The Taxman Blog

Jun 28, 2016
Do Audits Actually Increase Tax Compliance?

“The government has been trying to figure out how small-business owners can be persuaded to report their earnings more accurately. More audits may not be the answer.” – Taxman Client

Most taxpayers dread the word “audit.” Small-business owners can be especially hard-pressed to provide effective documentation, leaving them vulnerable to such audits. And yet, the New York Times discovered, it may not be as effective as a deterrent to tax evasion as the IRS would hope.

“The agency estimates that it collects $458 billion a year less in taxes from all Americans than the Government is actually due,” writes Stacy Cowley. This probably isn’t news to most of us. However, it may surprise you to find out that “those suspected of tax dodging tend to cluster in certain geographic areas.”

This may make it a little easier for the IRS to target taxpayers for audit. But “for those who dodge their taxes and get caught, the sting seems to fade fast. In the years right after an audit, taxpayers who had to make additional payments appeared to become a bit more compliant, but the effect diminished over time and disappeared entirely by Year 5, another study found.”

What do you think? Is the threat of an audit sufficient to keep you on your toes? Have you ever been audited? If you’re facing an audit right now, let me know— even people who didn’t end up owing anything, like Rebeca Mojica, “estimates that she spent $500 in accounting fees and 15 hours of her and her staff’s time dealing with her 2011 audit. The process lasted seven months.”

Read the full New York Times article here.

Jun 10, 2016
Why the IRS Won’t Answer Your Calls

Ever wonder why you can’t get through to the IRS? Turns out, severe budget shortages and hiring freezes, coupled with inflation and growing demand for taxpayer services, have left the IRS floundering.

The Center on Budget and Policy Priorities published an article on April 4 that details some of the reasons that the IRS is performing under par. Taxpayers trying to call customer service, victims of identity theft, and low-income taxpayers have all been particularly affected by these frustrating gaps in service.

Writers Chuck Marr and Cecile Murray point out that “In 2010, about three-quarters of calls to the IRS were answered, with an average wait time of 11 minutes. During last year’s filing season, only 37 percent of calls were answered, with an average wait of 23 minutes.  This means that more than 60 percent of calls were not answered at all.”

Sound familiar? IRS Commissioner Koskinen “notes that the IRS uses ‘applications that were running when John F. Kennedy was President.'”

There are plans in progress to deal with some of the issues: “In response to criticism, Congress agreed to a small nominal increase in IRS funding for fiscal year 2016, though funding was essentially flat in inflation-adjusted terms.  The year-end omnibus appropriations bill provided an additional $290 million to improve taxpayer services (in part by hiring seasonal employees), strengthen cybersecurity, and expand the agency’s ability to address identity theft.”

Read the full article here, and tell me what you think. Have you been negatively affected by the IRS’ lack of resources? If you’re struggling, don’t wait for the problem to get bogged down in the system–get in touch with me and let the Taxman help.

Taxman.cc, inc dba Howard Choder, Solving Tax Problems