Welcome to TaxBlawg, a resource from Chamberlain Hrdlicka for news and analysis of current legal issues facing tax practitioners. Although blawg.com identifies nearly 1,400 active “blawgs,” including 20+ blawgs related to taxation and estate planning, the needs of tax professionals have received surprisingly little attention.
The Wall Street Journal's Tax Blog gives “tips and advice for filers,” and Paul Caron’s legendary TaxProf Blog is an excellent clearinghouse for academic and policy-oriented news. Yet, tax practitioners still lack a dedicated resource to call their own. For those intrepid souls, we offer TaxBlawg, a forum of tax talk for tax pros.
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For most citizens of the United States, the thought of an IRS audit is probably scarier than a root canal or a colonoscopy without anesthesia. As a result, people will be pleased to learn that the Internal Revenue Service is in fact "audited" itself, and sometimes doesn't like the results of those audits.
The notion of auditing the IRS is probably surprising. Most taxpayers know that from time to time their local media doubtless has someone who will find a horror story about a widow who really didn't owe any taxes but is being harassed because of a mistake made by the IRS computer, and from time to time Congress occasionally exercises its oversight over IRS operations above and beyond asking the Commissioner what he's doing about closing the "tax gap." But these contacts are sporadic, and there's a question about their effectiveness.
At the same time, there is an ongoing effort by an organization known as the Treasury Inspector General for Tax Administration, or TIGTA for short. TIGTA has issued some reports this year that should be of interest to all taxpayers. In February, TIGTA issued a report to the effect that the IRS needs to take more action to determine that Section 527 political organizations more fully disclose financial information. These are political organizations having tax-exempt status which are supposed to be reporting their contributions and expenditures to the IRS, and TIGTA does not think that the exempt organizations arm of the IRS has taken sufficient action to identify and deal with non-compliant ones. In a very busy July, TIGTA issued several reports. For instance, TIGTA was critical of the IRS’ efforts to "protect taxpayer's rights" during the tax lien process, and in particularly the failure to comply with the statutory requirements as well as its own Internal Revenue Manual guidelines with respect to the filing of lien notices and notifying taxpayers about them. Later in July, TIGTA noted that the IRS Office of Appeals has improved compliance within its Collection Due Process program but, given the fact this is a 1998 statute, there was still room for improvement. Finally in July, TIGTA noted that the Internal Revenue Service was not properly observing procurements under the American Recovery and Reinvestment Act of 2009. Moving on to August, TIGTA criticized the IRS for failing to establish target dates to limit or reduce taxpayer's social security numbers from outgoing correspondence, a prime source of identify theft. At this point, readers of this article are probably saying "hooray for TIGTA!" But, as is always the situation, that action might be premature.
Two other reports of the last summer might cause one pause. In June, TIGTA issued a report indicating that the Internal Revenue Service did not consider the application of accuracy related penalties (20% of any unpaid tax deficiency) during correspondence audits. This is somewhat interesting, in that TIGTA is not known for its technical expertise about the application of the Internal Revenue Code, and the report stopped just short of suggesting that such penalties were "no fault penalties" which should have been automatically applied. Also, in July, TIGTA noted that, while the IRS Criminal Investigation program was improving, more work was needed to secure more investigations and convictions.
In September, TIGTA also requested power to "alter its audits," in discussions with both the Secretary of the Treasury and the Congress, to avoid audits that are at the moment mandatory, or reduce them to a bi-annual rather than an annual basis. One example is an energy efficient audit that suggests that the IRS could save several million dollars by using screensavers on desktop computers. Somehow, that seems like a wise investment of taxpayer dollars!
Perhaps the "bottom line" is simply that it's good to know there is someone keeping an eye on the Internal Revenue Service on a regular basis. Unfortunately, in the eyes of this writer, its approach is sometimes misguided, but it's certainly better than no watch dog at all. Meanwhile, the title of this article would make a great icebreaker for your next visit to a singles bar, or an ideal question to pose to Uncle Clarence as he is about to fall asleep after a hardy Thanksgiving dinner.