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IamA 28-year veteran of the Internal Revenue Service – having left IRS, I am free now to reveal how the agency is failing in its mission to serve the American people and have just written a 67-page open letter to Congress on that subject. AMAA!

Oct 25th 2014 by mikegreg • 17 Questions • 3719 Points

EDIT: Thanks for all of your questions - feel free to keep asking and voting, but I have to depart for today. I am leaving for a trip but will try to get back on here to answer some additional questions a few days from now. If you want a free digital copy of the full open letter, drop back by this coming week for the link! I had a great time today and was very impressed by the diversity and high caliber of the questions and do hope my answers were informative. If you want to see change: remember to write your congress(wo)men and get out the vote!

Michael Gregory here! IRS Employees are forbidden from lobbying Congress, leaving former agents and insiders like myself to raise the alarm about what is happening to and within the agency. With that in mind, I have written an open, public and free letter (summary here and extended excerpt here) to our leaders titled The Wheels are Falling Off the Wagon at the IRS in hopes of drawing much-needed attention to an ongoing crisis impacting American taxpayers.

I am excited to be with you Redditors today and hope to answer as many questions as possible. Please feel free to read more below and ask me (almost) anything about this open letter and otherwise! I am also being assisted today by a veteran Redditor who will help me address Reddit-specific questions (ducks and horses?).

My short bio: At the IRS, I was a specialist and territory manager for 23 states. I have testified in US tax court, written several books and twice won IRS Civil Servant of the Year awards. I have a BS, MS and MBA and am currently a qualified mediator with the Minnesota Supreme Court. In my younger years, I also worked for the US Army Corps of Engineers and was a sewer inspector.

My Proof: https://twitter.com/MikeGregConsult/status/523167713305583616

Context: This publication was made to raise awareness and motivate voters for the upcoming elections. Congressman Darrell Issa, the wealthiest man in Congress and Chairman of the House Committee on Oversight and Government Reform, has investigated the Lois Lerner Tea Party concerns with a dozen investigations costing over $12 million and collected over 67,000 emails while not finding any illegal activity at the IRS. There certainly was mismanagement, poor decision making and inappropriate acts by the IRS. These should be addressed. However, while focusing on this headline-catching case, the Committee has lost focus and severely underfunded the IRS. This cripples the agency hurts law-abiding taxpayers who want and need help from the agency – it also allows identity thieves and criminals to go unprosecuted, all at the expense of everyday Americans.

Disclaimers: While I can give my opinions on tax law and the state of the IRS, I cannot give you tax advice. I am open to other questions but am hoping to focus on the pressing political issues surrounding the current state of the IRS, its dysfunctional elements and how we can improve the agency for the benefit of honest US taxpayers.

Resources: For more about me and other books I have written, you can visit my website at MikeGreg.com. For a preview, click here - for a free digital copy of this open letter, stay tuned on Twitter or my blog. Hard copies of the book can also be purchased from Birch Grove Publishing on Thursday – any donations for the digital copy you may wish to make will go toward reimbursing the publisher for costs of production.

Q:

Do you see a collusion between paid tax preparers (such as H&R block and Intuit) and the IRS to keep the tax code complicated?

A:

I believe that the industry of tax preparers appreciates having a more complex tax code to keep them in business. I don't believe the IRS wants a more complex tax code.


Q:

My Dad is an accountant, has been for 50 years. He has always wanted a simplified tax code. Too many loopholes that corporations take advantage of and he feels the complexity of the codes hurt individuals. He really feels bad about the current state of the IRS. He has seen most of the good agents leave. Now it's cutthroat, with young agents who won't compromise.

A:

The IRS has 11 divisions dealing with external stakeowners. Small business self-employed has concerns with issue resolution. The commissioner has an advisory committee appropriately named the IRS Advisory Committee made up of accountants like your father. They have recommended to the commissioner that the current resolution system in SPSE be revamped because it is not working. I concur with his overall observation.


Q:

why can't the IRS take evidence by email or some other digital means? i had an audit go into 3-4 years and spent $200 printing crap at Fedex and sending it to the IRS and then having it sit in the mailroom

A:

The IRS has 13 different divisions, 11 deal with external stakeholders - each has its own policy. In some instances the IRS will accept electronic information and the IRS does use and accept faxed materials. The IRS is prohibited from sending you electronic responses without your initiative/permission.

If the IRS were funded properly to allow this to happen with encryption (such as with the Criminal Investigation Division) this would indeed make things much easier for the American public!


Q:

Hi, with the tax code being near impossible to understand by any one person, how does the IRS keep everything in line then? How do they prosecute anyone without forgetting about some obscure part of the code?

A:

The IRS has 13,200 revenue agents and about 2,000 specialists. I managed 1/4 of the country's specialists in engineering and valuation issues, with specialization comes an added degree of due diligence and accuracy. It's like if you go to a doctor you get referred to a specialist - the same thing is true at the IRS.


Q:

If you could make three immediate changed to the current tax code what would they be and why?

A:
  • 1) Simplify the internal revenue code - if you took 60 lines per page with no margins (that's a lot of lines) the code is 34.5 inches high. The regulations are 3.5 times larger. That's almost 13 feet high. Nobody can understand all of that. Congress has passed more than 4,000 code sections in the last 10 years - that's more than 1 code section per day. When I started, I could hold the internal revenue code and the regulations in my hand! - I've actually got them at home.

