There are several myths of why the IRS files tax liens. And this article addresses some of the more common reasons. And once you understand that reasons, you will learn how to stop the IRS from filing a tax lien.

What is a tax lien?

A Federal Tax lien is notice to the world that you owe the IRS money. The liens are published in town/city land records or in the country courthouse, depending on where you live. Once you have a Notice of Federal Tax Lien filed against you, you will likely get all sorts of junk mail from”tax resolution” promoters from all around the country. Many of these companies are out of business or have filed bankruptcy. But because so many people are unsure and scared, new one pops up every day. So very often, people learn that they have a tax lien filed against them by the volume of junk mail they received.

But why did the IRS didn’t tell me there was a tax lien?

They actually did. Or attempted to. The IRS will mail a Notice of Intent to Levy, A Form CP504. This letter looks like any other letter the IRS sends and comes regular mail and certified mail. You probably didn’t open the letter understand it, or you never were around to sign for it, or the IRS sent it to the wrong address. After that 30 days expires, the IRS will be able to file a tax lien against you at will.

Note: In rare exceptions, the IRS is allowed to file what is known as a jeopardy tax lien — these normal channels do not apply and the IRS is allowed to file a lien immediately as the IRS did in 2009 against the Reverend Al Sharpton.

Now how the does IRS file a tax lien? They IRS will simultaneously mails the lien to your town/city land records or courthouse and then also send you a copy in the mail certified to you. So for many people, and in most cases, the tax lien is filed before most people find out about it.

The damage a tax lien does.

Tax liens are picked up by all three credit reporting agencies. It is our experience that your credit score will drop by around 100 points.  Tax liens will encumber a property — but only if you have an equity interest in it (ex.: say your spouse owns a the house you live in. And your spouse does not have a tax problem.  The lien will be addressed to you at your home. But it will not affect your spouse’s title to the property)

So…How to Stop the IRS from filing a Tax Lien

Obviously paying your tax debt in full is one way to avoid to stop the IRS from filing a tax lien against you. But you’re probably reading this because you don’t quite have that ability. So what other options do you have?

Your Seven Tax Lien Options: Free report

This is why we developed out exclusive report of the Seven things you can do to solve a Federal Tax lien problem. You already know one of the solutions — pay you taxes in full. But even if you did this…did you know that the existence of this lien will appear on your credit rating. Di you know that there is one trick you can do for free that allows you to totally expunge this lien from your credit profile?

Click here to learn more about our free lien report where you can learn how to stop the IRS from filing a tax lien.

By David G. Parent, Esq.

In the real world people pay little attention to records, maybe keeps receipts in a box and dumps the mess on to a tax preparer about two days before the return is due. People then check to see how much of a refund is coming and file or misplace the return somewhere where it cannot be easily located. This becomes a problem when a hastily prepared return is selected by the IRS for and audit. But still many are surprised and ask themselves….how do I owe taxes?

 You see, in the ideal world, people would

• keep good financial records
• tax preparers  use the records to prepare accurate returns.
• tax payer uses the records and returns in planning and monitoring his financial course, sailing smoothly to a happy financial future.

 But of course, this is not what happens. (Hence the need for taxpayers to get back taxes help)

Why are people so careless? Are they inherently evil?

No! Like many of us people are too busy going to work to earn the money, taking care of their homes, families and other obligations to spend much time looking at their finances. But, by spending a modest amount of time reviewing the return they can obtain a good idea of where they are heading financially and can make some sound decisions. So, dig out your 1040 return and we are  almost ready to begin. 

But first. A WARNING. This article may get a little complicated. (we are talking about taxes after all). So if you need owe back taxes sign up for our easy-to-understand taxpayer awareness guide in the box below.

Form 1040 is designed for almost all taxpayers. Thus it has to accommodate all manner of income, and adjustments. For most people Wages (Line 7) and Taxable Interest (Line 8a) are the only lines used. Older folks may have pension and IRA income Lines 15a and 16a) and Social Security. People in business will have Business income (Line 12) and all of the other Lines are used to report particular types of income.

