My clients have reported over 200 phone calls and I've gotten six myself, attempting the latest identity theft scam where scammers are posing as IRS agents or federal marshalls. I had one client in tears last month over a false threat of going to jail.
I had one client who decided to play along with the caller. The caller had a heavy foreign accent told him to go to his bank, get only cash since the IRS doesn't take checks (??), drive to a park, and then call him on his cell phone (specifically not to use a land line) and someone would meet him there to "help settle his account." No kidding!
The IRS does NOT initiate first contacts with people via telephone (or email). The IRS is warning the public of scammers impersonating IRS employees and officials. There are several tell-tale signs of a scam:
After several of these calls from clients, I’ve started to google the telephone numbers used and, invariably, they show as a fraudulent telemarketers. Just type in the area code and telephone number and you can get an idea of whether a phone call is legitimate.
And to follow-up on a similar warning I’ve made many, many times, the IRS DOES NOT USE EMAIL to correspond with taxpayers EVER. If you get an email allegedly from the IRS, it is a scam trying to get you to supply personal information for them to steal and use. I don’t care how official it looks. Be careful out there.
I've had dozens of clients recently get the strangest notices from the IRS regarding address changes. When we look at the notice and recent filings, the addresses are always the same. We haven't yet seen an actual change of a single address. I tell clients not to worry since obviously the address is correct and they are clearly getting their mail.
But let's face it - ANY correspondence from the IRS tends to freak us out just a little bit. Okay maybe it freaks us out a lot.
I did have one client who chose to call and see why he was getting the notice. After an hour on hold, they finally got to him and told him why.
We had used the address: 1234 Elliott Street
So they corrected it to: 1234 Elliott St
To quote John McEnroe: "YOU CANNOT BE SERIOUS!!??
Congress has a bill before it that is a real doozy - H.R. 25.
Part 1 would have the entire income and social security tax system set aside and replaced with:
Part 2 - A national sales tax somewhat similar to the VAT tax system in Europe. And get this, the tax rate would START at 23% (plus your state sales tax making it closer to 30% overall). And it would drop the IRS staff entirely and rely on the states to collect the tax and turn it over to the federal government. Seriously? Do you think for a second that the states would actually turn it over to the feds? This would cause the fiscally responsible states to want to secede from the union and we'd have Civil War II.
The website govtrack.us gives this bill a 0% chance of being enacted.
(Originally Written in 1988)
With all the recent ballyhoo about IRS abuses of taxpayers as well as their own employees and the recent proposals before Congress, it seems that some people are again jumping on an “Abolish the IRS” bandwagon. For years various politicians have even put their signatures on a petition to seek this abolition within 3 or 4 years (even though no one has proposed an alternative means of collecting taxes with any substance).
People have proposed many different alternative type systems such as a national sales tax, value added tax, and flat tax as well as elimination of all preferential deductions and tax treatments of certain income.
Let me give you a few real reasons why I don’t think the abolition of the IRS is likely in the very near future, if ever.
1. The national sales tax type of concept won’t be well liked by most taxpayers. Why not? I can think of a couple of reasons:
First, for the federal government to raise the necessary revenue, the sales tax rate is projected to be 17-21% over and above the existing sales tax for each state. For Nevadans this would be around 25-29%. I don’t think so!
Secondly, if this national sales tax is applied like other state sales taxes and applies primarily or only to consumer goods (with savings and investments exempt) then you will find a disproportionate burden on people who spend all or a substantial portion of their income, a/k/a the poor people and middle class. On the other hand, people who spend very little of their income and invest the bulk of it, a/k/a the upper middle class and rich, will love this format.
2. The concept of a value added tax is really pretty much what we have now. Any business or person who adds value to a transaction (labor, wages, or profit) pays tax on this. The costs incurred in the production of the transaction are normally deductible (business expenses and costs of goods and materials in production).
