax filing clients a bigger claim on tax refund by putting fictitious dependent children on their refunds. He created fake dependent identities using Social Security Numbers (SSNs) of Puerto Rican citizens living in Puerto Rico. According to the IRS, use of Puerto Rican SSNs has been a common practice in tax fraud and identity theft.

In the complaint filed against Officer Wally, the officer allegedly used nine names from his list of names to add false dependents on the tax returns of thirteen different people. It was also found that he has been listing a false dependent on his own.

Over the period of 2010 to 2012, Wally has claimed more than $120,000 in fraudulent tax refund claims. Authorities have further said that the income he made from illegally doing tax filing jobs earned him a total of $112, 652 over a period of three years.

Jonathan Wally was charged with two counts of tax fraud and another three counts for identity theft. Neither the police officer nor his lawyer has commented on the charge.

This scam is according to the IRS very common. And it came within days since the US Senate Committee on Finance took on a hearing to discuss the widespread tax fraud and identity theft especially on tax returns. According to statistics, more than $5 billion have been lost to fraudulent tax returns in 2011 and another $6 billion had almost been lost in the same year if it were not intercepted by the authorities. The IRS employs a three-pronged action to combat the problem by providing help to those who are victimized by identity theft, prosecute and convict those found guilty of tax fraud and altogether strengthen the policies to avoid such incidences.

Both the US Congress and the IRS are looking into strengthening the current policies that the IRS employs in the battle against widespread tax fraud which Senator Max Baucus (D-Montana) described as “epidemic in proportions”. Also, the Senate Committee wants to increase security on files containing personal information and SSNs that are easily accessible to the public via online databases like the Death Master Files. In a five year period, the rise of tax fraud cases in America rose to 650% from 2008 to 2012.

Currently, the IRS has more than 35000 employees specializing in detection and prevention of tax frauds and identity theft on tax returns claims. This is a big jump from the more than 30000 employees on the same unit a few years ago.

The governor used the states of Texas and Florida as examples of successful states with zero income tax rates. He further cited the Tax Foundation Business Tax Climate Index and that the income tax abolishment would significantly raise Louisiana’s business tax climate ranking.

To make up for the losses in revenue for when the personal and corporate income taxes are removed, the governor proposed raising the sales tax to a record high 6.25%, an increase on tobacco taxes by about three times, and expanding the sales tax base altogether.

But the proposal is getting mixed reviews. Other legislators argued that while this may sound beneficial, the whole plan may do more harm than good in the long run.

The opponents of the said proposal argued, in particular, that it is quite impossible to get back everything the state would lose if the income tax is abolished. In one argument, it said, only Alaska could hold out to living sans the income tax because the void is made up for even greater with the mineral resources that are very abundant in the state. They also mentioned further that while Texas and Florida do not have income taxes, they have higher property taxes also makes up for the said void.

They further argued that while it may be true that phasing out the tax would definitely raise the business tax climate ranking, they said the ranking has never been proven to influence the business scenes significantly. And besides, they argue, the tax climate in Louisiana has been already among the lowest in the nation.

The biggest problem that lawmakers – both pro and against the proposal – see about taking away the corporate and personal income taxes is more than just sending out a good or bad message to the business communities. It is about finding the right funding to make up for its loss.

The revenues from the income taxes currently make up for more than 25% of the funding for various public services. Eliminating the said taxes would mean having to find different sources to fund the services that will be affected or to eliminate the services altogether. They said either of this will only increase the deficit in the budgets of the state and in no way will help benefit the poverty rate in Louisiana.

Meanwhile, competitors and political foes of the governor cited some personal interest and gains in this bold proposal made by the governor. They say eliminating the income taxes would only make the governor look good but the state will suffer. Governor Bobby Jindal is a possible 2015 Presidential candidate.

If the proposal submitted to the Congress Committee on Small Businesses, headed by a Missouri Republican representative, Sam Graves would gain approval, filing of taxes for small businesses might just be less complicated and virtually less expensive.

According to the documents and reports presented at the meeting, the small businesses in the US spend 65% higher costs on tax compliance than the country’s biggest businesses – irrelevant of the industry. A report by the National Federation of Independent Business has revealed that per annum, the small businesses in America spend a collective $19 billion on tax compliance rates alone. The report also revealed that the small business owners are left to spend so much time and money on complying with taxes rather than expanding their business and creating more jobs in the American nation.

According to Graves, “Over time, our tax code has become more complex and truly temporary, with tax relief been extended for one year, four months at a time even retroactively.” “Small businesses pay a tax compliance cost that is nearly three times larger than big businesses”, Graves added.

