There’s No Official “Collector of the Month” Award at the IRS

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In evaluating the performance of a car salesperson, the most important criterion is the number of cars he/she sells.  In evaluating the performance of an IRS agent, shouldn’t the single most important measure of effectiveness be the amount of revenue he/she collects?  That seems logical, but it’s not the law.  And according to a recent audit and report done by the Treasury Inspector General for Tax Administration (TIGTA), that’s not the way the IRS operates.

The IRS Restructuring and Reform Act of 1998 prohibits the IRS from evaluating collection employees based on “ROTER” (records of tax enforcement results).  TIGTA gives the following examples of ROTER: amount of dollars collected or assessed, the number of fraud referrals made, and the number of seizures conducted.

So, what is the standard by which IRS employees are judged?  I’ll tell you, but you have to promise me you won’t laugh.  The standard (as stated in the Restructuring and Reform Act) requires employees to “administer the tax laws fairly and equitably; protect all taxpayers’ rights; and treat each taxpayer ethically with honesty, integrity, and respect.”  I know, that sounds ridiculous. That’s not the reality.  Besides, how do you measure and track that sort of thing?

I guess it’s on the honor system.  IRS managers have to complete quarterly self-certification forms, promising that they did not use ROTERs in their employee evaluations.  And here’s how the TIGTA audit went down: they basically made sure that the managers were completing the forms and they reviewed performance documents to ensure they were free of ROTERs.  Not surprisingly, the IRS passed the audit with flying colors.

The reliability of the TIGTA report seems questionable to me.  Imagine this kind of exchange at the local IRS Collections Office:

Employee Joe: Hey Bob, I nailed a guy with a bank levy today and emptied his whole account, I also seized 4 properties, collected $6 million in penalties, and referred a little old lady to the fraud unit.

Manager Bob: That’s great Joe, but were you nice to these folks in the process?

Greece Increases Already Burdensome Property Tax

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The new property tax announced by the finance ministry of Greece over the weekend was like a knife in the chest of struggling homeowners.  Now, with tax relief nowhere in sight, the government is doing a little knife twisting.

Just a few days after the tax was announced at the rate of 10 euros per square meter, the government further increased the tax rate to 16 euros. And the nifty thing about having the tax paid through the property owner’s power bill is, if the tax is not paid, then the lights get switched off.  Full story here.

Cigarette Exec Sentenced in Tax Evasion Case

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Who:  Maurice Goulet, former North Carolinian now living in Idaho, owner of several cigarette-related businesses.

What:  Pleaded guilty of tax evasion; failed to file personal taxes for nearly a decade

Consequences:  6 months home confinement, one year supervised release, and must pay IRS $170,717 in restitution.  He probably go off easy.

Other:  Goulet purchased two motor homes and a vehicle with business funds. He also used false identification numbers on bank accounts.

IRS Can’t Procure the Number of Procurement Personnel

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As tax relief attorneys, we regularly deal with the Collections branch of the IRS.  It has been our experience that collection offices across the United States tend to be understaffed, and their personnel often lack sufficient training to work their cases efficiently.

According to a report released yesterday by the Treasury Inspector General for Tax Administration (TIGTA), the IRS Office of Procurement may have bigger problems than Collections . . . but they’re not sure. The Procurement Office is charged with the task of acquiring goods and services to help the IRS meet its mission.  TIGTA is concerned that Procurement may not have enough personnel and that the personnel they do have may not have the skills needed to appropriately spend the $2 billion they have budgeted to spend each year.  This is the actual wording of the report; they “may” not — they don’t know for sure because the Office of Procurement has not been able to identify its acquisition workforce.  They know the number of personnel within the Procurement Office, but there are other IRS employees on the outside that remain unaccounted for.

In other words, there is an unidentified number of IRS employees buying stuff without proper supervision and likely without proper training.  This report confirms the IRS’ image as an immense  bureaucracy that can’t keep track of its own personnel.

Are IRS Audits Random?

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As tax relief attorneys, we frequently get the question, “How likely is it that I will be audited?” or “Does the IRS audit people randomly?”

IRS audits are not completely random. You may have heard that the self-employed are a more common target than wage-earners.  This is true.  Income reported on a Schedule C is, according to some, one of the most likely types of returns (or parts of returns) to be audited. According to Forbes columnist, Robert Wood, the sole proprietorship is one of the most tempting targets for the IRS.  Formation of a legal entity like a partnership or a corporation may add complexity to your business, but it is not as routinely audited as the sole proprietorship.

According to the IRS, cases are selected for audit based on a variety of factors, including statistical formula, document matching, and related examinations.

Nobody can audit-proof your return. There is always a chance that the IRS will scrutinize your income and your business filings. But there are certainly steps that can be taken to reduce the likelihood of an audit.  One of those steps is to simply avoid filing as a sole prop.