Luckily there is no surtax for facial hair.

Why do we have so many types? After all, isn’t income income?

No. Certain types of income are taxes totally differently. A good part of the answer lies in public policy. The people, through its government wishes to encourage certain types of activity such as investing and savings. Thus only Wage income and Business income are subject to Payroll taxes (Social Security and Medicare.) Note that unemployment compensation is taxed only when it exceeds $2,400 per recipient.

What is the value of listing all of the different types of income that you received?

First, you now have an accounting. You at least know from whence the money came.

Second, it helps you to plan. For example if you are running a part time business but are also burdened with payroll taxes, might you be better off spending that time and capital on investments? Is tax exempt interest a better deal than taxable interest? Most importantly, what would this form look like if you were retired? You would have Social Security on Line 20a but what would take the place of Wage income? Maybe you want to ponder that question before continuing.

Total income is total income so let’s pay the tax on it. Well, not so fast.

Again, the people enact public policy through the tax code and so we have adjustments before we can answer the age-old question “how do I owe taxes?”

A self employed person has to pay the entire amount of socials Security and Medicare. Otherwise he would be getting all of the benefit while not paying all of the costs. But, we also want to encourage people to start and operate businesses. The answer is to allow the taxpayer to deduct half of the cost of his self employment tax on Line 27. We want people to save so there is a deduction for IRS contributions. Health care gets a boost with a health savings account deduction on Line 25. The beauty of having these deductions on these lines is to benefit a person who might otherwise not have deductible expenses that he can list on Schedule A.

We step away from the 1040 while we look at Schedule A, itemized deductions. This page is pure public policy. The government wants you to pay the money needed to take care of yourself. It partially helps you to do so by allowing medical and dental expenses but limits the deduction to the excess of 7.5 percent of your adjusted gross income. Essentially it wants to help but also wants to temper that help by considering your ability to pay.

The government also recognizes that depending on our income and where we live we may pay a substantial amount of state and local taxes. It seeks to maintain a sense of fairness by allowing those taxes as deductions. These lines also give you a chance to ask am I getting value for the state and local income taxes that I pay? If I am retired, is it worthwhile living in a high tax city and state? Could I run a business more profitably in another locality than where I am? Do I now have a good explanation as to why I enjoy a good income but seem to have little money left over?

Perhaps the most sacred line in all of the IRS forms is Line 10 Home mortgage interest and points. It is the starting point and sticking point of any thought of tax reform.

Originally included as a means of encouraging home ownership, it has now become an article of faith for the National Association of Realtors, the banking industry and most home owners. It is also pure bunkum. In order to claim the deduction, you have to pay the interest out of your income. But, what is the tax saving? A taxpayer with a marginal tax rate of 25 percent and an average tax rate of 18 percent would save between $2,500 and $1,800 in taxes on an interest payment of $10,000. But that figure is somewhat illusory because the banks, knowing full well that you are taking the deduction set their interest rates upward to compensate.

How can reviewing this figure help you? For planning purposes you know that the deduction in future years will be less because as you amortize the mortgage your decrease the amount of interest expense. You also know that your net worth will go up at a higher rate as your mortgage balance decreases. In planning for retirement you can compute what your income (that frightening figure on the income section) would have to be if you owned your property free and clear. Perhaps that figure will not frighten as much. Also, “unlocking the equity in your home” by refinancing the mortgage might not be such a good idea. You would have to make out a very strong case for the additional interest that you would be paying. “It’s tax deductible” doesn’t do it.

Gifts to charity (Line 16) is a nice touch. Again depending if you use your marginal or average tax rate you can determine the true cost of your deductions. Again you have to incur the expense to get the deduction, but if you are inclined to be generous, then a little bit of assistance is the Government’s way of thanking you. You are probably aware that eliminating this deduction as part of tax reform is also a non-starter.

Job expenses, etc. are set out separately because the government is not so generous. It will allow the expenses but also limit them only to the amount that they exceed 2 percent of your adjusted gross income.

