Understanding the Wynne Case
Taxing jurisdictions within the U.S. tax their residents on the resident’s total income. Income is taxed by the resident state regardless of if it was earned within or out of state. If income is earned by the resident in another jurisdiction, the nonresident jurisdiction will tax the nonresident on income earned within their jurisdiction. Thus, the taxpayer that has income in two or more taxing jurisdictions could be taxed twice on the same income, once by their home/residence state and another by the state in which the income was earned.
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IRS and State Reduction in Taxpayer Service
According to the National Taxpayer Advocate, the IRS budget funding gap is negatively affecting taxpayer services. The IRS budget has been shrinking annually, with a decrease of 9.9% compared to the 2010 budget. Adjusting for inflation and other factors, the estimated reduction is about 17%. At the same time, IRS workload has increased to integrate the Affordable Care Act, Foreign Account Tax Compliance Act and legislation to extend expiring laws. This affects implementation of the Taxpayer Bill of Rights made public in 2014 which includes the Right to Quality Service, which requires training IRS staff, retaining quality staff with adequate pay, and hiring in sufficient numbers. The modernization effort that is part of a ten year plan will go unfunded for this year, delaying necessary software upgrades.
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