Update on the current pathetic condition of the IRS
Michael PlaksPro Member
Tax Accountant / Enrolled Agent · Houston, TX · Member since 2014 · 5k+ posts · 6k+ votesUpdate on the current pathetic condition of the IRS
Most Popular Reply
Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes
4yQuote from @Michael Plaks:
Quote from @Greg O'Brien:
@Michael Plaks the craziest part is many don’t realize an actual human, in 2022, sits at a desk to type in numbers from any paper filed returns! Maybe use OCR to start?!
“Today, the digits on every paper return must be manually keystroked into IRS systems by an employee,” she wrote. “In the year 2022, that doesn’t just seem crazy. It is crazy.”
39 Replies
Quote from @Michael Plaks:
Quote from @Victor S.:
got an email from paypal last week. they will start reporting any goods/services transactions over $600/year to IRS. IRS loves nothing more than to squeeze the little guy just a tad more.
This was done by Congress, not the IRS. And you were always supposed to report all your income, with or without 1099s.
I agree that this reporting provision is awful, but not because it's "squeezing the little guy" - it's awful because of the massive confusion and double reporting it will create if not overturned. Let's hope it will get removed.
irs is the entity that is empowered by congress to collect taxes, so is your argument then we need to start hatin' on the .gov? no argument from me there.- 4yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Michael Plaks:
Quote from @Account Closed:
But then, he's just a random guy on the internet, so be smart & pay for time with @Michael Plaks for your particular situation and stay out of trouble.
Mark Kohler is far from "a random guy." He is a well-respected educator in tax and legal matters. I don't always agree with him, but it's not unusual between tax professionals.
For example, I disagree with this very common notion that extensions make it safer from an audit angle. This is based on an odd assumption that the IRS is extremely efficient and picks up their "quota" of audit targets between April and October. I very much doubt giving our government this much credit. Audits start about 2 years after filing. Are you saying they select their targets and then sit on that list for 2 years? Don't think so. I think they do not start picking their audit targets until 1.5-2 years later, well past the extension deadline. At which point extended and non-extended returns are in the same pool.
There're plenty of known audit flags to avoid though. Yes, definitely do not round your numbers. Do not claim unrealistic mileage. Do not claim real estate professional if you do not qualify. Do not claim your $40k rehab as "repairs." And a lot more.i have always extended and file on Oct 15th.. oct 15th is my april 15th.. I have been audited 4 times now in 50 years of filing self employed tax return
One was nasty this latest one with adjustments not to my favor.. .. the others were specific. one was Katrina Go zone write offs very easy to prove I qualified as a RE professional no adjustments . the other was airplane and the section 179 bonus I think they like to pick on Aircraft owner/Pilots who pilot their own planes.. so that one went through log books what was personal what was bizz what was training etc.. no adjustment. Then one other one that was some technical something and again no adjustment.. but all of these in the last 20 years first 30 years nothing.
- Rental Property Investor · Burlington County, NJ · Member since 2019 · 540 posts · 771 votes4y
Quote from @JD Martin:
NO POLITICS. Discuss the policies as you will but leave D/R/Trp/Bid out of it.Thank you, JD! I appreciate the reproach. This said, there are some on this thread who frequently bring in the politics to their forum posts. Perhaps those members need more personal outreach to offer them guidance. Love the policy discussion when all engage professionally.
- 4yBruce WoodruffPro MemberContractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
Quote from @JD Martin:
NO POLITICS. Discuss the policies as you will but leave D/R/Trp/Bid out of it.Well then, I guess I'll move on to another topic. Too bad, cuz I had a great take waiting :-)
I appreciate this forum's attempt to stay non-political.... but some topics need to allow at least a slight mention of politics or there becomes no point in even having the discussion.
Not my Forum though, I get it......
- Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes4y
Quote from @Bruce Woodruff:
Quote from @JD Martin:
NO POLITICS. Discuss the policies as you will but leave D/R/Trp/Bid out of it.Well then, I guess I'll move on to another topic. Too bad, cuz I had a great take waiting :-)
I appreciate this forum's attempt to stay non-political.... but some topics need to allow at least a slight mention of politics or there becomes no point in even having the discussion.
Not my Forum though, I get it......
You can discuss the pros and cons of policies etc but no arrows at persons or demographics is permitted - no bashing of trump or biden or democrats or republicans or conservatives or liberals or blue states or red states etc. No political discussion at all is permitted in the forums, but you are right that some things are difficult to discuss without acknowledging the political capital that contributes to the topic. That said, anything that brings groups into it is gone as it quickly disintegrates into ugliness.
Skyline Properties - Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes4y
Quote from @Jay Hinrichs:
Quote from @Michael Plaks:
Quote from @Account Closed:
But then, he's just a random guy on the internet, so be smart & pay for time with @Michael Plaks for your particular situation and stay out of trouble.
Mark Kohler is far from "a random guy." He is a well-respected educator in tax and legal matters. I don't always agree with him, but it's not unusual between tax professionals.
For example, I disagree with this very common notion that extensions make it safer from an audit angle. This is based on an odd assumption that the IRS is extremely efficient and picks up their "quota" of audit targets between April and October. I very much doubt giving our government this much credit. Audits start about 2 years after filing. Are you saying they select their targets and then sit on that list for 2 years? Don't think so. I think they do not start picking their audit targets until 1.5-2 years later, well past the extension deadline. At which point extended and non-extended returns are in the same pool.
