It’s that time again! As I do once every year, I’m turning over the blog to my readers for the last week in August. This year, readers had the opportunity to answer one of three tax-related questions; each of the questions is related to pending legislation or active issues in Congress.
I received a number of great responses. In order to have a balanced mix of posts, I have read through all of the submissions and have chosen those that represent a mix of viewpoints on each of the three issues.
Our first guest post was submitted by Carolyn Linkov:
There have been lots of calls this year to cut or reduce IRS funding. Is that fair? Why or why not?
A fully-functioning IRS is critical to serve the needs and rights of its clients: American taxpayers. Thus, it is wholly unreasonable – and unfair – to cut or reduce funding to the IRS because, like any organization, it requires necessary capital to operate. Certainly, a significant portion of any organization’s operating budget is payroll but that doesn’t mean that the best/only way to reduce costs is to reduce payroll. For example, if the IRS was forced to reduce its payroll by eliminating jobs, Americans would have even fewer resources available to them regarding IRS notices and forms, the Internal Revenue Code and their rights as taxpayers. It is not a stretch to suggest that in the United States our federal tax laws are astoundingly complex, confusing, voluminous, ever-changing and downright mind-boggling. Even those individuals who regularly interpret, draft and administer laws make those claims frequently. With this in mind, it is hard to argue that American taxpayers need less help in understanding the tax system than what is currently provided.
It is also important to acknowledge that federal tax compliance in the United States is largely a voluntary process. This means that the onus is on the taxpayer to provide an accurate and timely report, and pay a tax commensurate with such a report. As many taxpayers would acknowledge, this is not as simple as it seems. Funding cuts to the IRS would negatively impact an already resource-poor population as taxpayers will lose tangible assets concerning compliance and other key information regarding federal tax laws.
While the IRS is characterized as a greedy, often intimidating “ogre,” in reality, its present-day practices reflect a different persona and approach. The IRS has a “Taxpayer Advocate” department, which is dedicated to supporting the rights of taxpayers, from both the perspective of the general population as well as individuals. The IRS website is replete with publications containing layperson explanations of the federal tax laws, and it often holds webinars, call-in opportunities and Q&A sessions on relevant tax topics. And although wait times are often protracted, the IRS does offer a toll-free customer service number through which patient callers will receive helpful answers from well-informed and friendly representatives.
These IRS resources are provided in part to make it easier to comply with the federal tax laws. Presumably, a person who fully understands the procedures and guidelines will be more inclined to pay his or her fair share of federal taxes compared to an individual who is overwhelmed and confused by complex, technical rules drafted in a “not so” user-friendly way. As such, until Congress creates a truly simple tax system, it is only fair to continue to provide American taxpayers with adequate and accessible information necessary to help them voluntarily report their taxes.
Aside from its operational and resource-based roles in this process, the other important role of the IRS, which is critical to American taxpayers, is to serve as the enforcer and collection agent for federal taxes. While this role tends to connote images of zealots extracting money from unsuspecting American citizens, in actuality, the IRS serves an invaluable role. It uses its enforcement and collection powers to generate revenues for the United States government, which can then be used for critical services, including public roadways, public education, cultural assets and programs as well as public assistance programs.
Although robust and passionate disputes often occur regarding how and to what extent these revenues are spent wisely and productively, we can all agree that national infrastructure, especially through public roads, is critically important to all of our day-to-day lives. The IRS’ role as enforcer and collection agent is pivotal, given that the United States government needs funds (i.e., tax revenues) to sustain itself and its residents.
While proponents of a diminished IRS might applaud the effect that a reduction in force might have on the revenue side of the United States budget, that view is short-sighted. With fewer and less capable individuals available to enforce and collect tax dollars – and fewer and less capable individuals available to assist American taxpayers in this process – it is likely that fewer tax dollars will be available for all aspects of the federal government, including political-neutral functions. And in the grand scheme, that is not fair to American taxpayers.
— Thanks, Carolyn! Carolyn Linkov is a principal in ParenteBeard’s tax department and her areas of responsibility include tax and quality assurance as well as federal taxation. In her role, Linkov monitors the firm’s compliance with ethical requirements, such as Treasury Circular 230, and develops policies and procedures to ensure that the firm’s tax practice delivers high-quality, thorough, and current tax advice to its clients. Her areas of expertise in federation taxation include accounting methods, depreciation, S corporation termination events, transaction costs, tax-exempt organization issues, employee benefit plan taxation, and Form 8275 disclosures. Linkov is also involved in all aspects of complex research and analysis with respect to unusual and rare tax situations.
