Governmental Tax Authority Pen Pals

Some of you might have noticed a recent uptick in unsolicited pen pal correspondence. The unfortunate reality is that there indeed has been a recent increase, actually a significant increase, in the frequency of Notices from various federal and state tax authorities. Those Notices sometimes also wind up having rather a severe sounding, aggressive follow up communication when you either don’t respond quickly enough or they simply cannot handle the responses. What is happening?

Firstly, understand that it is almost always nothing you’ve done, or even that you failed to do. What we CPAs (and we’ve gotten feedback from a number of our peers) are seeing is that there has been a combination of 2 negative factors (we will explain further immediately below) that have caused this more than annoying recent uptick. These 2 factors are:

• Inadequate staffing – and while we’d like to say this is related, in theory it has nothing to do with whether or not the IRS has been recently defunded or will get its funds back. This has been an ongoing issue, at least as to the IRS, and has certainly expanded itself to various states. The unfortunate reality is that too many of those in power are too involved or obligated to the wealthy, and thus they would prefer to keep severely underfunded taxing authorities so that audits are rare, ineffectual and minimally invasive. Directly connected to that is – and we’ve heard this outpouring of grievances from a number of tax agents – inadequate staffing has led to often onerous production requirements and quotas. These requirements often fly in the face of sound and intelligent operational procedures. As a result, the life of tax agents has become more and more uncomfortable – causing them in many cases to seek employment elsewhere. That further compounds the inadequate staffing – making it not only inadequate but also inexperienced.

• Indirectly connected to the preceding, we have the ever-expanding use and abuse of mindless computers. Forget the current talk about AI and the genius its capable of accomplishing. The harsh reality when it comes to taxes, is that so much of the responses and contact with the general public have been relegated to computers, that what happens is they simply kick out one Notice after another. To compound that, when you respond, there is often a lag with the infamous, well-known “crossing in the mails”; as well as the above-referenced inadequate staffing precluding the proper inputting of information so that the mindless computers continue with their games. 

Is there a resolution to these problems? Is there a way to fix the situation? The answer is yes – but it will require a significant boost in the funding and staffing of the taxing authorities. That’s the harsh reality, and no degree of bloviating will change that.