Taxation & Estate Planning

Does the IRS play God?

By Darrin Mish

The only thing the IRS has in common with God is that they both have three letters in their 'names'. But of late, the IRS has been behaving 'like' God; but not the loving, merciful and kind God, instead it's the high-handed, dominating and controlling god. Here's a true story.

David and Dottie Morgan run Morgan Healthcare Audits, a small scale enterprise in Susquehanna Township in Pennsylvania. They work 80 hours a week to keep their business afloat in these trying economic times. All these years, they have been prompt paymasters to all their creditors, including the IRS. However, times are hard these days and their business has been adversely affected to the extent that they have started to delay paying some of their bills.

For perhaps the first time in their business, David and Dottie have had to prioritize their payments. The wages of their workers is their number one priority in business. At times, Dottie said she had to fork out the wages of their four workers out of her own pocket or credit card. But one of the most difficult expenses to keep up with is their corporate tax. For awhile, they were behind in their payroll taxes by three months. Subsequently they managed to cut it down to two months after paying some of the overdue amounts including penalties to the tune of about $3,300.

As a result, the IRS issues them a letter threatening to 'out' her and her husband. Bear in mind the backdrop against which all these things are happening. Dottie and David are honest, hardworking Americans. They are not con artists or corrupt politicians. They have never been late in paying their dues. But nowadays, the economy sucks. Everyone suffers and David and Dottie are no exception. In fact in its June 23rd issue, Business Week reported that more than 100,000 companies – that's one in every 270 American companies – have filed for bankruptcy since the economic downturn began about 18 months ago.

So does the IRS show any sympathy? No, instead they impose a heavy penalty for late payment. Dottie said the penalty was $1,000 for every $1,700 of late taxes.

But the last straw was when the IRS issued the Morgans a 'Notice of Potential Third Party Contact'. This means that the IRS has the right to contact third parties like the bank or even the neighbors of the Morgans to check on whether they truly cannot pay their taxes on time. Is this legitimate? Yes, according the Internal Revenue Code and more specifically in Publication 594, The IRS Collection Process.

Who do they think they are to act this way? Well, it seems they think they are-

Darrin T. Mish is a veteran, nationally recognized tax attorney who has focused on providing IRS help to taxpayers for almost two decades. He regularly travels the country training other attorneys, CPAs and enrolled agents on how to handle their toughest cases with the IRS. He is highly ranked among the top attorneys in the country, with an AV rating from Martindale-Hubbell and a perfect 10 on Avvo.com. Martindale-Hubbell has also honored him with a listing in their Bar Register of Preeminent Lawyers. He is a member of the American Society of IRS Problem Solvers and the Tax Freedom Institute. With clients on every continent but Antarctica, he has what it takes to solve your IRS problems no matter where you live in the world. If you would like more information about his practice and how he can help you, please call his office at (813) 229-7100 or toll free at 1-888-GET-MISH.

Full post as published by IRS Problem Solver Blog on September 20, 2009 (boomark / email).