Where are those scarce government resources going?

The Internal Revenue Service employs approximately 88,000 full time staff. This is two and a half times as many as the FBI.

Then, what about Spies v. Bean counters? Incomparable! The number of the CIA’s staff cannot “at present, be publicly disclosed.”   So says cia.gov.

With 48 hours left before the final deadline to participate in a voluntary disclosure program designed get taxpayers with unreported foreign bank accounts to come back into the system and report their foreign income, the IRS has announced that it is extending the deadline from Wednesday September 23, 2009 until October 15, 2009.

The IRS reports that this extension was made in response to repeated requests from attorneys and other tax practitioners from all over the country.

In addition, an IRS agent working on a team evaluating the disclosures being submitted by taxpayers trying to participate in this program told me that there was a huge volume of submissions.

Within the guidelines of this program, taxpayers are given an opportunity to avoid criminal prosecution for tax crimes such as tax evasion and tax fraud.

Also, as part of this program, a taxpayer is subject to paying penalties on previously unreported income in foreign bank accounts under guidelines defined earlier this year, in March 2009. These guidelines are tough and expensive, but not nearly as tough or expensive as the sort of penalties a taxpayer would be facing if not working within this program.

Not scorpions, not reptiles, not hairy poisonous spiders, not jackals, not piranhas, not hyenas.

And while some taxpayers may swear that the IRS agent they talked to was worse than the mythical Leroy Brown (that is, “meaner than a junkyard dog” and who was “bad, Bad!”

fourteen years before Michael Jackson was “Bad”), experience suggests (and were a study conducted, empirical evidence, I believe, would support) that the people who work for the IRS are human, all too human.

The significance of this to a taxpayer in a jam is that if some IRS (or corresponding state taxing authority) staffer has been trying for months or years to collect a back tax debt, or just get the taxpayer to file one or more missing returns*, that salaried government employee just might develop an all-too-human negative impression of the taxpayer.

(*If you find a tax advisor who says you don’t have to file a return, hang on to your wallet, and run, don’t walk, to someone else!)

The Taxman’s Human? What’s the Downside?

Even if the taxpayer has one or one-hundred-and-one unassailable reasons to explain how it is that he or she wound up in this situation with IRS agents giving chase, and it all makes sense, the all-too-human IRS employee might form a decidedly negative impression which can affect how that employee might treat the taxpayer.

The IRS agent might become convinced that the taxpayer is trying to pull a fast one of some sort, or is lying, or cheating, or some combination of these or other bad things, and so treat the taxpayer based on these underlying impressions.

This has happened: for example, over the telephone one sunny afternoon, a New York State Department of Tax staffer snarled at me something like “Ms. Smith [the taxpayer] has had the unauthorized use of $40,000 of New York State’s money for the past five years, and I’m going to come get it.”

This Tax Department agent was ready to start freezing and seizing bank accounts, garnishing wages, using the Tax Department’s enormous power to reach in and grab whatever he could find, wherever he could find it. And, man, was he angry; angry at the taxpayer.

A powerful and common impression is that the IRS and, often-times even worse, the state taxing authorities, have auditors, collectors, and other staff who are all Terminator-like in their robotic, inexhaustible relentlessness, toughness, and harshness.

Ah Taxman! Ah Humanity!

Yet the humanity, fallibility, and frailty of those seemingly Terminator-like IRS employees are often contributing factors to their relentlessness and toughness.

This is one reason (there are several) to have a professional representative handle the case and speak to the IRS for the taxpayer, rather than have do it himself, or herself.

The old saying, “A lawyer who represents himself has a fool for a client” may apply here, to taxpayers who decide to represent themselves, on those difficult occasions when they get tangled up with the IRS.

Another example: an IRS agent complained to me about another taxpayer, saying that she, the IRS agent, did not “like” the taxpayer.

More than “not liking” the taxpayer, the IRS agent said she thought the taxpayer “cheats,” or, if not “cheating,” then something must be very wrong with the taxpayer’s business or her record keeping, or both.

This statement of deep distrust, suspicion, frustration and indeed, anger, was made to me, the taxpayer’s lawyer, at a meeting where the taxpayer was not present.

Despite these powerfully negative impressions of the taxpayer, this IRS agent ultimately reduced the taxpayer’s tax bill. She reduced the tax bill because evidence I presented which the taxpayer gave me, strongly supported the reduction.

Plus, because the taxpayer herself wasn’t present at this conference, she was not there to remind this all-to-human IRS staffer how much the IRS staffer had grown to distrust and resent the taxpayer.

Instead, with the taxpayer represented by counsel,  the IRS staffer was more able to focus on the evidence supporting the taxpayer’s case rather than getting caught up in the all-too-human emotions of anger, distrust, resentment and frustration.

Every time this IRS agent did stray from the issues, though, and started thinking about the taxpayer, the agent just saw red – and one thing you generally don’t want is to wave the equivalent of a red cape when the IRS is snarling angry-bull-style, in an all-too-human bull-snarl (do bulls snarl?).

*          *          *

People, businesses, entrepreneurs, freelancers, and regular salried employees all too often get into trouble with the IRS by making mistakes they didn’t even know were mistakes — find out how to avoid problem-creating tax mistakes with my free report, 7 Big Mistakes Taxpayers Make and How to Avoid Them, by clicking here, now.

A San Antonio, Texas, woman was sentenced to 41 months in federal prison and ordered to pay $1.5 million in restitution to the IRS for her role in a fraudulent tax scheme.

