The Internal Revenue Service has announced that random audits are coming back. Calling it a National Research Program, the compliance project is aimed at reducing the tax gap.
No one likes paying taxes, including me. But the harsh reality is that some of us are paying our fair share while others are not. The estimated $290 billion difference between the taxes that should be collected and the taxes that are collected is pretty significant and could go a long way towards reducing the tax burden on all of us.
When I started working for the IRS back in 1980, the tax returns selected for audit were those with a high probability of error. That probability was based on statistics collected from TCMP (Taxpayer Compliance Measurement Program) audits – random audits of returns in which every single line item on the tax return had to be substantiated. Complaints about these audits led to their discontinuance, with the result being that the data used to select returns for audit was quickly outdated.
I, for one, welcome the return of these types of audits. For one, it will reduce the number of returns selected for audit that result in a no-change. Secondly, it will help to reduce the tax gap by identifying new methods that have been used to hide income or inflate expenses.
Finally, I’ve never quite understood the ire of taxpayers towards the IRS. They are a government agency charged with implementing the laws that Congress writes. Don’t like the law? Complain to your Congressional representative, not the IRS. After all, they are one of the few revenue-generating agencies the government has.
VIVIAN J. PAIGE | All Politics is Local 
My girlfriend made a mistake on her taxes this past tax season. It was her first time filing them herself, so she experienced some slight confusion in terms of what goes into what line–in the line where it asks for Total Payments, rather than entering the amount withheld for federal taxes by her employer, she entered the total amount that her employer had paid her. This obviously overinflated the size of her refund by something like $10,000. She probably would have realized that couldn’t possibly be right if she’d done her taxes by hand, but she was using turbo tax and it filled in all the information for her and calculated her return after she’d finished punching in all her numbers. She simply clicked “submit” without thinking the math could be wrong.
She actually deserved a refund of somewhere between $400 and $600, but rather than correct the math and send her the appropriate refund, the IRS (after checking her W2) decided to send her a letter informing her that she still owed the government money to the amount of the total tax for her income bracket. So on top of all the taxes withheld from her paycheck last year, she’s paying her total tax out of pocket–essentially, she’s paying more than twice what she should have to in taxes because she wasn’t clear whether “total payments” meant total payments made to her or to the government.
When I went through her papers and realized what actually happened, we called the IRS and asked to file an amendment so she could receive the appropriate refund. The agent’s answer would be best paraphrased as “bite me. Pay up.” He actually threatened her by saying that the size of balance owed to the government would continue to increase if she didn’t pay it off quickly–even though she didn’t really owe a dime!
I’m sure like any organization, an individual’s impressions are colored by whomever he dealt with as a representative of that organization. But the fact that IRS can penalize someone for a math mistake with impunity while a citizens only recourse in the event that the IRS makes a mistake is Congressional intervention is one pretty big reason why people hate the IRS.
By the way, we’re totally hiring you to do our taxes this year.
Last time I got audited, I ended up with a $6k check from the IRS for that year. Bring it on!
(Apropos of Waldo’s conversation, I’m going psuedoanon for this one :)).
anon – I understand your frustration. We as practitioners have to deal with those folks, too. Unfortunately, the government does not fully fund the IRS and so the folks on the other end of the phone are not as well trained as they could be, not to mention the fact that they are not as well paid as the should be.
AC – I’d go anonymous, too, if I got $6K back 😉
Hmmmm I just got audited myself and they are saying that I owe them over 10,000 dollars for not including lawsuite imformation in which I payed a third taxes on. You know what is really frustrating is I work as a seaman meaning I spend 9 months a year offshore and if I moved up to canada I wouldnt pay squat for taxes due to my profession. Also I could move to great britian and not pay squat either. So I guess one day ill get fed up with paying 3k a month to pay for a government that rewards irresponcible people with wellfare and penalizes hardworking people by taking a third of their income. Oh also isnt it kind of funny how the extremely rich people oppose a over haul of the tax code. Well its like this if people just paid a sales tax the rich bankers wouldnt make any money because loans would be paid off in record time.