Paul L. Caron

Tuesday, March 24, 2009

10 Things the IRS Won't Tell You

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I think this list should be a lot longer, some very important items are missing.

Posted by: Deborah Snow | Mar 27, 2009 1:17:51 PM

Actually, Smartmoney is being not so very smart, and is behind the times, by claiming that the IRS will "sic a collection agency" on taxpayers owing back taxes. About three weeks before the SmartMoney article came out, the IRS discontinued the private collection agency program.

On March 7, 2009, the Associated Press reported: "IRS Shifts Away from Private Debt Collectors" at .

Also, on March 6th, National Public Radio reported that President Obama addressed the problem with private collection agencies which had been contracted by the Bush Administration to do IRS collection work, and this administration's solution -- end the program:

"We will stop outsourcing services that should be performed by the government and open up the contracting process to small businesses," Obama said. "We will end unnecessary and no-bid and cost-plus contracts that run up a bill that is paid by the American people." Scott Horsley, "Looking to Save, IRS Stops Outsourcing Collections," .

While President Obama's remarks suggest the possibility of a new round of private contracting for outsourcing IRS collections, IRS Commissioner Shulman has allowed the the current contracts with private collectors to expire and, according to the Associated Press, expects to allocate resources to hire an additional one thousand IRS employees to join the ranks of collectors inside the agency itself.

Commissioner Shulman even invited the private collectors to apply for these jobs at the IRS.

The private collector outsourcing program had been the subject of severe criticism by the Taxpayer Advocate, Nina Olsen, as well. (The Taxpayer Advocate is an sort of independent ombudsman and watchdog within the IRS, working on behalf of taxpayers.)

Posted by: Allan Pearlman | Mar 25, 2009 11:31:53 PM

Hi Paul,
This is a really great top ten list, excellent advice during this tax season. I unfortunately had to learn #6 the hard way. You can post this to our site and then link back to your site. We are looking for top ten lists and our users can track back to your site. The coolest feature is you can let other people vote on the rankings of your list.

Posted by: Vince | Mar 24, 2009 11:08:58 PM

11. Always try to pay your taxes with a smile...but we will still insist on cash

Posted by: Robbins Mitchell | Mar 24, 2009 5:38:21 PM

One thing I learned when I worked at IRS in Austin many years ago -- When in doubt, deduct.
Several things can happen.
1. Your return zips through the process and you keep the deduction.
2. Your return gets audited, the auditor doesn't have a problem with it, you keep your deduction.
3. Your return gets audited (or bounces out somehow along the trail), your deduction gets refused, you challenge, you win, you keep your deduction.
4. Your return gets audited, your deduction gets refused, you challenge, you lose, you pay the extra tax. At least back then, if there was no indication of fraudulent intent, you didn't get a penalty, but instead just maybe had to pay interest. But you had use of your money for just a little while longer.

Posted by: Unsupervised | Mar 24, 2009 5:37:28 PM

In reference to #5: A few years ago, I got a bill for about $14k from the IRS. After getting up off the floor and trying to figure out what happened, I then received a second letter from the IRS two days later stating (something to the effect -- I'm paraphrasing from memory) "we found your check, it had become detached from your form. Since you didn't affix it properly, you still owe us about a thousand dollars in penalties and fees". When I consulted a tax lawyer in the area, his advice to me was pretty straightforwards (as I can directly quote it from memory): "Anytime you can make the IRS go away for under $1500, just write the check and be done with it".

Posted by: Casper | Mar 24, 2009 1:46:48 PM

11. We're doing for the children.

Posted by: soupmonkey | Mar 24, 2009 1:34:39 PM

For the past 40 years I've mailed my tax return on the day after it was due. I figure with 40 million tax returns they don't have the time or manpower to check the date on the post mark. It always gives me a chuckle to watch the local t.v. news out in front of the post office before midnight April 15 showing postal workers collecting returns from people driving by.

Posted by: gordon Morrison | Mar 24, 2009 12:56:48 PM

Re #5: We took money out of a retirement fund to pay for medical bills. The IRS audited us and told us we owed taxes on that money. After sending the exact same information to them 4 times because it kept getting "misplaced", we hired a tax attorney who suggested paying the bill to get it out of that auditor's purview. That's what we did. The attorney then asked for an appeal--getting the whole case in front of a totally different group of bureaucrat. Several weeks later we got a check in the mail--but no explanation or apology, of course.

Posted by: Karen | Mar 24, 2009 11:59:26 AM

How about


The tax probably doesn't even apply to you.

Posted by: otto | Mar 24, 2009 11:24:28 AM

On #10, the IRS did tell me once they had my refund. It was for about $15. They sent me a letter saying they'd sent me the check and I'd never cashed it. So if I contacted them they'd send me a new check. The refund was from 2005 I think.

Posted by: Spade | Mar 24, 2009 11:15:38 AM