Audits on Police deductions.

[tacks]

At the Liason meeting I attended last week we were told that the IRS intends to hire 1100 auditors, nationwide. That should fix it.

Thanks, Dave. That's good to know. I looked at a job some time ago. And i looked at the work done by the current/prior preparer. And i was very surprised this guy hadn't yet been pulled up by the IRS. For a moment it made me wonder why i bother.

[Nashville]

Shot Down?

Kamaina, it is quite understandable that you are going to have disagreement (yes from others on this very board as you say) on a position that preparers should "turn in" other preparers deemed to be unscrupulous. Not only that, but to be plying a doctrine which expounds this as being "professional behavior."

The rest of us should not contest your right to your own opinion, albeit perhaps unpopular. And most of us know there are people who shouldn't be preparing because of their shady tactics. Seems like there's at least one in every town. I don't have a problem with you knowing ANYTHING that I do that I post on this message board, so long as you don't think you are the sole judge and jury as to whether I am right or wrong.

Going back to the original post, I am confident dmj4 has known for years that this was going on in her town, yet refrained from whistleblowing on this errant preparer. And it's good to see that the IRS (not dmj4) finally put a stop to this.

Where your ship runs amuck is the ultimate perception that you are aligning yourself with enforcement officers of taxing authorities. The general public needing tax preparation services should know this about you, and they will eventually find out. Not only that but if you think you are turning in sleazy tax preparers into the "forthright and fair-minded" taxing authorities, you don't know much about many auditors and tax enforcement people. Percentage-wise, there are as many in their numbers that are the skurf of creation as there are in tax preparation.

In fact, the absolute most unscrupulous tax preparer I know of was a former IRS agent. The IRS would back off any time one of his clients was selected in "stratified selection" for audit. Rumor has it he was part of the the "good ole' boy" network, but of course this could never be substantiated. Finally retired.

I've admired those who stand up for what they think is right, in spite of whether it is popular or not. But this loses its lustre when the issue at hand is not really right.

[DaveO]

At the Liason meeting I attended last week we were told that the IRS intends to hire 1100 auditors, nationwide. That should fix it.

[tacks]

Of all the ridiculous arguments I've heard from government, perhaps the flimsiest is this thing about not having enough funding to pay an audit staff. I would be willing to bet that the IRS audit staff collects about 300% of what the cost is to run their audit division. So how can you make an argument that you "don't know where the money is coming from?"

Thanks for posting, Nashville.

I believe that you're correct about the IRS audit division pulling in more money than they spend. But i understand that they remain understaffed despite this fact. The federal government had a hiring freeze a few years back -- no were agents hired. Meanwhile many agents are coming in to retirement at a rapid rate.

[Black Bart]

Funny, but not really.

Exactly. Law enforcement is most effective when the greatest effort is expended against law-abiding citizens who occasionally stray over the line. I'm not suggesting that law enforcement officers of all types don't do some dangerous and dirty work - they definitely do that. But the best return on investment of time and resources is to turn the screws on people who have a lot to lose by not complying - they will generally pay the fines & penalties with a minimum amount of push-back.

I recently saw a 2008 report by the Treasury Inspector General for Tax Administration (IRS' overseer) which read "...while IRS has successfully developed processes to identify (italics mine) fraudulent EITC claims, they have not been able to develop a process to stop such claims and the majority of them are paid ..." That's progress of a sort I suppose.

TIGTA reported a couple of years ago that convicts in prison were claiming EITC and -- incredibly -- Head of Household status. Many were paid as IRS said they didn't have the manpower to deny/check them. Not much point in audit, I guess -- what could you threaten them with? Jail?

[kaimana]

Good for you! I sincerely applaud you

Preparer turned good
I got shot down badly for suggesting that we professionals should have no problem with turning in this type of preparer (from posters on this very forum). I am very happy to see that I am not the only one.

Where can I research how MN handles their program?
Thank you

[AuditorTurnedGood]

I've always heard their collections were aggressive, but I swear I think that state could collect from the moon.

I would be willing to bet that the IRS audit staff collects about 300% of what the cost is to run their audit division. So how can you make an argument that you "don't know where the money is coming from?"

On the first point yes, the Minnesota Collections Enterprise will stop at nothing to get the money this state is owed. The siezure unit even has windbreakers bearing their name. There was one collection attempt that made news about 4 years ago. They rolled up to a "non-resident" tax evader's 2.8 million dollar house in an exclusive private community, and within 2 hours of serving the Writ of Entry, had impounded everything in the house, down to the grandkid's dance costumes.

To the second, that was how our current govener has tried to stick to his "no new taxes" pledge he made when first elected about 6 pr 7 years ago. If you give the department 40K for a new auditor, they will likely find about 5 times that amount of non compliance in their first year.