In addition to the prison term, United States District Judge Fred Biery ordered that Terrell Diamond be placed under supervised release for a period of three years after completing her prison term.

According to court records, Diamond, along with her now-ex-husband and co-defendant, William Diamond, conspired to defraud the IRS in the assessment and collection of more than $1.5 million in employment taxes due and owing from November 1996 to June 2003.

The employment taxes owed pertained to temporary employment agencies owned and operated by the Diamonds, including Ameriforce and Primo Labor.

Both Diamonds pleaded guilty to the same charge: one count of conspiracy to defraud the IRS.

A revenue agent with the Internal Revenue Service has agreed to plead guilty to a federal tax fraud charge for filing a personal income tax return that claimed he suffered a loss in a real estate transaction when in fact he realized a substantial profit. (“Revenue agent” is the official title for the people at the IRS who audit tax returns.)

In a plea agreement, Jim H. Liu, 43, of Diamond Bar, Calif., agreed to plead guilty to subscribing to a false tax return — a charge that carries a penalty of up to three years in federal prison.

‘My Gain is Your Loss’ Shenanigan Uncovered and Confessed

Liu admitted he filed a false tax return for the 2002 tax year that improperly claimed a loss on his sale of a property in Pomona. Liu sold the property for a profit of more than $48,000, but he instead claimed a loss of more than $4,200.

The tax loss to the government, as a result of Liu’s filing, was approximately $14,642.88.

Can this guy keep try to keep out of trouble for even a minute or two?

Prosecutors allege Washington, D.C., Council member and former Mayor Marion Barry has failed to pay more $277,000 in back taxes.

In a recent court filing, prosecutors told the court the politician had not made a tax payment during a period in which he took a Jamaican vacation and ran for re-election to the Ward 8 council seat.

“There is no excuse for the defendant’s failure to make payments to the District of Columbia because, during this six-month period, the defendant nevertheless had enough time and money, for instance, to take a six-day vacation in Jamaica in Sept. 2008 as well as to run for re-election as a council member,” prosecutors told the court.

In 2006, Barry received three years of probation for not filing tax returns from 1999 to 2004.

If dentist Arlan R. Turley treated his teeth the way the Government alleges he’s treated his tax-filing obligations, he’d have cavities and one heck of a case of bloody, bad gums.

This 60-year-old Arizona man was indicted on two counts of willful failure to file a tax return and 20 counts of willful failure to pay over taxes. Turley operated the East Valley Dental Service in Mesa, Ariz.

The indictment alleges that the charges for failure to file are the result of Turley’s non-filing of his 2002 and 2003 income tax returns. In addition, Turley has not filed an individual tax return for a whole decade: 1997 to 2007.

The charges for failure to pay over taxes arise from Turley allegedly not turning over his employees’ payroll taxes to the government, again and again. (See http://lifelawandtaxes.com/not-just-for-bernie-madoff-or-king-tut-business-owners-build-devastating-pyramids-of-withholding-tax-debt-deducted-from-paychecks-but-not-sent-to-irs/ .)

If convicted, Turley faces up to five years in prison and a fine of up to $250,000.

Nashville, TN — A Tennessee man who operates a business installing complex sound systems in church auditoriums nationwide, pled guilty to two counts of failure to pay federal income tax. As part of his plea, he admitted that he owes the federal government more than $300,000.

After admitting guilt in August, 2008, the sentencing hearing took place in January 2009. The court sentenced Charles Grecco, 44, of Franklin, Tenn, to serve 6 months in prison, followed by one year of supervised release, and to pay restitution of $300,141.82 to the Internal Revenue Service.

According to the government, Grecco failed to pay more than $67,000 in federal income taxes for years 2001 and 2002 which was only two of the six tax years involved.

During the plea hearing, Grecco admitted that while operating the business, Sterling Group Audio, he did not make estimated tax payments as required by law even though he had funds to make those estimated payments on or before the due dates for making estimated tax payments..

The government’s investigation revealed that Grecco lived a lifestyle which prosecutors described as “lavish” during the time that he failed to pay his tax obligations.

Living a “lavish” lifestyle while not paying taxes drives the IRS crazy. Spending money on something else when a tax bill is due seems to make IRS agents’ and federal prosecutors’ blood simply boil. (Some may argue that living any life, even an un-lavish, plain one, while not paying taxes, may make more than a few IRS workers’ blood boil, but that’s something to take up on another day.)

Getting back to “lavish,” unpaid estimated taxes, and what it does to the IRS and prosecutors:

Think: indignant, huffy, angry, riled.

Think: red-cape-waved-in-front-of-snorting-bull.

Think: the girlfriend you broke up with when she didn’t want to break up with you.

Think: “Hell hath no fury ….”

(Then, though, it’s hard not to think of Ralph Waldo Emerson’s observation that “Of all debts, men are least willing to pay their taxes; what a satire this is on government.”)

Satire or not, though, Grecco did build up a significant tax debt.

And, satire or not, prosecutors made sure to identify what Grecco was spending money on rather than paying his estimated tax bills: Lasik eye surgery, elective plastic surgery, church donations (“generous” donations, to be sure), dance lessons, home-school tuition, several luxury vehicles, two expensive homes and a vacant lot (you know you’re really living it up when you splurge on a vacant lot!).

Grecco admitted that as of May 17, 2007, he owed more than $300,000 in taxes, penalties and interest for tax years 2000 to 2005, and then, to cap it off, during the sentencing hearing it was also revealed that Grecco had not paid taxes for 2006 or 2007.