Although accounting professionals are comfortable working with the IRS since they do it on a daily basis, any sort of correspondence between the collection agency and the common taxpayer can be a stressful and sometimes painful process. The recent revelation that the IRS targeted conservative organizations applying for tax-exempt status only reinforces the general public’s fear of “working with” the Service. Applicants for tax-exempt status through section 501(c)(4) with words such as “Tea Party” and “Patriot” in their names were purposefully subjected to levels of review outside of the normal scope of the application process. As a part of these reviews, IRS employees sent letters to applicants that included questions and requests for information that lacked relevance to the application process and, in some cases, invaded the privacy of group members. For example, some letters requested information regarding voting preferences and donor lists. Though the legality of the IRS’s examinations is under review, this is a clear example of how the perceived power of the IRS can bully individuals and organizations.
It may be too early to tell (or we may never know) how widespread these attitudes and policies have pervaded the IRS. However, at a minimum, this situation highlights the public’s perception of the IRS as a powerful government agency whose requests can be intimidating due to the complexity of the tax code, the potential financial implications of a negative result (the cost of going through an audit can be several thousand dollars depending on the extent) and the personal nature of the information necessary to calculate taxes. Though this recent IRS scandal is definitely not going to improve the public’s perception of the Service, we can hope that the current Congressional hearings and other potential investigations will help the IRS work to change its image through real organizational change.
In the meantime, there are some attitudes that you can adopt to help feel more comfortable working with the Service. For example, the IRS is naturally going to apply professional skepticism when reviewing returns for accuracy. As such, it is perfectly acceptable to apply the same level of skepticism when reading and responding to IRS information requests. If the IRS requests information that seems to be out of the scope of an audit or simple letter notice, ask why the IRS needs the information. As this IRS publication released less than a month before the “scandal” hit the news indicates, in some cases, a simple phone call with an agent or other IRS representative will clear up the issue. And of course if you would rather not deal with the IRS yourself, contacting a CPA representative is always a good option.
*Thank you to Andy Nentwich, Tax Senior, for his contributions to this post.