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Tax Pros Don’t Need to Sweat the IRS Budget Cuts

Posted on by Caleb Newquist

This is the first post from our slew of freelancer candidates. The following is by Jeremy Woodward.

The House Appropriations Committee has settled on an IRS budget, and it’s not good news for everyone’s favorite group of suits and ties. The $11.8 billion allocation is $1.2 billion below what they requested. Probably not enough for a Tea Party Ball, but I’m pretty sure Grover Norquist jumped and clicked his heels upon hearing the news (image unavailable outside my head).
 
What does that mean for the lowly tax preparer? Probably nothing. I spent 25 minutes on hold with the IRS the other day to ask a simple question, only to be transferred to the ‘proper department’ and wait another 20. A 10% decrease in service would be, what, 4.5 minutes? What’s an extra 4.5 minutes in the ‘Waiting on IRS’ code in the grand scheme of things? It’s still better than the friendly message from the Colorado Department of Revenue, happily explaining after going through the whole menu list that, to ensure I get proper treatment, they’re going to hang up on me until they’re less busy.
 
IRS Commissioner Shulman offered his own grim predictions back in October of last year, claiming that “budget cuts will result in a direct increase to the nation’s debt.” I’m still not sure if that was intended as a warning or a threat, but I guess we’ll find out soon enough.
 
And honestly, Shulman, why would enforcement change? I’m pretty sure the IRS’s main tactic is denying tax credits unless the company provides enough documentation to make the nearest forest sweat. How much money does it really cost the IRS to send a letter saying, “You won’t get an R&D credit unless you give us your firstborn* child”? 
 
This would have been less of a problem if the IRS had just waited on their budget before issuing those new repair regs. Now they have more work and less money. I’d probably start making threats, too.
 
So the next time you make it through the IRS hold music and Mr. Anderson, agent number #102934852374 sounds less than chipper, you’ll know why. Tell him if he audits one of your clients in the near future you’ll give him an under-the-table candy bar. Just don’t give him any identifying information in case he confuses kindness with bribes.
 
*Firstborn children make for inexpensive agents.

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The IRS Is Ruining Its Weekend Plans for the Sake of the American Taxpayer Again

The April 15th deadline has come and gone but that does not mean the IRS’ work is done. In fact, getting money in the Treasury Department’s door is a 24/7/365 sorta deal and in case you didn’t notice, there’s a bit of a deficit problem.

Accordingly, the IRS has decided to host open houses at 200 facilities in all 50 states, DC, and Puerto Rico on May 15th from 9 am to 2 pm local time (locations here). IRS staff will be there to help individuals and small businesses sort out any issues they may have (See? Filing that extension was a good idea).


This marks the second time in 2010 that the IRS has opened its arms to public on the Sabbath, having done so on March 27th. According to the Service, that particular National Day of IRS Friendliness was a resounding success, with 88% of taxpayers getting their issues resolved that day.

Doug Shulman all but assures your satisfcation in the press release, “Our goal is to resolve issues on the spot so small businesses and individuals can put any issues they have with the IRS behind them. If you have a problem filing or paying your taxes or resolving a tough tax issue, we encourage you to come in and work with us.”

Okay, maybe it’s not exactly a 100% money-back guarantee but the Service is going to work their cans off to get you in compliance and cutting a check that day. Unless of course you’re a Tea Party type trying to get on the six o’clock news, in which case you’ll be dealt with in a swift and decisive manner.

Open House on Saturday May 15 to Help Small Businesses, Individuals Solve Tax Problems [IRS.gov]

Boston Scientific Corp. Will Gladly Spend ‘Several Years’ Taking Issue with the IRS’s Notion That They Owe $525 Million

It’s not that they don’t have the money; it’s the principle of the matter:

The Natick, Mass., medical-device company, which purchased Guidant in 2006, said it received a “notice of deficiency” from the IRS on Dec. 17 relating to the 2001 through 2003 tax years for Guidant and subsidiary businesses. “The incremental tax liability asserted by the IRS with regard to the Guidant claim is $525.1 million plus interest,” Boston Scientific said in a filing with the Securities and Exchange Commission.


