Regarded as one of the nation's foremost experts on IRS procedures, Pilla lays out simple, easy-to-follow battle plans for resolving tax problems, as well as simple, effective guidance for avoiding trouble in the first place. Charts & graphs.

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The IRS Problem Solver
From Audits to Assessments--How to Solve Your Tax Problems and Keep the IRS Off Your Back Forever

Chapter One

Basic Things You Need to Know

Myths and Realities about the IRS

There are two great fears people share when it comes to dealing with the IRS. The first is a generalized fear of the unknown. Because the IRS is a huge agency powered by an incomprehensible code and funded with billions of dollars annually, people make the mistake of believing the agency can do "anything it wants" when it comes to tax law enforcement. This gives rise to the second fear, that you will "go to jail" if you run afoul of the agency. As a consequence, people tend to roll over to the agency rather than try to fight back, believing it will go better for them if they do not "make the IRS mad."

Because these attitudes are both false and responsible for millions of people paying untold billions in taxes they do not owe, it is meritorious to examine these notions in some detail, with an eye toward exposing the myths and realities about tax law enforcement. This way, you will better understand what to expect from the IRS in a given situation and in turn can intelligently determine the best course of action. Let us address the two common fears, beginning with the greatest fear.

Will the IRS Put Me In Jail?

Whenever people think of IRS problems, names like Redd Foxx, Leona Helmsley, and Willie Nelson immediately come to mind. These of course are high-profile tax cases involving intensive enforcement action and, in the case of Leona Helmsley, an extended jail sentence. These high-profile cases are no accident. They are part of a long-standing IRS plan to utilize the media to publicize cases that promise to have a "positive impact" on "voluntary compliance."

This means very simply that people who are afraid of the IRS will "voluntarily" comply with its edicts, regardless of their legitimacy. Of course, the IRS defines the term voluntary in much the same way that gangsters do. The infamous line from the movie The Godfather comes to mind: "Either your brains or your signature will be on the contract."

Okay. Where do I sign?

This is "voluntary compliance." And by trumpeting the misfortunes of the poor slobs who do not comply, the IRS sends a clear message to the public: "If you don't toe the line, you can expect a similar fate."

This not only frightens people who can comply, but it terrorizes and drives underground those who, for whatever reason, cannot. This is one explanation of why there are between seven and ten million citizens who do not file their annual tax returns. These people are mostly in hid, ing and living in fear of going to jail for their tax transgressions.

You need to know, however, that with a universe of about 125 million individual tax returns filed every year and only about 2,500 criminal prosecutions, you have a better chance of being eaten by a shark than you do of going to jail for a tax crime. What landed Leona Helmsley and others like her in jail were deliberately false statements in their tax documents and fabricating documents to support bogus deductions. Those convicted of tax-related criminal charges are guilty of deliberate, voluntary acts the purpose of which is to deceive and mislead the IRS, to unlawfully hide income, and to evade the payment of taxes.

This motivation is not shared by the vast majority of citizens. Instead, the majority of people in this country make every effort to comply with the law and pay what they owe. That they may make mistakes, miscalculations, and errors in judgment, obtain erroneous advice, or otherwise misinterpret the law does not make them criminals. Even the majority of those who owe taxes they cannot pay are not criminals. More often, they are victims of economic, medical, or other unforeseen circumstances beyond their control that leave them unable to pay on time.

The criminal sanctions in the tax code are reserved for premeditated tax cheats, not those who tripped over or fell into one of the innumerable pitfalls built into the code. The Supreme Court described it aptly when it said, "Even a dog distinguishes between being stumbled over and being kicked."

This book is about empowering citizens to use their rights to fend off unjustified claim's by the IRS and to manage and mitigate the legitimate ones. There is no way you can even begin to do that if you believe the IRS is going to kick your door in at three in the morning and haul you off to some rat-infested jail if you do anything other than turn out your pockets. You need to know that unless you undertake a deliberate plan to cheat, deceive, or mislead the IRS, you are not going to jail.

What Can I Expect From Tax Law Enforcement?

If you are not going to jail, what is going to happen in a given scenario? The short answer is that the IRS will make contact with you at some level to address the dollars-and-cents aspect of your tax obligation. This is what we refer to as the civil, as opposed to criminal, elements of tax law enforcement and administration. The worst-case scenario in this theater is that you owe more money.

It is equally true, however, that before you can be made to pay more money ...

The IRS Problem Solver
From Audits to Assessments--How to Solve Your Tax Problems and Keep the IRS Off Your Back Forever. Copyright © by Daniel Pilla. Reprinted by permission of HarperCollins Publishers, Inc. All rights reserved. Available now wherever books are sold.

Excerpted from The IRS Problem Solver: From Audits to Assessments--How to Solve Your Tax Problems and Keep the IRS off Your Back by Daniel J. Pilla
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