Schedule C applies only to those who operate a business and will be the subject of another discussion. But, if you are planning start a business it is a useful tool. You can experiment with different revenues and expenses and see what you could reasonably expect to earn if things go according to plan.

Returning back to the second page of the return you can see how your adjusted gross income is further adjusted into taxable income (Line 43) and tax (Line 46)

But again public policy raises its head with alternative minimum tax and tax credits for retirement savings contributions and child tax credit. Please note that tax credits differ from deductions in that credits reduce the amount of your tax whereas deductions reduce the amount of your taxable income.

But again the government is not quite done because it has other taxes to charge. Note Self employment tax (Line 57) This expense is about 15 percent of the net profit from a business.

Now you can see why most businessmen are conservative and hate government. Assume that the business was successful and that the Taxpayer’s marginal tax rate is 25 percent. When he adds in the 15 percent in self-employment tax his rate goes to 40 percent. You can see why the IRS also has a self employed/small business collection unit and why so many small businesses operate under the table.

Payments get a little bit complicated but soon end at the point that you do pay attention to which is the balance due or the amount of refund.

 If you have used your tax return in following the discussion, you have probably raised more questions in your mind than we have attempted to answer. We hope that reviewing your form has induced you to think about the future. We are sure that we have convinced you that income tax and tax planning are complicated subjects. Finally we hope that if we have raised some serious issues and concerns that you will give us a call so that we can help you find a solution.

FBAR Help

On April 20, 2012, in a huge win for the government, a jury found Attorney Rick Matsa of Ohio guilty of, inter alia, one count of willfully failing to file a Report of Foreign Bank and Financial Accounts (FBAR). Attorney Matsa faces a potential sentence of 108 years imprisonment and a fine of up to $3.25 million.In addition, wife mother Loula Matsa faces a potential sentence of five years imprisonment, a fine of $250,000 Read this article to learn how to get FBAR help to avoid this tragedy happening to you.

If you’re a U.S. citizen, or if you have permanent residence status (a ‘green card’) or visa, you must declare any income earned in the U.S. or abroad on your annual IRS tax filing. This includes investment income, bank account interest, and any other asset that generates income. If you you’ve failed to report income and filing an FBAR , you can be prosecuted for federal tax evasion – a felony – which as Attorney Matsa and his wife mother found out, is a felony which carries huge jail time and staggering fines.

The IRS’s focus and attention is all about offshore accounts. From criminal to audits, the IRS is training and hiring huge amounts of new staff to crack down on people they feel are breaking the law.It has never been more important to get FBAR help than it is now.

Offshore Evasion? Resistance is Futile

 

Here are some meaningful quotes from the Department of Justice with regards to this conviction:

“Today’s verdict shows that attorneys and other professionals who violate the tax laws or who attempt to obstruct justice will be held accountable for their actions,” said Assistant Attorney General for the Tax Division Kathryn Keneally. “Those who illegally attempt to hide their income and assets from the IRS through fraudulent trusts or offshore bank accounts will be prosecuted and punished.”

“Those Americans who file accurate, honest and timely tax returns can be assured that the government will hold accountable those who don’t,” said Rick A. Raven, Acting Chief, IRS Criminal Investigation.”

*   *   *

We want our clients to make the best  decision when they are presented with uncomfortable facts in this highly-aggressive FBAR enforcement climate. We’ve helped clients understand how to weigh advantages of the 2012 Offshore Voluntary Disclosure Initiative (OVDI) and calculate risks when confronted with other choices such as “quiet” or “soft” disclosure and expatriation, along with the risk of doing nothing.

Which is why we created the 2012 OVDI Taxpayer’s Awareness guide. You can sign up for it by putting your name (does not need to be your real name) and email below. Your request for this information is 100% protected by the Attorney-Client privilege.  Watch this video to find out more.

Get FBAR Help Now.