Besides, the issue is related to transfer pricing which isn’t exactly cut and dry, so the company figured they’ll explore the differences they have. Besides there’s no rush to pay up:

The company said the main issue under dispute is transfer pricing linked to technology license agreements between certain domestic and foreign Guidant subsidiaries.

“We do not agree with the transfer pricing methodologies applied by the IRS or its resulting assessment,” the company said.

It noted that no payments on this assessment are required until the dispute is definitively resolved, which could take “several years” based on experiences of other companies.

Boston Scientific Says IRS Seeks $525.1 Million in Taxes [WSJ]

Man Who Claimed $23 Worth of Vegetables Triggered an IRS Audit, Explains His Rationale

A couple of weeks ago, we brought you the tale of Don Dunklee, who claimed that he was audited by the IRS for a paltry $23 in vegetables from his garden. At the time, w Mr Dunklee could have come to such a strange conclusion, considering that it’s pretty obvious the IRS’s efforts at closing the tax gap would be spent in better places than the organic vegetable farmer dynamic.

And as it happens from time to time, the subject of our post reached out to us directly (Big 4 CEOs should take a hint) to explain the situation further.


You see, Don – who is a bit of inventor but not when it comes to stories about tax audits – farms as a hobby and a woman who accepted some vegetables from him stuffed a wad of cash in his pocket that he reluctantly accepted:

I work off farm for Walgreens as does my wife. We reported our entire incomes from our employer as well as the $23, and used only the standard deductions provided by the IRS as we do not have enough “expenses” to write off deductions. The $23 was a lady looking at starting her own organic farm who I refused money from. She insisted to the point she would have been offended had I not kept the money she shoved in my pocket. I kept the cash out of respect to her and reported it as additional farm income. I have a 23 acre farm that I have been building for 27 years with the infrastructure so I can have a farm business when I retire in a few years. People visit my farm to see my off grid solar/wind system, my solar charged electric scooter [Ed. note: see above], and my organic vegetable production. I give away any vegetables anyone wants as I grow much more than I can harvest for myself, in part to learn how to produce enough to make a small retirement income later on, and I like to show off my veggies/farm/lifestyle.

Then Don informed us that he fell victim to the Geithner tax malady:

I do my own taxes. I tried TurboTax for the first time (won’t again) and the $23 was reported, rightly so, as farm income. (investigator suggested I can make up to $400.00 and should consider reporting on the other income line rather than farm income during the end of our interview when she agreed our taxes were correct and made no changes). TurboTax created a form F, farm income for the $23, reported. I claimed no expenses for growing, as I do not have a true farm business.

Then Don gets to the crux of the argument behind his belief that the audit was not “random”:

Farming is my passion/hobby. Had our audit been a true random audit I believe we would have had a general agent and general tax officer doing the audit with questions and info requested related to all of my employment reported. I believe this was a targeted audit as the title of the investigator was “small business and self employed” which does not fit the nature of my return. Her questioning was often off topic from the particulars of my return (fishing?). I would not have a problem if the IRS would be honest and say something to the effect, “we would like to audit your return as we see some irregularities we need clarified.” This might help build trust in the IRS. Knowing they have powers that some consider above or outside of the law in how they deal with taxpayers I was worried. The entire process is intimidating. I do not like feeling like a criminal for being honest. I could not afford legal help, which their literature suggested, further intimidating information they provide creates the impression one is in trouble. I hope this helps clear it up a bit for you.

Giving this a little more thought, we aren’t really surprised since the IRS has shown the willingness to shake down taxpayers for a sum that wouldn’t buy you a Hershey bar in a Mad Men episode. Don told us that he doesn’t have any ill will towards the IRS but he wonders if sometimes they can be a tad misguided, “I do have a lot of respect for the IRS and their mandated task, however I wonder if their very task generates a lot of problems.”

Not sure if the IRS is into self-reflection but that’s why we have TIGTA, s’pose. Thanks to Don for reaching out to us and now that his solar-powered scooter is getting a little more exposure, KPMG (and other firms looking to reduce their carbon footprint) may have a decent alternative to the sherpas.