Posted on: Sunday, March 14, 2004

Tips for staying out of trouble with the IRS

Washington Post

After a dozen years as a revenue officer for the Internal Revenue Service — that's a tax collector — Richard Yancey knows a few things about compliance.

Here are his tips for staying out of trouble with the government.

• Do file and pay on time. If you don't, you'll wish you had. The IRS charges penalties and exorbitant interest, plus you may have someone like me knocking on your door ... or your neighbor's door ... your parents' ... your employer's. ...

• Do file your return, even if you can't pay. The failure-to-file penalty runs at 5 percent per month, up to 25 percent of the total tax owed.

• Do keep in mind that the IRS categorizes "noncompliant" taxpayers as three types: Will Pay, Won't Pay and Can't Pay. If you're a Will Pay or Can't Pay, you're pretty much in the clear. Won't Pays keep tax collectors in business (we called it job security).

• Do take the initiative if you owe on your return. Call or write the appropriate IRS office and ask for a payment plan or additional time to pay. They won't waive the penalties and interest, but it's better to "take the bull by the horns" before the bull buries one of those horns in the middle of your back.

• Do expect courtesy and professionalism from the IRS personnel you deal with. It's the law! Report any rude, obnoxious or bullying-type behavior to the person's immediate supervisor.

• Do know your rights. You can appeal almost any decision the IRS makes.

• Do keep good records and all records of deductions for at least three years, in case you're audited.

• Don't lie! Especially when it comes to taxes. You may get away with it for a year or two, but eventually the IRS will catch you. Currently the agency is cracking down on tax cheats, in all income brackets.

• Don't claim any more exemptions than you are legally entitled to. Your employer is required by law to send questionable W-4s to the IRS, and the IRS does look unkindly on people who try to bypass the system.

• Don't trust anyone — not anyone — who tells you that you don't have to pay income tax, particularly if it's someone who is trying to sell you something. Everyone who makes over a certain annual income has to pay. Anybody who tells you differently is either pulling your leg or trying to pull your wallet out of your pants.

• Don't assume the worst about the IRS. Most of its employees are well-trained professionals who are rewarded for helping taxpayers satisfy their tax obligations. Of course, in every crop of apples (and the crop is very large in the IRS) there are a few rotten ones. If you're unfortunate enough to run into one of these, report the conduct and ask that your case be reassigned.