In a recent survey, a majority of the small business owners in the country supports a tax code reform. They cited that they spend at least 120 hours of each year just doing their taxes. A significant number of these small business owners who do not spend as much time on doing their taxes spend a fortune hiring someone else to do their taxes for them. Either way, the complexities in the current federal tax codes are taking a toll on their small businesses.

In his statement, the House committee on Ways and Means chairman Dave Camp (R- Michigan) testified on his committee’s efforts on coming up with a tax reform that would reform the current federal tax code on compliance so businesses save both on time and money in compliance.

Camp further stated, “simply put, the tax code ought to be easier to understand and less expensive for small businesses to comply with – because every dollar they aren’t spending on taxes and tax compliance is a dollar they have to invest in equipment, start a new production line, hire a new employee or provide more wages and benefits. That is my goal for comprehensive tax reform – a simpler, fairer tax code that leads to more jobs and higher wages.”

Early last month, Camp and his committee have submitted a draft of the proposed federal tax reform plan for small businesses. It encompasses all the earlier mentioned goals for tax reform including lower tax rates and easier, fairer compliance policies.

Inclusions on tax exemptions for new machinery and equipment, simplified cash accounting methods  for gross receipts of only up to $10 million, and other tax deductions for startup organizations have been mentioned in the Camp’s draft for federal tax reform.

This is, in a way, the government’s move in empowering the small businesses in America that are employing the majority of the citizens.

The question whether new tax revenue should be on the table has been a major sticking point in the economic questions Democrats and Republicans have been battling. Republican House Speaker, John Boehner, wrote in an op-ed piece for the Washington Journal, “The president has repeatedly called for even more tax revenue, but the American people don’t support trading spending cuts for higher taxes. They understand that the tax debate is now closed.” Democrats want to add new revenue, indicating that there are loopholes they believe can be closed. Republicans say that the tax debate has been resolved. On Tuesday, President Obama referred to a Democratic plan “that pairs more spending cuts with tax reform that closes special interest loopholes and makes sure that billionaires can’t pay a lower tax rate than their….secretaries” in an effort aimed at pressing lawmakers to pass a measure that would avert the automatic spending cuts known as sequester.

There is clearly miles between the two sides; and Americans generally feel the same. In a poll conducted by United Technologies/National Journal poll, Americans were split down the middle on the question of where taxes fit into the question of deficit reduction – 48 percent say a mixture of tax increases and spending cuts should be instituted in order to reduce the deficit, while 49 percent feel that only spending cuts should be used. In a poll by Reason-Rupe, two in three Americans say they would support increasing tax on wealthier households as a way to reduce the nation’s debt, above the increases that were already instituted to avoid the fiscal cliff. The same poll showed that 85 percent of Americans polled would support spending reductions as a way to reduce the country’s debt.

So it seems, even though Republicans believe the debate is over, the general population does not agree, though Democrats will not get much support for adding more tax revenue. Lawmakers will have to decide soon whether they are going to do anything to avert the sequester; however, with both sides holding their ground, it seems like we will all be looking for another 11^th hour deal.

Consumers’ paychecks are 2 percent smaller than they were in 2011 and 2012. For the past two years, employees have been paying 4.2 percent of their wages towards Social Security due to a temporary rate cut that was part of a plan to stimulate the economy; however, the cut expired at the end of 2012, and it was not renewed in an effort to avoid the fiscal cliff that was impending at the end of the year.  As a result, the Social Security tax rate went back up to 6.2 percent on January 1, which is the same rate prior to the 2011 temporary cut. According to the Tax Policy Center, this amounts to about $700 annually for the average worker.

Economists and retailers had been concerned that the increase would affect consumer spending; and so far, two major U.S. retailers have noticed a difference. Walmart had the worst start to a month in seven years, based on internal company emails obtained by Bloomberg News. In an email dated February 12 from Jerry Murray, Walmart’s vice president of finance and logistics, said that the February month-to-date sales were a “total disaster.” In another email, Cameron Geiger, senior vice president of Walmart U.S. Replenishment asked “Where are all the customers? And where’s their money?”  On January 3, Family Dollar Stores, Inc., Chief Executive Officer Howard Levine said while on a conference call that higher payroll taxes “go against our customers’ wallet. Clearly, they do not have as much for discretionary purchases than they did.”

