IRS tax scams vs. powerful strategies
Each year, the IRS produces a list of “Dirty Dozen Tax Scams” to warn the public of the worst ways taxpayers are being scammed or how they cheat on their taxes. This year, most new scams related to COVID laws. They included: 1) theft of Economic Impact payments, 2) cons related to “phishing,” ransomware, and phone “vishing,” 3) ruses involving fake charities, and 4) unemployment fraud. I agree with the IRS that these bad apples should be brought to justice.
However, the last five of 12 scams on the list include four tax savings strategies I have recommended for years. I think it is hypocritical for the IRS to expect us to respect and obey the tax code when they often disregard effective tax deductions that are part of the code. The IRS’s mission is to collect tax money faster than Congress can spend it. (They have fallen behind by about $30 trillion.) Can you blame them for bluffing wealthy taxpayers out of powerful, legitimate tax deductions by defining them as scams?
Is a deduction a scam just because the IRS disagrees with the tax code? Has the IRS ever interpreted a tax break more narrowly than Congress intended? Could training of IRS auditors be slanted to result in higher taxes? Could IRS employees be incentivized with promotions for assessing and collecting tax money people don’t really owe? Is it possible that the IRS employs many quality people, but the organizational culture disdains the Taxpayer Bill of Rights? Is it possible that that culture…