Revenooer Rants: IRS lacking with correspondence audits

Jeff Quinn

The Treasury Inspector General for Tax Administration recently conducted an audit of IRS procedures relative to “correspondence audits.”

You know those audits — typically you receive a letter from IRS asserting that they have detected some income omission from your return (based on a 1099 or other info received from a third party) and therefore you owe tax — send the money now!

In our experience, these correspondence audits are presumptuous and/or self-serving, to say the least, often erroneous in their assumptions, but to some folk, scary nonetheless, who immediately pay the bill just to get the blokes off their back.

Any way, IRS stats show that in Fiscal Years 2008 through 2012, IRS conducted about 5.7 million correspondence audits and recommended approximately $40.4 billion in additional taxes! That’s “billion.”

But what rankled TIGTA was their finding, after looking at a sample of correspondence cases closed in 2010 and 2011, and in which each of the taxpayers involved agreed that they actually did understate their tax liabilities by at least $4,000, IRS typically did not look at prior or subsequent years’ returns filed by these offenders, resulting in loss of something like $14 million when projected to the population of the audits tested.

So the next time you are scrutinized by the Revenooers via mail, get ready to have adjoining years’ returns looked at as well — IRS agrees with TIGTA that procedures need “improvement” in this area.

Speaking of procedures (often emanating from government-imposed regulations), we heard this week from CBS News that since the enactment of the now well known “Affordable Care Act,” aka “Obamacare,” the administration has published 109 final regulations governing how the law will be implemented — a modest 10,516 pages, or more than eight times as many pages as there are in the Gutenberg Bible! Blame the Department of Health and Human Services, Department of Labor, IRS, Office of Personnel Management, FDA, Department of Defense, the Centers for Disease Control and Prevention, the Social Security Administration, and Department of Veterans Affairs for this morass of rules.

Jeff Quinn can be reached at 775-831-7288.

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