A report from the National Retail Federation (NRF), a retail trade association, indicated that January retail sales, increased 0.3 percent seasonally adjusted from December. This figure excludes car, gas, and restaurants. NRF President and CEO Matthew Shay said these figures indicate a “stable yet fragile economy.” On February 13, the U.S. Department of Commerce released January retail sales, which showed total retail and food services sales increased 0.1 percent seasonally adjusted. This figure does include cars, gas, and restaurants.

Jim O’Sullivan, chief US economist with High Frequency Economics, said the payroll tax is a “hit to growth, but not a devastating blow.” He says there is no doubt some people live paycheck to paycheck, but a lot of people do not; and for those people it will not affect their spending, it will just affect their savings rate. He says the affects will vary from person to person.

Robert Johnson, director of economic analysis at Morningstar, a Chicago-based investment research firm, cites high gas prices as the real issue. As of February 15, the average price per gallon rose to $3.64 according to AAA.com, compared with $3.29 a month ago. He says “People tend to drive long distances to get to Walmart, and so when gas prices go up, people say, ‘I’ll go to local store but I’m not making a special trip because it will cost me money with higher gas prices’.”

Becki Dilworth, director of online marketing at ShopAtHome.com, a savings web site, says that there has not been significant change in use of grocery coupons, which, to her, indicates that consumers are “continuing to do what they’ve always done for an everyday shopping tool.”

As of 2013, 77% of Americans will pay higher federal tax rates because the cuts in Social Security payroll taxes expired when Congress passed its tax deal on New Year’s Day. Furthermore, the income tax rate rose this year from 35% to 39.6% for individuals earning more than $400,000 a year and married couples earning more than $450,000 a year. The Tax Policy Center estimated that those who earn more than $1 million would pay an average of $170,341 more in taxes each year. Additionally, many states have revised their income tax rates, further contributing to households’ tax burdens. For instance, California recently enacted Proposition 30, which raised state income tax rates from 9.3% to 10.3% for individuals making at least $250,000 and from 10.3% to 13.3% for individuals making at least $1 million.

From 2009 to 2011, the number of expatriates – people who renounce their U.S. citizenship – doubled to 1,781. Nigel Green, CEO of deVere Group, which provides financial services for expatriates, said that just in January, 48% more of his clients than in a typical month inquired about moving funds abroad and further inquired about the possible tax implications of changing citizenship. Green says there is a “tipping point” for most people with regards to tax issues affecting their choice of location and citizenship.

Renouncing your citizenship is not difficult. You must simply appear in person before a U.S. consular or diplomatic officer, in a foreign country and take an oath of renunciation. However, be aware, if you renounce your U.S. citizenship, there’s no turning back – the U.S. government will not reinstate your citizenship if you later change your mind. You will be required to pay an “exit” tax, but it only applies to those individuals whose net worth is more than $2 million or whose annual income tax average for the past five years is at least $145,000.  There is an exception for those born with dual citizenship. A 15% tax will apply to capital gains above $651,000 and other assets, like retirement accounts, are taxed up to the normal income rate up to 39.6%, which is the same as the individuals selling or withdrawing their monetary funds from the accounts.

Other implications include no further protection from the U.S. government and possible issues with travel visas, including traveling and staying in the U.S. for long periods of time. Consequently, it is not recommended for those individuals who currently live and/or conduct business mostly in the U.S. However, if you are already living in a foreign country, it may be worth considering.

National Taxpayer Advocate Nina Olson said the IRS waits to give refunds to identity theft victims until it conducts a stack of paperwork for internal purposes, even if it has already determined that the victim is owed a refund. Giving victims their refunds as soon as their identities are verified would cut wait time significantly according to the watchdog group. The group also suggested that if the IRS set up a single point of contact for identity theft victims rather than the 21 individual agencies currently created to assist with these cases, the process would ease significantly. According to the group, for the three-quarters of Americans who are owed refunds averaging around $3,000, this is “an unacceptable period of time to expect taxpayer-victims to wait,” further indicating that complicated cases leave some victims waiting even longer.

The IRS has responded that its current setup is effective because each group has a specific specialty. It also indicated that it has improved its procedures for stopping identity theft and is dedicating an increasing number of resources to the problem, including tripling the number of employees handling these cases. However, the IRS did not respond to a request for comment as to how long it takes to resolve identity theft cases.

The IRS has struggled to keep up with a surge in fraud. Tax-related identity theft has risen more than 650% from 2008 to 2012; and by the end of 2012, 650,000 identity theft cases within the IRS remained unsolved. More criminals are finding ways to steal Social Security numbers and filing fraudulent tax returns claiming they are owed big refunds.