FederalDaily - October 2, 2006
Reservists Get an IRS Tax Break
A new law gives a tax break to military reservists who are called to active duty, the IRS said. Qualified
servicemembers can receive payments from their individual retirement accounts, 401(k) plans and 403(b)
tax-sheltered annuities, without having to pay the early-distribution tax, the IRS said Sept. 28. The
newly-enacted Pension Protection Act eliminates the 10 percent early-distribution tax that normally
applies to most retirement distributions received before age 59 1/2. The new law provides this relief
to reservists called to active duty for at least 180 days or for an indefinite period. Eligible reservists
activated after Sept. 11, 2001, and before Dec. 31, 2007, qualify for relief tax. Early distributions
from both Roth and traditional IRAs received by a reservist while on active duty qualify, as does a
reservist’s elective contributions and earnings distributed via employer-sponsored 401(k) plans
and tax-sheltered annuities. Regular income taxes continue to apply to these payments in most cases.
To see more, go to: www.irs.gov/newsroom/article/0,,id=163054,00.html
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GAO: Half of DHS Card Purchases Unauthorized
About half of the Department of Homeland Security purchase card transactions made for hurricane
relief were not properly authorized, and 63 percent never showed whether the goods were ever
delivered, says a new government report. In the wake of last year’s hurricanes, the Government
Accountability Office and DHS’ Office of Inspector General (DHS OIG) initiated a number of audits
and investigations addressing the federal government's response to those events. The Sept. 28 report
listed a litany of inefficiencies, which included a weak control environment and breakdowns in key
controls which exposed DHS to fraud and abuse in the use of its own purchase cards. OIG found cardholders
failed to dispute improper charges, resulting in losses to the federal government. There were also
examples of what appeared to be outright fraud. Abusive or questionable transactions included the purchase
of a beer-brewing kit, a 63-inch plasma television costing $8,000 which was found unused in its original
box six months after being purchased, and tens of thousands of dollars for training at golf and tennis
resorts, the report said. To see an abstract: www.gao.gov/docsearch/abstract.php?rptno=GAO-06-1117
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NTEU: IRS Missing Point on Tax Gap
The National Treasury Employees Union (NTEU) said the new IRS plan for closing the nation’s “tax
gap” completely misses the point. What the agency should do is hire more staff, the union said.
IRS Commissioner Mark Everson, testifying about the gap between taxes owed and taxes collected before
a Senate subcommittee, outlined a plan that includes computer upgrades to help detect tax evasion sooner,
and more research into the causes of tax evasion. NTEU President Colleen Kelley expressed dismay over
the plan. “Treasury refers to its document as a ‘comprehensive strategy,’” Kelly
said on Sept. 28, “but the report fails to contain one word about the need for rebuilding the
dramatically reduced staffing levels at the IRS.” The number of tax returns has been growing—from
114.6 million tax returns filed in 1995 to 130.3 million by 2003—while the IRS staff has been
cut from 114,000 to 94,000 during the same time period. “People at the highest levels of the
IRS are going to understand not only that enforcement and customer service play equal roles in the
effective collection of taxes,” Kelly said, “but that cutting back on staff while the workload
increases simply isn’t going to get the job done.” To see more, www.nteu.org/PressKits/PressRelease/PressRelease.aspx?ID=970
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