[Snaggletooth]

Cash Scam

I guy I grew up developed a scam and used it numerous times.

Bought a refrigerated truck, and went to Nashville to a huge regional food distributor. Bought meat, fruit, and produce and would drive to a medium-sized town about 150 miles away in KY. Would find a huge parking lot somewhere and pretended that his truck was broke down. Sold meat and produce off the back of the truck to the public at bargain prices, pretending that his refrigerant would give out soon and the food would spoil if he didn't find someone to sell it to FAST. Scheme would turn around $4-$5K per load.

A few days later, more food, and the truck would move to GA, MS, TN or wherever he could find a medium-sized town. Of course, no license, no sales tax, nothing. Had to make sure he didn't hit close to the same town twice. Told me once that a couple locals chased them down at gunpoint to rob them of the cash and had to race them out of town.

Don't know whatever happened to him...

[erchess]

Observation

In NC we have people who will sell stuff in store parking lots or by the sides of heavily traveled roads. I guess most of them probably are operating under the table on a cash basis but I've very seldom bought anything from one of them or thought about their tax situations. It does seem like to me it would be cost effective for the NCDOR to go after these folks by stopping and checking ID then making appointments to audit for sales tax. They would of course have to check out vehicle tags and driver licenses and make sure there was a match. If sales tax was found to be significantly out of compliance there could also be audits of their complete returns.

[JohnH]

Exactly. Law enforcement is most effective when the greatest effort is expended against law-abiding citizens who occasionally stray over the line. I'm not suggesting that law enforcement officers of all types don't do some dangerous and dirty work - they definitely do that. But the best return on investment of time and resources is to turn the screws on people who have a lot to lose by not complying - they will generally pay the fines & penalties with a minimum amount of push-back.

[Nashville]

Low Hanging Fruit

John, they've always gone after the easy stuff. The "low hangin' fruit" as opposed to the tough stuff that ties up their lawyers and highly paid personnel. Can you imagine the cost and fallout from going after the bank accounts in Switzerland? Much cheaper to program another 25 million mostly wrong CP-2000 notices.

Go after Microsoft or General Electric? Forget it. Go chase down illegal EIC recipients? Forget thst one also, they are too many and too transient. Who does that leave? You're right John. SIX MUNTHS AGO I CUDN'T EVEN SPEL CAYMIN ILANDS, NOW I ARE ONE!!

Ever been to Philadelphia in the summer (or anywhere in the Northeast)? Seen the outdoor fruit and veggie markets doing thousands in cash business? Not a chance you will see a Treasury agent go into one of those.

I've said since the beginning of this recession that the boldest and most desperate attempts and tax enforcement will come from hard-strapped state and local governments. I could have been wrong.

[JohnH]

Speaking of auditing & collections, here's a little tidbit from today's news. Anybody want to bet how much of this enforcement eventually focuses on individual taxapyers and corps rather than the offshore stuff?

http://www.reuters.com/article/pressReleasesMolt/idUSTRE5464DP20090507

I'm betting the administration will decide that this is a lot better source of revenue than trying to run auto companies and financial institutions. After reading this, I'm thinking about raising my rates again...

[Nashville]

Funding Problems

I found out about 10 years ago the long arm of the MN law for state income taxes from an Alabama customer who fled the Great Prarie owing your state. I've always heard their collections were aggressive, but I swear I think that state could collect from the moon.

Of all the ridiculous arguments I've heard from government, perhaps the flimsiest is this thing about not having enough funding to pay an audit staff. I would be willing to bet that the IRS audit staff collects about 300% of what the cost is to run their audit division. So how can you make an argument that you "don't know where the money is coming from?"

[Nashville]

MN police

Earlier confessed to a couple of TN traffic violations, but also in 2007 got one from a Minneapolis cop who said I turned on red. I decided to write the district attorney, pointing out that in my 40+ yrs of driving I have had 9 moving violations and over half of them had been out-of-state (my point being that police are precipitously biased toward out-of-staters). She did write back and found my verbage "interesting" and never heard anything else.

For all you Yankees, Westerners, Midwesterners, whatever, I would like to tell you we don't do those despicable things when you visit Tennessee, but alas, our police like out-of-state money too. You guys don't vote here, I suppose.

[AuditorTurnedGood]

Well, if the IRS won't crack down

the state certainly can. I know here in MN, the Dept. of Revenue has it's fradulent preparer project in full swing, and has had for about 6 years now. When ever I find someone in this business who is seriously undermining the law and those of us that know what we're doing, I get as much info as possible and pick up the phone. I'm not sure about the rest of the country, but here in MN, the Revenue department has no lack of funding or resources.

Brilliant thread, BTW.

ATG