There're plenty of known audit flags to avoid though. Yes, definitely do not round your numbers. Do not claim unrealistic mileage. Do not claim real estate professional if you do not qualify. Do not claim your $40k rehab as "repairs." And a lot more.i have always extended and file on Oct 15th.. oct 15th is my april 15th.. I have been audited 4 times now in 50 years of filing self employed tax return
One was nasty this latest one with adjustments not to my favor.. .. the others were specific. one was Katrina Go zone write offs very easy to prove I qualified as a RE professional no adjustments . the other was airplane and the section 179 bonus I think they like to pick on Aircraft owner/Pilots who pilot their own planes.. so that one went through log books what was personal what was bizz what was training etc.. no adjustment. Then one other one that was some technical something and again no adjustment.. but all of these in the last 20 years first 30 years nothing.
Sorry to hear that. Can you guess what triggered the audit or did they say?
- 4yBonnie LowPro MemberLender · Asheville, NC · Member since 2016 · 1k+ posts · 1k+ votes
Quote from @Michael Plaks:
Quote from @Bruce Woodruff:
Are we surprised? And sending in 87,000 armed agents will help how?
87,000 armed agents is a media hype. They are indeed trying to hire a bunch of new employees, but they are for all kind of jobs, including answering phones and processing.
The IRS has always had a relatively small armed Criminal Investigation Division - the one that brought down Al Capone.
The biggest problem with their hiring plan is lack of resources to properly train these new employees. I expect an influx of poorly trained people unable to do their jobs. It's already a headache to deal with the IRS, and this will likely make it worse.
Sounds like modernizing their systems (or just creating them!) is their other big problem. Shocking....but not really....that in this day and age a federal agency can be so antiquated. - 4yBruce WoodruffPro MemberContractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
Quote from @JD Martin:
Quote from @Bruce Woodruff:
Quote from @JD Martin:
NO POLITICS. Discuss the policies as you will but leave D/R/Trp/Bid out of it.Well then, I guess I'll move on to another topic. Too bad, cuz I had a great take waiting :-)
I appreciate this forum's attempt to stay non-political.... but some topics need to allow at least a slight mention of politics or there becomes no point in even having the discussion.
Not my Forum though, I get it......
You can discuss the pros and cons of policies etc but no arrows at persons or demographics is permitted - no bashing of trump or biden or democrats or republicans or conservatives or liberals or blue states or red states etc. No political discussion at all is permitted in the forums, but you are right that some things are difficult to discuss without acknowledging the political capital that contributes to the topic. That said, anything that brings groups into it is gone as it quickly disintegrates into ugliness.
Probably a smart move......none of my business anyway.....
- Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes4y
Quote from @Michael Plaks:
SOL is very complicated. 6 years for substantial understatement and unlimited for fraud. Plus, it could be extended by agreement during an audit and in other circumstances.Quote from @Account Closed:
Scottsdale Flipper Found Guilty on Three Counts of Tax Evasion
https://www.biggerpockets.com/...
What is interesting is that something in 2020 caught the eye of the IRS to begin an investigation of his 2014, 2015, &/or 2016 which then expanded. I say 2020 because the grand jury would have to convene and the indictment didn't come down until Sept of 2021. Then this last year has been the trial with a conviction in Sept 2022. Seems he could still be liable for 2017-2021.It looks like these were the items the IRS focused on.
At Trial, held Sept 2022, it was determined that he was guilty of Tax EvasionAccording to the report, for the Tax Years 2014, 2015, 2016 he
- Failed to accurately report his income between calendar years 2014 and 2016
- He also received payments in cash from customers that he failed to report
- He reported a loss of $38,000 in 2016 despite, in the same year, purchasing a primary residence
- He was “asking clients to make payments with checks in his name and depositing them into personal bank accounts instead of business accounts.”
Sentencing is scheduled for December 5, 2022
- Real Estate Broker · Salt Lake City & Oklahoma City · Member since 2018 · 3k+ posts · 2k+ votes4y
Quote from @John Clark:
Quote from @Bruce Woodruff:
sending in 87,000 armed agents will help how?
We’re supposed to take such previously disproven drivel seriously?
Like it or not, better enforcement of the law is only fair. Don’t like it? Vote, and have our representatives change the laws.
Semper Fi, MacRegarding enforcement of the law, well said, Mac!
The key thing I hope we as a society can re-think is whether or not tax law should be criminal law. Most of the time it is within reason to expect someone to follow the law. Drive under 35 MPH when the speed limit is 35 MPH. Don't break into someone's home. Don't steal.
However, when that law is thousands of pages long and few, if anybody enforcing it has ever read it or understood it, it becomes concerning that we are one of the few nations that criminally process people who err. Concerning because no reasonable person can fully understand the tax code, nor can the people tasked with enforcing it understand it fully.
It really gives a walking, breathing example of "among the blind, the one-eyed man is king."
- Tax Accountant / Enrolled Agent · Houston, TX · Member since 2014 · 5k+ posts · 6k+ votes4y
True, nobody understands it completely, not even us tax professionals and not even the IRS lawyers. I've dealt with them, I know.
That said, breaking the US tax law is not criminal unless it's intentional. For example, misunderstanding one of those crazy rules can result in an audit and penalties but not in criminal charges. In contrast, asking to get paid in cash to "avoid" taxes and not report it is criminal, as one of the examples above illustrates. Or reporting bogus deductions (albeit the latter is rarely prosecuted as criminal).
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