Sign up for the 2012 OVDI Taxpayer’s Awareness Guide

The firm’s involvement is part of a broader effort by the American Society of Tax Problem Solvers (ASTPS) to help RCVs around the country. “As soon as I heard about this program, I wanted our law firm to be a part of it,” said Parent.

For the firm, the issue is personal. Partner Capt.(Ret.) David G. Parent, Esq. knows what combat duty entails, serving in the first Gulf war in the 142nd Medical Clearing Company.

“I was only in Saudi Arabia for 4 months. I was probably safer in our remote desert camp than I pretty much anywhere else in the world,” said David Parent. “It’s difficult to compare my service with that of the folks coming home from Afghanistan and Iraq; but, I do know what it is like to be separately from your family.”

“My dad’s service with the Army medics in the 142nd is why I chose IRSmedic for our website url. When I was seven or eight, I asked my dad what he did in the National Guard and he responded, ‘We’re medics.’ I asked further what’s a medic? He said “a medic takes someone in trouble and gets them the h—  out of there quickly and safely,” remarked Anthony Parent. “So in 2006, when trying to come up with a name, we thought ‘IRSmedic’ fits perfectly in what we do.”

“Except bullets, the trouble we pull people out from is the tax man,” added David Parent.

Parent & Parent LLP services clients worldwide but is looking to help Connecticut RCV’s first. “Connecticut has a high cost of living and a very poor economic climate — and high taxes.” So those RCV living in Connecticut who need pro bono legal representation are encouraged to go to IRSmedic.com. Applicants must be RCVs with documentation of their deployment location and dates.

Those RCVs not in Connecticut are encouraged to visit ASTPS.org to find tax help in their area.

Wallingford, Conn. – April 22, 2012 – Anthony Parent, founder of IRS Medic, has joined a select group of America’s leading attorneys to co-write the forthcoming book titled, “Protect and Defend: Proven Strategies from America’s Leading Attorneys to help you Protect and Defend Your Business, Family and Wealth.” Nick Nanton, Esq. along with business partner, JW Dicks, Esq., recently signed a publishing deal with each of these authors to contribute their expertise to the book, which will be released under their CelebrityPress™ label.

Anthony Parent is the founder of IRSMedic, and managing partner of Parent & Parent LLP, a boutique tax law firm dedicated to working with those with IRS issues and disputes. He is routinely quoted on tax issues in the local and national media, mostly recently in the Wall Street Journal, Smartmoney.com, Wall Street radio, Fox CT and the Hartford Business Journal. He has developed streamlined tax solving systems to ensure the optimum result each and every time.

The forthcoming book, Protect and Defend: Proven Strategies from America’s Leading Attorneys to help you Protect and Defend Your Business, Family and Wealth, will feature strategies from some of America’s leading legal minds to help businesses and families navigate the often cumbersome nature of the today’s legal system.  Some of the topics covered include how to keep your house from foreclosure, offering compromise with the IRS, veteran’s benefits, alcohol related cases, injury settlements, health insurance, asset protection for the middle class, and much more. The book is tentatively scheduled to be available in the summer of 2012.

To learn more about IRS Medic, please visit http://www.IRSMedic.com

More about Anthony Parent:

Anthony works primarily on cases involving difficult tax problems. His day-to-day practice includes:

• Audit representation
• Bankruptcy consultation and filings
• Tax refund claims
• Comprehensive solutions for those who cannot pay their back taxes
• Offshore Bank Account disclosure 

Anthony’s academic credentials include:

• J.D. – Quinnipiac University School of Law

• Internship – Marty Zeldis, Esq. of the Connecticut Public Defenders Appellate Division
• Awarded CATIC (Connecticut Association of Title Insurance Co.) award for Real

Estate Law academic achievement

• B.S., Finance – Southern Connecticut State University

• Managing Editor of the Southern News
• Legislative Intern for James A. Amann, Insurance Committee co-chair

His professional qualifications include:

• Admitted to US Tax Court
• Admitted in Vermont
• Admitted in Connecticut
• Active in:

• American Society of Tax Problem Solvers
• Conn Society of CPAs
• New Haven Bar Association
• Connecticut Bar Association

 About Celebrity Press™:

Celebrity Press™ is a leading business, health and wellness book publisher that publishes books from thought leaders around the world. Celebrity Press™ has published books alongside Jack Canfield, Brian Tracy, Dan Kennedy, Dr. Ivan Misner, Robert Allen and many of the biggest experts across diverse fields. CelebrityPress™ has helped launch over 500 best-selling authors to date. 