  • 2) Address issues related to inversions and international tax

  • 3) Fund the IRS properly - increase funding consistent with the recommendations of the non-partisan IRS oversight board (2.3 Billion!)


Q:

Follow up: what is the reason beyond this exponential growth of the code? is it motivated by the necessities of an increasingly complex business environment, or are there other factors at play?

A:

In general, I would argue, from a historical perspective, when representative Rostenkowski [spelling fixed] was the chairman of the committee he made sure he understood all changes to the revenue code. When he was convicted and left his post the growth in the revenue code became exponential.

After that it became a game of making changes by those who wanted to help out particular constituents rather than fully exploring policy implications nationally - that continues to this day.


Q:

Rep Rostenkowski for those curious

A:

Sorry: someone else is helping type!


Q:

Address issues related to inversions

do you think the treasury's new regulations were enough? abbvie seems to not be inverting anymore.

A:

That remains to be seen - any laws made by people will be met with people intending to circumvent the intention while meeting the letter.


Q:

I read somewhere that the IRS has enough information just from business payroll tax filings, that for the average taxpayer filing a 1040A or EZ the agency could fill out a return and send it out. Assuming no major changes in situations like buying a house, is this true/workable? I'd love to get a letter from IRS with my 1040 already filled out. I could review it for accuracy and sign it and return it.

But I realize that H&R Block, et am, will never allow that to happen.

A:

Yes, more or less. There are other countries in the world (Netherlands, I think?) that have properly funded their tax systems and have been proactive to address this type of situation - could it be done here? I think it could. It would mean a funded mandate from Congress.


Q:

Did you read David Foster Wallace's 'The Pale King', which examines the droll lives of IRS employees?

A:

I have not! Would you recommend it?


Q:

I am an American expatriate living overseas. While I am very familiar with IRS Publication 54 (you better believe I've studied that thing) which addresses the taxation of foreign-earned income, it is nevertheless disheartening to be surrounded by people from all over the world and be the only nationality among them that still has to pay income tax, despite not being physically present in the US.

My question for you is this - are expatriates more likely to be targeted for auditing since they qualify for a certain amount of tax exemption?

Also, for someone who is an employee of a foreign entity (non-US company) what document(s) will the IRS accept as a declaration of my income in lieu of a W2, as this company is not required to produce such forms?

A:

My question for you is this - are expatriates more likely to be targeted for auditing since they qualify for a certain amount of tax exemption?

Not to my knowledge. I'm not aware of any filter like that.

Also, for someone who is an employee of a foreign entity (non-US company) what document(s) will the IRS accept as a declaration of my income in lieu of a W2, as this company is not required to produce such forms?

I don't know. You might try IRS.gov and put in 'declaration of income' to start a search.


Q:

There has been talk of simplifying the tax code for a long time. Has it ever, in your memory, actually happened? Has the legislature ever passed a bill that significantly reduced the complexity of the tax code?

A:

Good questions! No. And ... maybe, I honestly don't know for certain, but clearly the trend is the opposite direction.


Q:

Let's say someone is due a refund, but didn't file years ago, what then?

Also, what is your opinion on a flat tax, VAT, and luxury taxation?

A:

Let's say someone is due a refund, but didn't file years ago, what then?

There is a three-year statute of limitations you can explore at IRS.gov

Also, what is your opinion on a flat tax, VAT, and luxury taxation?'

The IRS has conducted research on all of these areas. Flat tax: found to be politically unacceptable by Congress because it increased the tax rate for about 80% of Americans. VAT: found internationally to increase level of non-compliance by those who run cash businesses, causing rate of the tax to increase over time. Luxury taxation: any tax on any articles should be explored to determine the impact on the items being taxed and on those who are being taxed to insure unintended consequences are evaluated before implementation (and proper application).


Q:

Do you believe that reptilians are in fact running the IRS?

A:

I have not had any experience with lizard people, but to be fair: I have spent limited time in Washington, DC.


Q:

So why such the lid on you guys? Why can't you lobby Congress just like any other American can? Why can't you give tax advice either?

A:

IRS employees are civil servants constrained by the Hatch Act and have a Code of Conduct that sets policy (would suggest reading up on that to learn more) - the basic idea is that we should be there to carry out the policies of the US government and not to lobby for ourselves - we are to be non-partisan, independent and dedicated civil servants. FWIW, I myself have someone review my return every year, too.


Q:

Do you believe politicians (on both sides) like a complex tax code because it's how they are able to provide favors to their pet industries, initiatives, etc? Does a straight and simple tax code takes some power away from politicians?

A:

There are many examples of Congress caving to lobbyists and perpetuating industry- and/or company-specific tax breaks, ultimately at the expense of the American people. A tax code not being amended daily (as we have now) would definitely reduce the number of loopholes!


Q:

Are you worried about getting in trouble?

A:

In coming out with my book/open letter I have had two people contact me regarding my own personal safety and with regard to taking down my website and/or moving my financials because there will be people who are very unhappy with the information in the book. I discussed this with my spouse and we agreed to go forward and hope for the best. I think the issue is big enough and the IRS could crash without adequate funding. And there are those who want to see that happen - and they do not have a backup plan.