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It’s Possible That the IRS Is Partly to Blame for Postal Workers Going Postal

Posted on by Caleb Newquist

Our favorite corner of the Federal bureaucracy, the Treasury Inspector General for Tax Administration, has come out with a new report today that admits that the IRS current method of sending notices and letters is costing us – taxpayers – millions because so much of it is undeliverable. This happens for various reasons, including nearly 25% of instances where recipients may or may not have physically threatened their mail carrier.


Press release (our emphasis):

TIGTA Report: Current Practices Are Preventing a Reduction in the Volume of Undeliverable Mail

The Internal Revenue Service’s (IRS) current method of sending notices and letters is costing taxpayers millions of dollars because it results in a large amount of undeliverable mail, according to a report publicly released today by the Treasury Office of the Treasury Inspector General for Tax Administration (TIGTA).

The IRS sends out approximately 200 million notices and letters each year to individual and business taxpayers and their representatives at a cost of $141 million. In 2009, approximately 19.3 million of those mailings were returned to the IRS at an estimated cost of $57.9 million.

TIGTA assessed whether the IRS can reduce the volume of undeliverable mail. Its review of a random sample of 331 notices and letters returned to the IRS found that 37 percent were undeliverable because of invalid or nonexistent addresses; 35 percent had the wrong address; 24 percent were refused by the taxpayer or the taxpayer was not at home to receive the certified or registered mail; and four percent were returned for other reasons.

TIGTA recommended that the IRS allow taxpayers to submit a change of address over the telephone and improve its systems for identifying known bad addresses. TIGTA also recommended implementing a standardized procedure for processing undeliverable mail.

“The Internal Revenue Service needs to take advantage of the latest technologies and systems now available to cut down on undeliverable mail, thereby saving the taxpayers money,” said J. Russell George, the Treasury Inspector General for Tax Administration.

In response, the IRS agreed with all of TIGTA’s recommendations and has begun the process of planning to implement them.

So, in other words, the IRS is partly responsible for several instances of the following:

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Man Who Claimed $23 Worth of Vegetables Triggered an IRS Audit, Explains His Rationale

A couple of weeks ago, we brought you the tale of Don Dunklee, who claimed that he was audited by the IRS for a paltry $23 in vegetables from his garden. At the time, w Mr Dunklee could have come to such a strange conclusion, considering that it’s pretty obvious the IRS’s efforts at closing the tax gap would be spent in better places than the organic vegetable farmer dynamic.

And as it happens from time to time, the subject of our post reached out to us directly (Big 4 CEOs should take a hint) to explain the situation further.


You see, Don – who is a bit of inventor but not when it comes to stories about tax audits – farms as a hobby and a woman who accepted some vegetables from him stuffed a wad of cash in his pocket that he reluctantly accepted:

I work off farm for Walgreens as does my wife. We reported our entire incomes from our employer as well as the $23, and used only the standard deductions provided by the IRS as we do not have enough “expenses” to write off deductions. The $23 was a lady looking at starting her own organic farm who I refused money from. She insisted to the point she would have been offended had I not kept the money she shoved in my pocket. I kept the cash out of respect to her and reported it as additional farm income. I have a 23 acre farm that I have been building for 27 years with the infrastructure so I can have a farm business when I retire in a few years. People visit my farm to see my off grid solar/wind system, my solar charged electric scooter [Ed. note: see above], and my organic vegetable production. I give away any vegetables anyone wants as I grow much more than I can harvest for myself, in part to learn how to produce enough to make a small retirement income later on, and I like to show off my veggies/farm/lifestyle.

Then Don informed us that he fell victim to the Geithner tax malady:

I do my own taxes. I tried TurboTax for the first time (won’t again) and the $23 was reported, rightly so, as farm income. (investigator suggested I can make up to $400.00 and should consider reporting on the other income line rather than farm income during the end of our interview when she agreed our taxes were correct and made no changes). TurboTax created a form F, farm income for the $23, reported. I claimed no expenses for growing, as I do not have a true farm business.

Then Don gets to the crux of the argument behind his belief that the audit was not “random”:

Farming is my passion/hobby. Had our audit been a true random audit I believe we would have had a general agent and general tax officer doing the audit with questions and info requested related to all of my employment reported. I believe this was a targeted audit as the title of the investigator was “small business and self employed” which does not fit the nature of my return. Her questioning was often off topic from the particulars of my return (fishing?). I would not have a problem if the IRS would be honest and say something to the effect, “we would like to audit your return as we see some irregularities we need clarified.” This might help build trust in the IRS. Knowing they have powers that some consider above or outside of the law in how they deal with taxpayers I was worried. The entire process is intimidating. I do not like feeling like a criminal for being honest. I could not afford legal help, which their literature suggested, further intimidating information they provide creates the impression one is in trouble. I hope this helps clear it up a bit for you.

Giving this a little more thought, we aren’t really surprised since the IRS has shown the willingness to shake down taxpayers for a sum that wouldn’t buy you a Hershey bar in a Mad Men episode. Don told us that he doesn’t have any ill will towards the IRS but he wonders if sometimes they can be a tad misguided, “I do have a lot of respect for the IRS and their mandated task, however I wonder if their very task generates a lot of problems.”

Not sure if the IRS is into self-reflection but that’s why we have TIGTA, s’pose. Thanks to Don for reaching out to us and now that his solar-powered scooter is getting a little more exposure, KPMG (and other firms looking to reduce their carbon footprint) may have a decent alternative to the sherpas.

The AICPA Doesn’t Mind If You Copy and Paste Their Letter for the Expressed Purpose of Telling the IRS That the Preparer Regs Suck

The AICPA is following the ABA’s strategy of mass letter sending by urging its members to inundate the IRS with tearful pleas to reconsider the Service’s Tax Preparer Registration Proposal.

The issue is so serious that the Tax Vice President, Edward Karl, went on the Hill today to testify about the AICPA’s concerns, in what had to have been one raucous hearing:

The AICPA has serious concerns that the proposed IRS regulations are an overreach and would place immense burdens on CPA firms, particularly small- and medium-size firms. Further, the AICPA questions whether the IRS has adequately examined the costs that would be imposed on tax preparers and American taxpayers.

The IRS has proposed four broad new requirements for paid tax return preparers including: mandatory registration, application of enforceable ethical standards, competency testing and continuing education requirements. At [today’s] hearing, the IRS specifically requested comments about registration and the fees tax preparers will be charged for newly required personal taxpayer identification numbers, or PTINs.

While the AICPA has consistently supported the IRS’s efforts to increase tax compliance and elevate ethical conduct through the adoption of a registration process for paid tax return preparers, the AICPA does not believe other elements of the policy are fully justifiable or necessary, according to Karl.

The AICPA is urging all of its 360,000 members to contact the IRS about the proposed regulations to express opposition to elements of the plan.

Adrienne urges everyone to do the copy and paste thing ASAP and since there’s no mention of the IRS being anti-form letter, then we’d probably say that it’s safe to proceed with the letter with the AICPA’s language.

That being said, that’s a pretty boring approach and if you can muster the passion of either side of the fair value debate, we suggest you write from the heart.

It’s Official, Finally: Charles Rettig Is the New Commissioner of the IRS

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