May ? 1997
Beginning of the Road
By Dane Sorensen
I’ve noticed that with the U.S. Government’s Paper Reduction Act, the IRS is once again creating their own parallel universe where trees are no object when monetary extraction is concerned. In other words I received a seven page missive from the boys at the Treasury Department claiming I owed about $1000 more on my 1994 taxes. About 20 percent of that was fines and penalties for being human. I always like the part where they talk about $50,000 fines and jail. It really makes you feel like you live in a country with a Bill of Rights.
1994 was the year we made our big life style change. We sold a business and put our house on the market. Dennis Jerrold of radio fame once told me you never really close a business after you sell it. What he was referring to was the fact the IRS and other government agencies will never let your former business affairs rest in peace.
If my memory serves me, I have had three altercations with the IRS concerning taxes. With such a major shift of assets in 1994, I knew my taxes would create extra perusal by the IRS. For that final business year, I decided to use a CPA firm from the Twin Cities. It cost me about twice what my current property taxes are to have them do my federal and state taxes that year. It involved several hours of meetings before the business sale to help orchestrate the sale. I picked that particular firm because I liked their attitude toward the IRS. I personally will never forgive FDR for starting income taxes. The CPAs felt the same. They had a little room that was kept cold in the winter and warm in the summer. Here was a mismatched table that was too high for comfort and a chair that was miserable to sit on for more than five minutes. This is the room they loaned to the IRS agent for audits.
The worst thing a taxpayer can do is invite an auditor into your home. You’ll be Minnesota nice and give them coffee, cookies and a comfy chair. You’ll end up including them in every birthday part and probably your funeral, too. Once in your home they can ask for any and all documentation. They can tie you up for weeks.
My CPA did a good job preparing my taxes. It was thorough and concise. It also cost $3.00 in postage to mail it. We were very careful to document everything. I have never had a full blown audit and I believe quality tax preparation is the first way to keep you safe from that dreadful fate.
However, selling a business and moving tends to set off red flags. Our tax laws are so complex and anal, there is no one correct way to do them. Most folks have two choices – the long or short 1040. Both will give you different answers as to what you must pay. When you add in all those different schedules, the ability to pick out the best course becomes impossible. Only expensive tax help can lead us poor blind taxpayers.
For Christmas the IRS sent me a small mail bomb that claimed I owed taxes on thousands of shares of stock that I have never owned in my life. That Christmas present only took two hours to disprove and settle.
The last mail bomb form the IRS was a brilliant execution of dominoes. Because they accused me of one error, the numbers changed in from after form. The net result was a $300 deduction form 1994 would now cost me almost $1000. As I stated earlier, there were seven pages of warnings, threats, and numbers to deal with. I counted four bar codes. Lord knows what they meant.
Your options are to either call the IRS on the phone or mail in your defensive reply. I suggest never calling. They are probably recording you and you will probably get an agent who knows less about taxes than Hilary Clinton. Once I talked to an agent that barely understood the king’s English.
Always, always, answer the charges in writing. Not
should you answer their charges, but you should answer them in the most convoluted manner possible. They tried to bury you in paper, it is only right that you do the same. Be complex and wordy.
An advanced method of wasting the government’s time is to degrade any photocopies you have to send to the IRS to prove your innocence. There are two school’s of thought on making photocopies difficult to read. One group prefers to make the photocopies washed out as possible, the other school of thought likes to make the copies look muddy. I try to use the poorest copier in town and go for the muddy look. First, set the copier to dark. Next reduce the copy to size 66%. Finally, re-enlarge the copy to 150% to full size. If you can still easily read it, repeat the process. A nice additive is to shake pepper on the copier glass. With a highlighter, mark all the unimportant sections of the documents. Assuming you are in the right and follow my time tested process, you can receive this one page reply from the IRS-
“Thank you for giving us more information about the income we recently wrote to you about. We are pleased (edit. Note: Is “We” meant to be plural or the royal form of we?) to tell you that, with your help, we were able to clear up the differences between your records and your payers’ records…
If you have already received a notice of deficiency, you may disregard it. You won’t need to file a petition with the United State Tax Court to reconsider the tax you owe. If you have already filed a petition, the office of the district counsel will contact you on the final closing of this care….
Thank you for your cooperation.”
Anytime, gentlemen. My pen awaits.
Published May 1997
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