If you’d like to learn more about Celebrity Press™ or to see if we’re a good fit for your book project, please visit http://www.celebritypresspublishing.com/contact-us

Wallingford, Conn. – April 20, 2012 – Anthony Parent, founder of IRS Medic, was recently featured in USA Today with other leading tax professionals from around the world as one of “America’s PremiereTaxPros™.” A feature story about Anthony Parent was also recently seen on the online home pages of major publications such as Yahoo! Finance, CNBC, The Boston Globe, The Miami Herald, Morningstar, Los Angeles Daily News and MarketWatch, among many others.

In the USA Today feature, each tax professional was asked for their top tax tips.  Anthony Parent replied, “Being at the mercy of the IRS can be one of the most painful experiences of your entire life. Never underestimate the IRS’ power to turn your world upside down. Always file your tax returns, even if you owe money, especially if you owe money. And understand only you can take away your constitutional right to have a lawyer represent you, never the IRS.”  

Anthony Parent is the founder of IRSMedic, and managing partner of Parent & Parent LLP, a boutique tax law firm dedicated to working with those with  IRS issues and disputes. He is routinely quoted on tax issues in the local and national media, mostly recently in the Wall Street Journal, Smartmoney.com, Wall Street radio, Fox CT and the Hartford Business Journal. He has developed streamlined tax solving systems to ensure the optimum result each and every time.

To read the full feature story about Anthony Parent, as seen on CNBC, Morningstar, CBS MoneyWatch, The Houston Chronicle and others, please visit http://www.irsmedic.com/2011/12/07/irs-medic-breaking-tradition/

To learn more about IRS Medic, please visit http://www.IRSMedic.com

More about Anthony Parent:

Anthony works primarily on cases involving difficult tax problems. His day-to-day practice includes 

• Audit representation
• Bankruptcy consultation and filings
• Tax refund claims
• Comprehensive solutions for those who cannot pay their back taxes
• Offshore Bank Account disclosure

Anthony’s academic credentials include:

• J.D. – Quinnipiac University School of Law

• Internship – Marty Zeldis, Esq. of the Connecticut Public Defenders Appellate Division
• Awarded CATIC (Connecticut Association of Title Insurance Co.) award for Real

Estate Law academic achievement

• B.S., Finance – Southern Connecticut State University

• Managing Editor of the Southern News
• Legislative Intern for James A. Amann, Insurance Committee co-chair

His professional qualifications include:

• Admitted to US Tax Court
• Admitted in Vermont
• Admitted in Connecticut
• Active in:

• American Society of Tax Problem Solvers
• Conn Society of CPAs
• New Haven Bar Association
• Connecticut Bar Association

The new IRS Form 8938 does not replace or otherwise affect a taxpayer’s obligation to file Form TD F 90-22.1 (Report of Foreign Bank and Financial Accounts), aka, FBAR. Individuals must file each form for which they meet the relevant reporting threshold. Adding to the confusion is that the Form 8938 and the FBAR have totally different requirements, luckily there is this FBAR v. Form 8938 instructions for reference.

NOTE: For those filing FBARs for the first time when there was a previous obligation, be sure to visit our Voluntary Disclosure Page for important information. 

Again, for those filing Form 8938 and have not filed an FBAR form yet (but under an obligation to do so), or considering making a so-called “soft” disclosure, be sure to visit our Voluntary Disclosure page to learn how to come into proper compliance with the IRS.

If you are audited by IRS, there are just not a chance of crippling tax bill, but there is also an chance that your civil auditor will “refer” you to the IRS Criminal Investigation division. Read this important article to learn our Tax Audit Checklist: 9 Essential Facts.

