During the past two years, have you had any issues with the Internal Revenue Service? Many people have come to me to vent their frustrations with the Internal Revenue Service. In this article, we’ll expose a number of IRS misconducts. Ideally, the solutions are self-evident.
There are a lot of people who receive IRS notices asking them to either pay more taxes or call a specific phone number to clear up any ambiguity. They finally reach an IRS employee after 150 minutes of trying to reach a live person at the agency. In this case, they may be chastised for calling the wrong number.
They have to start the process all over again when the line goes dead while transferring them. For a few minutes, they’re stuck in a two-and-a-half-hour-long wait at the IRS. While talking to the IRS, others are interrupted.
First, I’d like to point out a few things the IRS has done right. It’s easy for me to think about how the Internal Revenue Service (IRS) handled three separate direct deposits of about 160 million EIPs (Economic Impact Payments) (April 2020, January 2021, and May 2021). The vast majority of recipients received their money on time. It was a massive undertaking, but they did an excellent job of it.
The IRS also does a commendable job of updating and maintaining its website (irs.gov). Successfully reconciled Obamacare’s Patient Protection and Affordable Care Act (aka Obamacare) and computed the corresponding Premium Tax Credits (refund), as well as Shared Responsibility payments, a few years ago (penalty).
For now, let us take a step back and assess the current state of affairs. For 99 percent of the world’s population, COVID-19 was a game-changer. The IRS was forced to shut down for three months as a result of this.
IRS employees were denied access to their workplaces in large numbers. Projects that weren’t absolutely necessary ceased to be worked on while the work itself continued to flow in.
Responding to notices, filing returns, and contacting the IRS remained a common practice for many taxpayers. Despite the fact that no one was present to process the mail, the Postal Service was still required to deliver it. Rumors abound about tractor-trailers full of unopened mail at IRS Service Centers.
My previous article stated that income taxes defy common sense because they are not based on logic and mathematics like accounting theory is. However, Congress is in charge of enforcing and modifying the rules.
A look at the IRS’s egregious and frustrating practices is in order.
1. The IRS’s various divisions do not communicate with each other. There are currently 6.2 million unprocessed 2020 tax returns on the IRS website. The IRS, unlike most businesses, does not process returns before sending out dunning letters requesting payment. Because your tax return hasn’t been filed, the collection division sends nastygrams (tax assessment notices). Your return has already been received by another division but hasn’t been entered into the computer yet.
2. Taxpayers have an unfair advantage. You are only innocent until proven guilty under the tax code.
3. To the IRS, your time is completely free. Erroneous notices from the IRS are all too common. To avoid paying the tax, a certain percentage of taxpayers have historically paid it right away. People experience real anxiety and stress as a result of receiving these notices. You have to pay to document the error and respond in writing if notices are incorrect. Avoid ignoring an IRS notice at all costs.
4. Many notices from the Internal Revenue Service ask that you contact them, but all of the call centers are severely understaffed. 3. Most people don’t have the patience to wait on hold for long periods of time and risk having their line dropped.
5. Frequently, the IRS rules defy common sense. Let’s say a doctor donates $50,000 to his church as a tithe. A contribution statement from the volunteer church treasurer is delivered to him in January of the following year. In order to claim a $50,000 charitable deduction on his tax return, he submits a receipt from his church. For tax-deductible contributions, the IRS requires a key phrase, “no goods or services were provided in exchange for the contribution,” to be included on receipts. However, the treasurer was unaware of this requirement.
His tax return is audited by the IRS two years later. Their attention is drawn to a glaring omission from the contribution statement.
An audit adjustment removes $50,000 in deductions, which significantly raises his tax bill and also includes a significant fine. Because of the mistake of a church volunteer, he now owes more than $25,000 which is more than half of his contribution.
Also, the date of the receipt from the charity must be prior to the date the physician’s tax return was filed. “No goods or services were provided” appears on a contribution statement only when the IRS notices that phrase. Once that occurs, it is too late to have the statement corrected and reissued with those words.
The only reason I’ve ever heard of someone giving money to a church is that they believe it will help them grow spiritually. Why isn’t the doctor able to get a new statement after the IRS has set a date? The IRS audit didn’t change the intent or purpose of the $50,000 in weekly donations that totaled $50,000 for the year.
Because of tax law, common sense is a non-starter, as onerous fines and penalties are levied if you don’t follow the rules.
As a Certified Tax Strategist (CTS), Aric Schreiner is a CPA, PFS, and a member of the Association of Certified Tax Strategists (ACTS).