3. The concept of a flat tax sounds wonderful until you apply it to yourself. No deductions, but everyone pays the same rate. Sounds fair. “But wait a minute, what do you mean I don’t get credit for my kids, or get to deduct home mortgage interest, property taxes, and charitable contributions? No child credits or personal exemption? Hey, that’s not fair (to me)!”
As soon as Congress gets enough complaints about the loss of deductions and starts selectively allowing them back into the tax computation, we will have the same type of convoluted system we now have. There is a marvelous quote from former Treasury Secretary William Simon that seems to fit here: “The nation should have a tax system that looks like someone designed it on purpose.”
4. Charitable and religious organizations would be financially devastated by eliminating contributions to their organization from the list of deductions. While one would ideally think that charitable giving is truly from the heart, there is no doubt that it is significantly more “heartfelt” when the government chips in 10-37% of “my” gift.
5. Congress can’t give up the power that the tax structure gives them. This is the major reason in my opinion. Virtually no other tool gives the Congress as much, nor as much immediate power, as the tax structure. In that sense the tax code is a very effective political and economic tool (although it is not necessarily used wisely or fairly). What I mean by immediate power is that people react to changes in tax law immediately, sometimes before the laws are even finalized. The Tax Reform Act of 1986 was a marvelous example of people over-pre-reacting (I know it’s not a word, but you get the idea).
Virtually all other government programs have time lags. There is a time lag to even determine that a need exists. There is a time lag to determine what might be done. There is a time lag to pass a law enacting a program. There is a time lag to create and implement the program. There is a time lag for the impact of the program. And there is a time lag to measure the results of the program. This can easily be many years later for the full cycle to run its course.
By contrast, the tax system is far more immediate and, indeed, can be retroactive such as the regular extension of various tax incentives that backdate to the beginning of the tax year. Is there anybody out there who really thinks that Congress would create a tax structure that takes one of its most powerful tools away from itself? C’mon really?!
In my opinion this is nothing more than political rhetoric and will likely be forgotten after the next election. Oh, it’ll come back for the year 2000 elections and again in 2002 and again in 2004 and again in 2024 . . Well you get the idea, I'm sure.
This Rant is presented on behalf of my daughter (Oh from the mouths of babes!)
My 14 year old daughter is officially a tax protester. She worked a small job over the Christmas break. She made about $400. Before they’d issue the check, she had to fill out a W-9. She asked me what that was about. I told her that she’d have to pay taxes on it. The silence was deafening. Although not as deafening as the scream when I told her it would be about 30% of the total. Yep, $120 in taxes. She went ballistic. She said, “I shouldn’t have to pay anything to this government.” Hard for me to disagree.
And we are all reeling from the devastation caused by the mandatory sequestration cuts - NOT! I guess all of that "needed" government spending really wasn't all that needed now was it? Does anybody even know what sequestration was? It’s rumored that a U.S. Senator from Nevada thought it was Nevada’s 150th anniversary and was all for it. No, that’s the sesquicentennial. Go back to sleep Senator.
A client recently asked me to explain the “budget cut” deal made in Congress and if now, with all these cuts, would the budget and deficit be “okay?”
Hmmm! How can I possibly explain all the the Congressional gridlock, doublespeak, and deceit?
Here’s the best I could do:
Imagine a really overweight guy with severe health issues because of it. That’s the national debt. (This analogy already strikes too close to home for me).
Also imagine that you’ve been getting about 10 pounds heavier each and every year for a very long time. That’s the annual deficit.
Next imagine that you’re at a social function (maybe a tea party) where you become fatigued and pass out. When you come to, there are a bunch of people staring at you, worried that you might keel over dead any time. That would be a “default.”
Several people comment that maybe you should do something about it. So does your family, friends, and co-workers. You decide that maybe it finally is time to do something. You spend hours festering, wrestling with yourself, debating on what to do about your weight problem. This is our Congress at work. And you finally come up with a plan. You tell family, friends, co-workers and doctor (that’s all of us) about your plan. And here’s what you decide to do, proudly announcing to everyone:
“Folks, I’ve decided that it’s time to get healthy and go on a diet.