New Greek Property Tax to be Collected by Power Company

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Just a quick update on Greece’s financial crisis as it is related to taxes this time.  On Sunday the government of Greece approved a new property tax aimed at quickly raising 2 billion euros to help plug some serious budget holes.  So the tax collectors got right to work on this, right?  Nope.  In fact, tax offices around the country were shut down today as workers protested pay cuts.  However, even if tax collectors never go back to work, property owners should not expect any automatic tax relief because the new tax is to be collected through electricity bills.

It’s an open question whether or not the tax will actually be collected amid union protests and the country’s rampant tax evasion.  The government needs to get over its credibility issues by cracking down on prominent individuals and businesses that believe they are above the law and immune to taxation.  Lasting solutions for this country’s economic troubles probably involve reducing the public sector and moving towards privatization, whereas the new property tax appears to be just a band-aid.  Worst of all, experts believe that the new property tax will only worsen the country’s recession.

The Big Red Rabbit at Sac Airport

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Airport art can be massive.  The red rabbit is massive.

Airport art can be striking.  The red rabbit is striking.

Airport art is often symbolic or reminiscent of the locale.  The red rabbit . . . not so much.

Sure we have rabbits here, but rabbits are everywhere, and they’re not usually red.  So there was some degree of controversy surrounding the installation of “Leap,” the big red rabbit created by Denver artist, Lawrence Argent, now on display in the new terminal of the Sacramento International Airport.  But we’ll get used to it . . . once people (myself included) stop trying to find hidden meanings.  Besides, who says art can’t just be fun?

Other possible interpretations:

1. Red Rabbit (nutritional food for children)

2. Red Rabbit (novel by Tom Clancy)

3. Red Rabbits (song by The Shins)

My favorite interpretation: it’s a bold anti-drug statement (i.e., the opposite of a white rabbit).

GAO Releases Report Bashing IRS Whistleblower Office

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The IRS is bound by act of Congress to pay tax whistleblowers up to 30 percent of the revenue collected as a result of information they provide, so long as the amount in dispute is more than $2 million. But the Government Accountability Office (GAO) does not believe the IRS is complying like they should.

Since the Whistleblower Office was established in early 2007, IRS has received over 1,300 whistleblower submissions qualifying for the expanded program, alleging tax noncompliance by more than 9,500 taxpayers. As of May 12, 2011, IRS has paid a small number of awards under the expanded program. . . . As of April 2011, about 66 percent of claims submitted in the first 2 years of the program, fiscal years 2007 and 2008, were still in process.  ~ GAO

Of course, the IRS can’t officially say exactly how much award money has been paid to whistleblowers because it would violate the IRS’s privacy protections. The same protections apparently prevent the IRS from keeping whistleblowers in the loop as far as the status of their claims.

The Whistleblower Office is a mess.  Is it really too surprising though, that the agency charged with collecting revenue has a hard time dishing it back out?  The IRS has buried itself in minutia on these cases to, as they say, “ensure the integrity of the claim.” It’s not collecting data on the amount of time each step in the process takes, and it has failed to establish deadlines and accountability for those working these cases.  If the IRS wants this program to incentivize whistle-blowing and voluntary compliance, then it had better turn things around. If not, the Whistleblower Office is going to quickly make a bad name for itself.

See full report here.

SF Giants and Burgers- A Sign of Karma for winning it all in 2010

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Regular readers of this blog are aware that the tax attorneys at Montgomery & Wetenkamp are huge baseball fans; and great SF Giants fans. We’ve been hoping the Giants with all their injuries would still find a way to pull it together. The first major blow of the year was of course the Buster Posey injury. However, the last straw may have been today’s announcement that Jeremy Affeldt will be out for the rest of the season. My mother has been a Jeremy Affeldt fan ever since he served her hot dogs at a season ticket holder event with the charm of a young boy a few years ago. But sorry mom, you should have whispered the secrets of defrosting meat before barbequing, as he stabbed himself separating burgers with a knife… and is now joining rest of the SF Giants on the disabled list.

Offer in Compromise: The 24-month Rule

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The IRS has 24 months from the date that anOffer in Compromise is received to make its decision.  If the IRS does not accept, reject, or return the offer within 24 months, then it is deemed accepted  (IRM 5.8.8.6).  According to IRS policy, “The timeliness of case actions in an offer investigation is important not only to ensure the efficiency of the process but also is a key component of taxpayer satisfaction”  (IRM 5.8.1.2).

But lets face it, the Offer in Compromise process can be lengthy and the IRS has never been very good with taxpayer satisfaction.  It routinely takes several months just for the IRS to mark the offer as received and assign it to an Offer Examiner.  And that’s only the beginning of the process.

I have never seen the 24-month mandatory acceptance provision come into play.  Certainly the responsible IRS employee(s) would be disciplined, if not fired, for letting the 24-month period expire.  My problem with the 24-month rule is that it does not have the intended effect.  In fact, it seems like it is quite the opposite.  An astute IRS representative with a caseload he can barely keep up with will probably delay as long as he can, even though the entire process could easily be completed in 30-60 days.