Yesterday, the US Senate after careful deliberation (there is no such thing on Capital Hill) passed The Inflation Reduction Act. I won't be able to comment in detail until I read it but why should that be an impediment. After all, the Congress passes Bills without reading them so it's a matter of Equity.
One headline item being promoted by the Democrats as a benefit of the bill is the inclusion of $80,000,000,000, that's 80 BILLION. The money is ear marked for adding an additional 87,000 IRS Agents. The claim made to justify this outrageous expansion is that these new agents will focus on tax cheats mostly the rich and wealthy non payers who often under report their incomes. On the surface, I would not disagree with achieving more effective and efficient collection of taxes rightfully owed. There are those who cheat and there are those who don't file and those who under report income. But most taxpayers do file and do report all of their income. W-2 wage earners have little choice because their information is reported by their employers and matched to ensure compliance. COMPLIANCE is a big deal and is another word for OBEY. So these 87,000 new agents will be engaged in making you obey. Presumably they will be auditing the rich and wealthy cheaters but I must say that I am quite skeptical.
Being more or less a Libertarian, I am broadly against big government and centralization of power. My preference is to have the federal government stay out of most areas that the States are better suited to administering which passes down to counties and municipalities where We The People actually do our living. Unfortunately, over many decades the Federal Government has grabbed more and more power and grew their bureaucracy into the behemoth it is today. Power taken is never given back and so it is a huge drain as an expense and adds numerous arbitrary factors into the lives of our Citizens. It is in many respects an Unconstitutional usurpation of State Rights and People's Rights not delineated to the Federal Government in the US Constitution. This basic argument has yet to restrain the Federal power grab with some uncommon exceptions enforced by the SCOTUS.
Without telling my tale as to why I believe the income tax system is in itself a bad system, let me focus on this new 87,000 IRS Agents. Reports which may have some truth are surfacing that armament is part of this new money's destination. More armed IRS agents and more guns and more ammo. This private militia is not entirely new. From inception the IRS has had armed agents. This force is said to be a very small percentage of the regular IRS employees. Even so, having tax collectors carry guns seems a but akin to the Sheriff of Nottingham who heavyhandedly went about collecting taxes. This appears to be an increase expecting resistance. Resistance to taxation, come on, who does that.
The IRS (read up on Lois Lerner) has in the recent past been found to have been politicized and weaponized and used against the ruling party's opposition. Real 3rd world and the stuff of Dictators. Oh, by the way, the President above Lois was Obama. He undoubtedly used the IRS to chill enemies as did Nixon and probably a host of others. Let's face it, Power corrupts but it also attracts those already corrupted. The adage that Power corrupts and Absolute Power corrupts absolutely comes to mind.
Marjorie Taylor Green who is a firebrand of the Republican party but marginalized even by them has her suspicions about this new 87,000 man army. See https://www.newsweek.com/marjorie-taylor-greene-says-new-irs-force-takes-aim-small-businesses-1731453. I personally think she is on to something in her assertion that it is the middle class and small business owners who get to meet and greet with this 87,000.
My experience in this world of taxation is rather vast. I have worked with good agents and bad. But the system itself is bad so even the better agents are strapped by it. Many know that the income tax laws are skewed but are in no position but to work within the edict of getting Compliance. No matter how gently said, OBEY is the goal. Having an obedient tax payer is the end result of enforcement and if the printed laws can't accomplish that, then perhaps the barrel of a gun can.
Governments require funding. In the US, Congress has the power of the purse string and boy do they use it. Among the favored things that Congress likes to spend on is regulations that in one way or the other control people. The various Departments like Treasury which is home to the IRS and its army, Justice which is home to the FBI and other armies, and the numerous regulators, an army of sorts using mostly Lawyers on the front lines. Chief among these are the EPA. They just received a bit of a blow from the SCOTUS reigning in heir abusive practices. See https://scalise.house.gov/media/press-releases/heat-leaders-praise-scotus-decision-reigning-epas-regulatory-overreach. Yes, there is plenty of corruption in DC. Trump's promise to drain the swamp targeted the bureaucracy which is the deep state so often referred to as the permanent government. That holds much truth. If that permanent government is politicized and it has been in favor of the left, draining it is wishful thinking. It will not let that happen and therefor operates in the various Departments regardless of the leadership installed, to resist and destroy any such initiative. Trump is likely less naive on this now understanding that many Departments must go en masse if big government is ever to be reduced. This would take considerable support in both Houses so votes count. One can hope they count anyhow.
My approach to the morass of unfairness in bad laws and corruption in administering them is to 1. know the bad laws and 2. do all one can to legally pay the least amount of tax and 3. document everything including the law that bask up tax positions. Understanding the field manuals, the IRC and the inside processes helps. Most Accountants do a credible job. Some better than others. And there are those who act like an arm of the IRS getting their client to OBEY. To a degree, getting clients to be compliant involves using all of the laws and their ins and outs so I see that as a two way street. When too many taxpayers get wise and use good accountants to minimize taxation, be assured that the deep state will find a way to clamp down on it. A nice overview of the big ones is to be found at https://www.investopedia.com/articles/tax/10/concise-history-tax-changes.asp.
We must fund our Government. We must demand it shrink and be less involved in our lives. We must have a fair evenly applied tax system that can be followed without being an accountant and thereby be easily obeyed. Hey we have to give them something I suppose. One plan I support is to eliminate the current tax scheme and most of its bureaucracy and replace it with a consumption based National Sales Tax. The enforcement of such a tax plan would be done by every person who sells goods and/or services. With a 21 Trillion Dollar economy taxed at 10%, the Federal level government would collect 2.1 trillion in taxes. If they also had a balanced budget amendment that should be enough once the departments are trimmed back. If not, the Congress using its purse strings can alter the National Sales Tax. That would be a one page change not the thousands of pages even the most benign tax laws have. No carve outs, no special interest groups, no lobbyists seeking special tax deals and yes, no armed agents making you OBEY.
I watch this closely and try to advise my clients according to which way the wind is blowing. I work at getting tax bills as low as legally possible and use every tool in the law to do it. Still, audits can happen but I am proud to say that my clients have a very low rate of audit and most are handled by mail and not the face to face variety. When you do have one of the invasive face to face audits or a field audit, it pays to know what they know. I try every day. My win rate suggest I am doing a pretty good job of it.
Try a little disobedience in the form of knowing what the IRS knows and operates on. In the US most operating manuals are openly available. Maybe not the CIA but tax law is published as are the application and audit manuals. You can know much of the same information as well trained and armed agents. And remember, in the current US, you can be armed too. That does not suggest that you show up to an audit carrying an AR-15, but too much heavily enforced bad law can become a heated discussion. Ask the French. The Let Them Eat Cake thing is being duplicated in modern terms...let them drive EVs.
Best of luck.
Donn Marier
DM-Your Own CFO