The Internal Revenue Service’s (IRS) website at https://www.irs.gov has a staggering 118,000 pages. And you’d think with that much information available for public consumption, keeping things hidden would be a virtual impossibility. After all, we’re talking about the IRS here, not the CIA (note: you did not read that…or this).
However, even after all of these years — the IRS was founded all the way back in 1862 — there are still a few things that the IRS keeps very, very close to the vest. That is, until now! Behold, three things that the IRS doesn’t want you to know, but that you need and deserve to discover:
- IRS agents make mistakes more often than you think.
If we’re talking about the number of times you make par on the golf course, or the discount you get off the (hilarious) Manufacturer’s Suggested Retail Price on your next car, then 30 percent is a good number. Heck, it may be a great number. But we aren’t talking about golfing and driving. We’re talking about the number of IRS agents who dole out the wrong information.
Yes, believe it or not, but about 30 percent of the time IRS agents know less about tax law than you do. What’s more, unlike folks like you who wisely “know what you don’t know,” IRS agents assume that they’re right. Except about 1 out of ever 3 times, they aren’t. Keep this in mind when dealing with the IRS. Don’t assume that they’re automatically wrong, but don’t take everything they say or write as sacrosanct, either.
- The IRS really doesn’t want to seize your assets.
Though it’s the threat that keeps some taxpayers awake at night, the truth is that the IRS really doesn’t want to seize your assets. They aren’t in the repo and liquidation business. In most cases, the IRS would much prefer — even if they don’t come out and reveal it — for you to make a valid Offer-in-Compromise (OIC), which is a settlement proposal that (obviously) is for less than you owe.
However, as pointed out by Jeffrey B. Kahn, a tax lawyer in Orange County who is certified to go head-to-head against the IRS in U.S. Federal Tax Court, many OIC petitions are returned or rejected because they’re incomplete, or fail to meet deadlines. What’s more, a surprising number of people propose to settle for more than the IRS would have likely been willing to accept.
- The IRS would rather you didn’t hire a tax attorney.
If you’re flagged for an audit, while the IRS would never come out and advise you against hiring a tax attorney (at least not on the record!), the fact is that they’re really rather prefer that you didn’t.
The reason for this is simple and practical: communications and work product with a tax attorney are protected by attorney-client privilege. Communications and work product with accountants, bookkeepers, next-door-neighbor financial wizards and the like aren’t. If the situation moves forward into a full-blown audit or a criminal investigation, then it’s virtually certain that some or all of these folks will be at least questioned, and probably subpoenaed. In other words, they essentially become the IRS’s de facto data gathering team (which you paid for).
With this being said, don’t fall for the old cop game that goes “if you hire an attorney, then you must be guilty, because people who haven’t done anything wrong don’t need attorneys.” The amount of regret that this tactic has generated is unfathomable. It wasn’t true in the past, it isn’t true now, and it’ll never be true in the future.
People hire tax attorneys because they don’t know — and will never know — the ins and outs of tax law, which is arguably the most incomprehensible and byzantine body of law the country; and possibly, in existence. If you doubt this, pour yourself an extra large coffee and take a gander at Title 26 of the United States Code (don’t say we didn’t warn you!).
The Bottom Line
When dealing with the IRS, knowledge is power — provided that you’re getting the full story, and not just bits here and pieces there. The above insights give you a sense of what’s going on, and possibly what’s in store.