Good afternoon folks - 

Iowans sent me to Congress with a mission: to cut reckless spending and stop government inefficiencies. 

That's why every month, I give out the Squeal Award, which recognizes a Washington expense, program or concept that has proven to be wasteful and needs to go.

Squeal Award: Complicated and Erroneous Foreign Tax Credits

"It's too complicated."

"It's broken."

"There's too many loopholes."

As I travel across Iowa, those are just a few of the frustrations folks have with our current tax system - and they're right. Many of the provisions put in place burden taxpayers and overwhelm the Internal Revenue Service (IRS) to the point that erroneous payments and returns are made to the tune of hundreds of millions of dollars. For a prime example, look no further than the Foreign Tax Credit (FTC).

The United States generally taxes individuals based on citizenship rather than residency, therefore American citizens who are working abroad have to pay taxes to the foreign country they are working in, as well as U.S. taxes above a certain wage of salary exclusion. For those Americans paying double the taxes abroad (U.S. and foreign), the Foreign Tax Credit is available to offset their overseas tax liability.

However, a 2015 audit by the U.S. Treasury Department Inspector General for Tax Administration found that this tax credit is not working the way it was intended to, and the oversight for compliance is dismal.

In the audit, the Treasury Inspector General identified that the IRS fails to have the adequate "controls and processes in place to identify erroneous FTC claims". Because of this, between 2010-2012, the IRS potentially mishandled nearly $100 million in FTCs due to improperly filed tax returns, nearly $2.9 million was claimed both as a deduction and a credit, and allowed nearly $40 million in incorrect FTCs on more than 188,000 tax returns when third-party information return documents didn’t match the FTCs that were claimed.

The flawed claims and mishandled money when it comes to FTCs add to the pile of evidence for the great need for tax reform. We must simplify and streamline this process for U.S. citizens

Due to the failure to properly monitor claims and payments under the Federal Tax Credit, I hereby present the IRS with this month’s Squeal Award

Do you have an example of government waste or inefficiencies that I should take a look at? Send me an email by clicking here.

Thank you!