Hello Folks,
This is NOT the year to mess around on your taxes. The word on the street is that the Internal Revenue Service is becoming more aggressive in its collection efforts.
Three things:
1) The IRS is hiring up. I talked to my accountant yesterday morning about some real estate related issues. It came up in the conversation that what she is hearing in the CPA community is the IRS is hiring up to 25,000 thousand additional staff to examine individual tax returns. While the 25,000 figure seems a bit high, a quick scan of the Federal Jobs website USAJOB.gov shows 105 IRS listings for a variety of positions including clerical staff, auditors, and IT personnel. Many of these 105 listings have multiple vacancies. So, early indications are the Feds are probably going to hire a lot more staff for tax collection.
2) The IRS is flexing its regulatory muscles. Earlier this year the IRS announced that it would require the licensing and regulation of tax preparers. (see the LA Times article here). While the Internal Revenue Services’ stated rule for the regulatory change is to protect individuals against unscrupulous tax preparers, the outcome of this regulation will probably be to standardize and facilitate revenue collection.
3) Current political support for taxation is high. In an interview with C-SPAN, IRS commissioner Doug Shulman made allusions to this effect. Essentially with the Democrats controlling Congress and the Obama administration in the White House there is a strong amount of political support for increasing tax revenue to make up for the Federal budget deficit. You can listen to the interview with Commissioner Shulman here.
What does this mean for your personal finances? Well, if you are tempted to fudge your income numbers a bit or you desire to take a questionable deduction – don’t do it. Second, if you haven’t filed, you need to file. This year – and probably the next year as well – would be especially bad timing to try anything even remotely questionable on your returns.
Thanks,
James
I believe the IRS along with many other government agencies are short on funding to be as aggressive as they'd like to.
Yep, it definitely seems like they are going to start cracking down more. Several of the recent jobs/stimulus bills that have come out of Congress in the last few weeks were paid for by eliminating tax loopholes and going after off-shore accounts. I think it is a great idea – there is no reason multi-millionaires should get to escape out on their taxes.
-Kyle