1. Know your rights. Before your audit, read IRS Publication 1, “Your Rights as a Taxpayer.”

2. Be honest. If you are audited by IRS, lying to the IRS can trigger heavy fines and even jail time. But do not divulge too much information either as that can open an investigation further.

3. Get help. You can be represented by an tax attorney who has experience in IRS audits and processes, a CPA or an enrolled agent.. The IRS h but beware the IRS has a 90% conviction rate for those charged with a tax crime. If you think that you may be at risk for criminal investigation, be sure to speak to a tax attorney and no one else before going any further — the IRS can subpoena other tax professionals in criminal matters and force them to tell the IRS what you told them.  Also, when speaking with an attorney you must be 100% honest about all facts so your attorney is not surprised later. Bad facts can be dealt with, surprises can not.
 
4. Be  organized. You’ll have more credibility if you can quickly answer questions and produce what’s asked of you. If you need time to get your act together, request a postponement.

5. Stick to the topic. Whether you’re answering a question or responding to a request for records, when audited by IRS, only give the IRS what it requests. Do not attempt to “brown nose” or curry favor with the auditor.

6. Take notes. Keep track of the examiner’s questions and your answers. But it is our advice that even though you have the right to, that you do not tape record  when your are audited by IRS.

7. Be courteous. Don’t be hostile. The auditor is not the last word. But if you are branded as “difficult,” you may hurt your chances upon supervisor or appellate review .

8. Consider an appeal. If you disagree with the auditor’s findings, you might first try talking to a supervisor. You also can send a protest letter to the IRS Office of Appeals within 30 days of receiving the report. This appeal will be reviewed by an appeals officer who is likely a top-notch professional. It is our experience that the IRS Office of Appeals has some of the best and brightest in the IRS.

9. Consider tax court, if you do not agree with the IRS Office of Appeals findings. And the number one factor in whether or not your tax court case  succeeds or fails, is how well your developed your case administratively. If you follow the above steps precisely and calmly, your tax court petition will have the most favorable chance of prevailing.

If you are audited by IRS, follow this checklist for the best outcome. And in the future, you may want to review the audit red flags to avoid., to see if you can cut down on the chances of being audited again. 

Did you know that the IRS audited almost 1.6 million individual taxpayers in 2010?  That’s an 11% increase over 2009 and more than double the rate of 2002.  If you are audited, the IRS will attempt to open up 3 years for examination. So if you the IRS finds unreported income or unallowed expenses, the tax bill can be staggering.  And worse still — an auditor may refer you the IRS Criminal Investigation Division.  In 2010, the IRS recommended 1,511 cases for prosecution and got a conviction rate of 90% with an average sentence of 27 months. Fortunately, there are steps you can take to avoid  audit red flags.

To help you avoid such entanglements, these are 9 Audit red flags to avoid.

1. High incomes. According to IRS 2010 enforcement results, your chance of being audited triples once your income crosses $200,000. Obviously, high income is something you may not want to avoid, so be extra vigilant what paying attention to these other audit red flags.

2.Unreported offshore accounts. If you have previously unreported foreign accounts, the IRS has ways of tracking you down. The penalties if caught can be staggering. Go to our Offshore Bank account page to learn more.

3. Large itemized deductions.  We advise our clients to deduct every penny you’re entitled to — but realize that if your itemized tax deductions are bigger than most people’s at your same income level, your return may get flagged. Just be prepared to properly document and explain such deduction. If a deduction seems questionable to you, be sure you have at least one professional opinion before claiming it. 

4. Home offices. You can only take a home office deduction if you regularly and exclusively use part of your home as your principal place of business. If your office doubles as the kids’ playroom, forget about it. For details, see IRS Publication 587.

5. Missing investment income. You know those 1099 forms that financial services companies send you to summarize your interest and dividends for the year? The IRS also gets a copy. Make sure your return matches them.

