Friday, June 15, 2012

Senate Wants to Increase IRS Funding

Last Friday I had a meeting with an IRS Appeals officer downtown. Her name is Fran and I like her. I understand that she and I sit on opposite sides of the table, but she does and has done – in my opinion - a fair job balancing the interests of the government and taxpayers.
Fran is retiring this year. Presently there are two people in Cincinnati Appeals. This means that soon there will be one. There are a number of reasons for this, and one is the IRS budget.
I saw this morning that the Senate Appropriations Subcommittee on Financial Services and General Government has marked up an appropriations bill that would increase IRS funding by 6%.
Perhaps I have been at this too long, but I take this as good news. Doing this every day, I have seen the decline of IRS administration. We have talked previously of IRS brain drain and the difficulty of working with their green and inexperienced replacements. We have also pointed out the blizzard of CP notices, which process often doesn’t work well and results in large amounts of wasted taxpayer (and my) time. Trying to settle an issue with ACS sometimes feels like the search for a starting New York Jets quarterback.
IDEA: Don’t issue these notices unless there is enough money to justify the time.
Collections can also do a better job. We have clients who have been laid-off and are now working where they can, perhaps as independent contractors. This creates the problem of making less money but owing more tax. Many times what they do earn is unpredictable. They are uncomfortable agreeing to a fixed monthly payment plan because they do not have reliable cash flow. Collections has a difficult time with a variable payment plan – one fluctuating as one’s income fluctuates. We presently have two of these clients in CDP Appeals.
OBSERVATION: This further increases the workload of Appeals, which will soon be down to one person in Cincinnati.
One of my non-profits received an $8,000 penalty notice for filing their Form 990 untimely. They have reasonable cause, as their bookkeeper became very ill and passed away. The Board did not know what to do, and by the time it came to us the return was late. I feel comfortable that the penalty will be abated. However, does $8,000 – for a small charity – seem reasonable to you?
OBSERVATION: If the penalty is not abated, we will go to Appeals, which again will soon be down to one person in Cincinnati.
On the other hand, I recognize the downside of increased IRS funding. This means they can look at more taxpayers, and I pay taxes too. Hopefully some of it will go to improved staffing and more experienced personnel.
I wish you the best, Fran. Enjoy your retirement.

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