IRS Commish Doug Shulman has not been shy about talking about targeted enforcement. Targeted enforcement – the idea of cherry picking certain target groups to investigate or examine – is nothing new: it’s happened for years. In fact, as a young lawyer, I remember FLPs (Family Limited Partnerships) being called out under the Clinton Administration. But the IRS hasn’t been all that eager to talk about it. Until now.

Shulman has been very open about the fact that it’s happening and very happy to say what’s being targeted. Right now, the IRS seems to be circling the tank around three main areas:

  1. Offshore accounts
  2. Pass through entities (esp s corporations and LLCs)
  3. High wage earners

Areas of targeted enforcement vary depending on what’s happening in the world, who’s in the White House and how many resources are available. Previous efforts have included self-employeds with Schedule C and Family Limited Partnerships.

So today’s Fix the Tax Code Friday question is two-fold:

Do you think targeted enforcement makes sense? And if does, it is fair?

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Author

Kelly Erb is a tax attorney and tax writer.

Comments

  1. Income taxes aren’t fair, so that’s a moot point. The whole Marxist concept of a graduated tax has evolved into creating a large percentage of people who pay no taxes. They contribute absolutely nothing towards their upkeep.

    Is targeted enforcement a good idea? I don’t know. I don’t have enough data. If the people that do have the data have determined that they can attain their goals, which are probably maximizing income and increasing prosecutions, by utilizing the process, then of course it’s a good idea.

  2. Mary Kay Foss Reply

    I was at a meeting once with IRS reps who mentioned they were doing an audit project where they selected tax returns with an Earned Income Credit when there was a male single parent with twins under age 2. The returns that they selected had a high incidence of EIC fraud.

    I think that targeted enforcement works if they select logical targets. Unreported income, to me, is a more important issue than overstated deductions and I don’t think that targeting high wage earners will help that situation.

  3. One more group they should target is former and current congress members. Just look at what they uncovered with the cabinet selections…

  4. As a practical matter, I think it makes a ton of sense. I’ve dealt w/ IRS examiners that didn’t understand some of the basic contours of what they they were working on (that’s not to fault them: tax is an enormous & complex field). Targeted enforcement lets the examiners focus their efforts and do a better, more sophisticated job.

  5. I pretty much agree with everyone else. The purpose of enforcement is to make sure that everyone pays all the taxes that they’re legally obliged to. The IRS doesn’t have limitless resources; they can’t audit everybody. So it makes sense to put those resources where they are likely to yield the most additional tax revenue.
    I particularly approve of their current targets, since I’m not in the sights of any of them.

  6. Of course targeted enforcement makes sense. To paraphrase Willie Sutton, “That’s where the money is.”

  7. I’m with you LJ, let’s start at the top and target cabinet appointees and selections, starting with Tim Geithner. I assure you that Turbo Tax will not be using Mr. Geithner in any of their ad campaigns. To answer the question, no, targeted enforcement may actually be against the law some what like entrapment and it is not fair. When the IRS makes open statements like this, the CPA’s and Tax Attorneys take notice and start closing the loopholes.

  8. I love how we’re willing to assume our neighbors are guilty until proven innocent. Oh, wait… it’s supposed to be the other way around.

    Oh, and Angela’s comment that not paying an income tax is ‘not contributing to their upkeep’. Let’s see, they pay 15% payroll taxes, sales taxes, and worst of all, they get hit the hardest by the inflation tax. There’s more than one way to clip coins, and just about everyone is paying a heavier price than any other civilization in history.

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