Overly Optimistic

While I hope Bruce Bartlett is right about a chance for more tax cuts for investors, I don’t see how that is very likely, given the attacks the current tax reduction plan is receiving. When so many of our rulers are calling for a repeal of the miniscule tax cut from last year, there isn’t much chance for an additional tax break for the supposedly evil rich folks who make up the investment community, according to the mainstream media who do their best to influence public opinion.

KMK

Checking Your Own Work

Working pretty much independently, there is nobody to check my work for errors; so I have had to devise various methods to do that on my own. With tax returns, I will generally put the file down for a day & then pick it up later with fresh eyes as if I were reviewing someone else’s work. It’s amazing & a little scary how many small and sometime large errors I catch that way, especially on returns that were done very very late at night.

I have also developed a number of check figures with QuickBooks and Lacerte to make sure everything balances properly and nothing slips through the cracks. When adding up long lists of numbers, I always add from the top down and then again from the bottom up with a good old fashioned paper tape adding machine until I come out with the same total both ways.

KMK

Living Long Enough

This recent announcement that the average life expectancy in this country is 76.9 years shows that we have definitely made great progress in dealing with medical conditions. It also clarifies what a scam the Social Security system is for younger people. According to this, somebody retiring in 2030 would have to live to 110 just to get his own money back from the system. Maybe medical technology will allow people to make it that far; but not likely.

The only fair thing to do would be to make the participation in the Social Security system completely voluntary. However, as I have to repeated ad nauseam, don’t hold your breath waiting for that to happen. If you want to protect your own retirement assets, and avoid flushing more money down the Social Security commode, there are steps that can be done on your own. While there is no one size fits all, I have found that the most effective way for most people, especially the self employed, is to utilize a corporation.

KMK

State Tax Problems

Victor Canto has an interesting look at the revenue shortfalls most State governments are facing and how they are poised to compound their problems by trying to raise tax rates rather than cut back on some of the spending programs that were established when their idiotic financial forecasters predicted an endless stream of increasing tax dollars for all time.

He also points out a very interesting observation. The states without a personal income tax have had either a much smaller decline in revenues and/or a slight increase.

KMK

Tax Heroes In DC

I’m not sure I would go so far as to categorize 202 members of the House of Representatives and 31 Senators as Heroes of the Taxpayer; but everything is relative in DC. The Americans for Tax Reform organization has tallied up how all of the Senators and representatives voted on the 20 most important taxpayer related bills in 2002. Those individuals with a “grade” of 85% or better are in the “heroes” ranks. You can see how your elected rulers stack up in this comparison.

KMK

IRS Differences

One of the many frustrating aspects to dealing with the IRS is how different things are handled between different areas of the country. For a national tax system, there is very little uniformity & consistency around the country. That wouldn’t be a problem if you were always dealing with the same IRS offices. However, they have split their tasks up in such ways that contacting several different offices is just normal procedure nowadays.

For example, filing tax returns has long been broken up by geography. While I do work with clients in practically every state, most of them are located in the closest three states, each of which files with a different IRS Service Center. Arkansans file with Memphis, TN. Oklahomans file with Austin, TX. And Missouri residents file with Kansas City, MO.

Back about a month ago, I filed over 80 extension requests (Form 2688) for clients’ 2001 1040s. As I always do, I separated them by Service Center and put the ones going to the same Service Centers in the same envelopes, which seemed like the common sense thing to do. Just yesterday, many of the approved extension forms came back to me via snail mail. A large envelope from the Kansas City Service Center contained ten approved 2688s. However, there were 54 separate #10 envelopes from the Memphis Service Center, each one containing a single 2688. As Sherry said when she saw that, “Our tax dollars at work.” I know the Postal Service needs all the money it can get, but this is ridiculous. We obviously know which Service Center has more common sense.

I don’t want to be completely negative about our friends at IRS. I do want to express my appreciation for the unusually quick turn around of the 2688 forms this year. Normally, they all come back marked as Approved some time around November. This makes attaching them to the 1040s that were due on October 15 a little difficult; so I normally just attach my photo-copy of the form that was mailed in. While some of the returns for which 2688s were received yesterday have already been completed, most of them haven’t.

Appeals

If an IRS audit doesn’t go well, that isn’t the end of the line. IRS has long had an Appellate Branch that is supposed to allow a second, and impartial look at the facts of the case. While the Appeals Officer is technically an employee of the IRS, s/he is supposed to look at the facts objectively and give both sides equal consideration. Here is where I have seen a huge discrepancy between jurisdictions.

Before moving to the Ozarks in 1993, almost all of my work with IRS Appeals Officers was with those stationed in San Francisco. I have to say that those people understood the mindset they needed to review cases. I was able to present my clients’ side of the case and in the 15+ years of handling cases there, I estimate I won about 98% of them at the Appeals level. Most of the time this was simply because the auditors were morons and the Appeals Officers knew it.

Since relocating to the Ozarks, and having to deal with Appeals Officers in Little Rock and Oklahoma City, there couldn’t be a bigger difference in attitude. Rather than start from an objective open minded “Show Me” attitude, these Appeals Officers literally rubber stamp the opinions of the auditors, even those that are blatantly idiotic and wrong. Battling this built-in bias, I have only been able to win about half of the cases I have worked on with Appeals since moving here. While this may sound like I’m just being a sore loser, that isn’t the case at all. It is a very real difference in attitude and approach that has severely hurt my faith in the entire Appeals system within IRS.

Ironically, I found that I’m not the only one upset with the Oklahoma City Appeals Office. I was speaking with an IRS Auditor out of the Fayetteville, AR office a little while ago and I was explaining to him how frustrated I was getting with the Appeals Officers. To my surprise, he said that he & his fellow Fayetteville auditors were also unhappy with the way they are treated by the OK City Appeals Officers after the merger a few years ago of control over Arkansas into the Oklahoma City office, in one of the IRS’s many reorganizations (Titanic deck chairs?). He said that all of the policies & practices that had controlled the Arkansas offices were tossed out and replaced by those developed by Oklahoma. This is just like the situation in corporate mergers, when the dominating company crams its policies down the throats of the vanquished employees. However, it also illustrates how varied the policies for a national tax agency are.

I have recently spoken with other tax practitioners around the country who have noticed similar variations between Appeals attitudes in different IRS offices, often within the same state. We are trying our best to work cooperatively with IRS; but this sure makes it difficult when rules and procedures are interpreted so differently by so many different IRS offices.

KMK