July 18, 2021 - Douglas Myser

IRS methods for tax compliance. The IRS has an awful lot of tools in their arsenal to go after taxpayers. And even though they have been underfunded in the last decade, they made up a portion of that by becoming more efficient at how they worked, and smarter at what they did. And now the IRS is in the process of revamping the oldest computer system in the entire federal government, and they are being infused with $80 billion from President Biden and a Congress, who have finally wised up to the fact that the IRS is the one agency of government that returns an awful lot more than what you put into it. In the age of increasing deficits, especially after Covid, its about time. One of the ways that the IRS will catch up to you is a review of your books and records. Then you might need tax resolution services. Examinations for compliance actions require the IRS to review the books and records of taxpayers. Therefore, the task of the IRS is to take more time to ensure that the audit is accurate and to look for mistakes, or potential fraud that they might uncover as a result of the audit. IRS methods for tax compliance.

Educational and "soft" letters. Soft lettters are letters that alert the taxpayer to a potential mistake, usually caused by inadvertence or a common adding mistake, or a mistake regarding the lines on a tax return. These are the type of mistakes that the IRS is quite familiar with and knows why they happen with the large majority of taxpayers. The soft letter is an opportunity for the taxpayer to correct the mistake on their own, before it becomes a dispute between the parties. If the taxpayer actually disputes it, then they are afforded an opportunity to give a reason, or file an amended return. Otherwise the IRS will take the stance that they are right, and the taxpayer simply doesn't want to pay the tax.

Criminal investigations at the IRS are fairly rare. They involve the willful avoidance of paying federal income tax, or filing of federal income tax returns based on arguments that have no merit. The criminal division of the IRS is a serious matter and should never be handled by a taxpayer alone. Knowing the tax laws, and the consequences of these actions is paramount to staying out of trouble. One way to do that is to go to Tax Court, if and only if you believe that you have a valid argument that would not be deemed to be frivolous by the court.