The 'Friendlier' IRS Has a New Goal: Compliance

During the third week in September, the IRS converged on Las Vegas to host one of seven nationwide tax forums that are being conducted around the country. Many questions and concerns were answered, but many more were raised. After attending the IRS forum, we have a fair idea of what lies ahead. Although the forum focused on the continual restructuring of the IRS, a major theme that was repeated over and over was compliance and education. We will discuss the details of this forum in a future column. In this column, we are going to concentrate on what bothered us the most at this conference, which was the emphasis on compliance. Billions – yes, billions – of tax dollars are lost each year because of noncompliance (in other words, the nonfiling of tax returns or the understatement of tax liability on returns that are filed). An IRS official stated, "With our new policy of educating the public, there will be no excuse for nonfiling." For some years now, the IRS has maintained a "friendly" attitude toward nonfilers. This will change when the new programs are fully in place.

We all know that jail time has always been a possibility, but it has seldom been used except when the case was high-profile. Now, it appears that the IRS will impose jail-time penalties much more often. The use of the words "no excuse" concerned us greatly, since we believe there are legitimate reasons for not filing, such as illness. Additionally, the IRS has been on a hiring binge, with emphasis on increasing the number of auditors and compliance officers. To date, more than 2,000 new auditors have been hired. This may not sound like many, but it is just the beginning. This leads us to our favorite piece of advice: If audited, do not represent yourself; get licensed, professional representation. Do not wait until after the IRS imposes penalties to get representation; do it at the time you are notified of the audit. Do not talk with the IRS after you get the notice of examination; talk only with your representative.

Also of importance is that a new unit has been developed to deal exclusively with small businesses and the self-employed, which should be of concern to the professional gambler. Now, instead of having people who rarely have seen a gambling case, there will be a whole unit (one out of the four that now exist under the new structure) devoted to bringing the small businesses and the self-employed into compliance. The term "outreach" was bandied about like a Ping-Pong ball. The IRS is going to try to teach the small businessperson and the self-employed person the tax laws, the regulations, and all the case law. We wish them well. Our guess is that for a number of years, we professionals are going to have to endure a lot of grief to educate the new recruits at the IRS. The decisions that these newbies make will undoubtedly increase the appeals rate. They also mentioned that they are going to be more willing to go to court to settle disputes with taxpayers. So, hold on to your hats, ladies and gentlemen, as we move onward in the new millennium with the "new" IRS.

Roger and Yolanda can be reached at R.B.S. Tax Services (see their ad elsewhere in this publication). To purchase their book, The Tax Guide for Gamblers 2001 Edition, call (800) 829-7271. For questions or comments, write to: R.B.S. Tax Services, 8370 W. Cheyenne, Suite 109, Las Vegas, NV 89129. For a collection of articles and other tax information, visit their website at www.rbstaxes.com.