6. Incomplete returns. If your return is missing a few pieces, the IRS may wonder what else you forgot. Tax preparation software either self-prepared or professionally prepared can help you avoid clerical errors that raise auditors’ eyebrows.  Do not do your return by hand unless you want a clerical error to be the cause of your audit.

7. Business losses. Make sure your expenses are legitimate, and that your business isn’t just a thinly disguised hobby. You must treat your business like a business and not a hobby. Here are two examples. Legitimate deductions. Non-legitimate deductions.

8. Charitable deductions. You’ll need a canceled check or dated receipt for any cash contributions, and contributions of $250 or more require a written acknowledgement from the charity. If you made a non-cash contribution valued at more than $5,000, you’ll need an expert appraisal to back up your claim. Also, and we see this many times, tax “professionals” will artificially inflate charitable contributions. Do not think they will provide a defense to fraud if you take their advice when you know it is not true.

9. Medical expenses. You only can deduct these costs to the extent they’re greater than 7.5% of your adjusted gross income, and it’s important to have detailed records. No estimates.  This rule can be very helpful. Plus, if someone is a depending, those expenses can be written off as well.Here’s a true story.  One client came to us and owed the IRS $40,000.00 I asked him waht happened? He said he stopped making his tax payments because he had to pay medical expenses for his sick daughter. We asked him to gather up all his expenses. We  amended his returns and he found out he owed the IRS nothing! And even better news…his daughter got better.

Now if you do find yourself audited by the IRS,  to get through the process as smoothly as possible, follow this guide —  IRS Audits: 9 things you must know.

Videoconferencing to be new tax audit format?

As it is right now, there are two types of tax audit format. One format is the face-to-face “field audit.” The second is the more common, correspondence, or “corr” audit. The IRS prefers the corr audit because the costs are low. But for taxpayers, ‘”corr audits” are awful Resulting in very high default audits. The reason is that the process is extremely user unfriendly (read more about “corr audits” here). Yesterday, however, the IRS taxpayer advocate announced the possibility of a new tax audit format: the video audit.

In the future, you will get applause for being so honest.

The Problem with “Corr” Audits

IRS national Taxpayer Advocate Nina Olson lays out the problems with “corr” audits:

“While the IRS instituted correspondence or “corr” exams in an effort to conserve its resources and minimize taxpayer burden, IRS customer satisfaction surveys and Taxpayer Advocate Service (TAS) research studies have consistently shown that for the majority of taxpayers subject to this method of auditing – many of whom are low income and unrepresented – corr exams are an unnavigable labyrinth. In fact, in a statistically representative survey of Earned Income Tax Credit (EITC) taxpayers who had been audited, over 70% said they would prefer some other audit method than correspondence.”

New Video Service:

The new proposal is to create kiosks at IRS service centers, and potentially other governmental buildings such as post offices and libraries with video conference and HD cameras. No doubt, this a  boon to taxpayers. They will be able to benefit from the many positive attributes of non-verbal communication. Yet, this is not why I would see the program as the success that I think it will be.

The true benefit to the program?

As opposed to the “corr audit,” the new video audits, if they occur, have the tremendous benefit of having ONE AUDITOR RESPONSIBLE for the case. This is a significant improvement over the “corr” audit process. This would be a bigger help than just implementing video. Taxpayers will have one person they are dealing with. This will result in a incredible reduction in stress and wasted time — regardless of the video.

Video tax audit format is still a terrific idea, and my modest proposal.

But if I were to be as bold to make one additional suggestion. A lot of government buildings are rather inhospitable places. Limited parking, limited access, and then of course the joy of body scans. For unrepresented taxpayers, many of them do have the technology to video chat. And for professionals, it is far more effective for us if we could conduct video conference from our offices — we don”t have top ass along our traveling expenses to our clients. So why not allow taxpayers and representatives to skype? It is no less secure than a phone. Additionally, with skype,  a taxpayer could be in Hong Kong, a tax attorney could be in Connecticut, and the IRS could be in Memphis — but everyone could be on the same page.