SO NEXT YEAR I’M ONLY GOING TO GAIN 9 POUNDS, INSTEAD OF 10 POUNDS.”
We all know that’s no diet, but apparently it IS a budget cut . . . at least according to Congress. Bull puckey!!! THAT ISN’T A CUT.
And I’m not making any of this up. That’s the truly pathetic thing . . . that I don’t have to make any of this up. Congress does this all by itself. That’s the best that these clowns can come up with.
There isn’t a dime in the way of real cuts in any of this “deal.” The debt is still growing, albeit a bit slower maybe, but still growing to be sure. And it’s not even close to a step in the right direction. It’s only a shorter step in the wrong direction.
Try telling your doctor that your new diet plan is to get fatter, but slower. If I’m not mistaken, you would still get fatter this way. And somehow I don’t think that’s “healthier.”
Now that I have this little task over, it’s time for me to go on my own diet and work out. Now, where did I leave that Snickers bar?
I found it interesting that the Supreme Court decided that Obamacare was in fact a “tax” as opposed to a health care mandate. A few years ago I was bored at a seminar, so I downloaded the bill when it was HR3200. And I read the tax provisions of it. I quickly realized that it was just that . . . a TAX bill. Let me show that in two ways:
1. The IRS is hired thousands of new employees to enforce Obamacare. Some estimates go as high as 16,500 new employees. If it’s not a tax, why is the IRS so involved? Personally I thought it might involve . . . say . . . doctors, nurses, hospitals, but apparently not.
2. Starting in 2014 if you don’t have health insurance, you have to pay a tax . . . excuse me . . . a “shared responsibility payment” to the IRS . It grows significantly over the first few years to a minimum of $2,085 per household of four. And after you pay this penalty guess what you still don’t have? You still don’t have health care!!
(Note: Thankfully the Trump Tax Cuts of 2017 removed this extra extortion.)
Various quirky and fantastic stories, cases and facts that will leave you shaking your head.
* Courts in New York are trying to decide if lap dances are “artistic expression” and therefore exempt from sales tax as a “dramatic or musical arts performance.” Normally this would include theatrical plays and musicals, the ballet, concerts, etc. Some of the issues being considered in the case are: choreography, training, and the cultural anthropology of lap dances(?). I think the club lawyer had the best quote on the matter. “What we’re saying is the state of New York doesn’t get to be a dance critic.” Hmmm, I wonder if they need auditors for this?
* Not really a tax issue, but with a local connection to Las Vegas, the estate of Huguette Clark (Clark County is named for her father, William Andrews Clark) is being disputed in court. She died in May of 2011 at age 104 spending the last 20 years of her life in a hospital in New York. While most of the estate goes to charity, there is a fight over the rest between her long-time nurse of 30 years and a “grand-half-nephew” and two “grand-half-nieces.” I wonder how often they visited her.
* More of your government at work for you - The IRS has over $14,000,000 in unpaid payroll taxes due to it from . . . are you ready . . . 70 federal government agencies!! You’d think the IRS could easily collect these, but think again. Agencies cannot use current year’s funding to pay old years’ bills and the old funding for the delinquent year has all been spent. And the IRS cannot charge them penalties or interest. Nor can the IRS lien or confiscate government property. Instead they “educate” and “encourage” them to pay in full and on time.
* An example of classic political hypocrisy: Nancy Pelosi said that Mitt Romney releasing only two years of tax returns made him unfit for the cabinet, let alone to be President. Harry Reid said that it made him unfit to be a dogcatcher. But apparently refusing to release your tax returns is perfectly fine for a Speaker of the House or Senate Majority Leader. Both Pelosi and Reid (and 516 other members of Congress) refuse to release their tax records. While I rarely agree with Harry Reid, I do find myself concurring that a dogcatcher does reflect a higher ethical standard than the Senate Majority Leader.
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