IamA 28-year veteran of the Internal Revenue Service – having left IRS, I am free now to reveal how the agency is failing in its mission to serve the American people and have just written a 67-page open letter to Congress on that subject. AMAA!

If you could make three immediate changed to the current tax code what would they be and why?

• 1) Simplify the internal revenue code - if you took 60 lines per page with no margins (that's a lot of lines) the code is 34.5 inches high. The regulations are 3.5 times larger. That's almost 13 feet high. Nobody can understand all of that. Congress has passed more than 4,000 code sections in the last 10 years - that's more than 1 code section per day. When I started, I could hold the internal revenue code and the regulations in my hand! - I've actually got them at home.

• 2) Address issues related to inversions and international tax

• 3) Fund the IRS properly - increase funding consistent with the recommendations of the non-partisan IRS oversight board (2.3 Billion!)

Follow up: what is the reason beyond this exponential growth of the code? is it motivated by the necessities of an increasingly complex business environment, or are there other factors at play?

In general, I would argue, from a historical perspective, when representative Rostenkowski [spelling fixed] was the chairman of the committee he made sure he understood all changes to the revenue code. When he was convicted and left his post the growth in the revenue code became exponential.

After that it became a game of making changes by those who wanted to help out particular constituents rather than fully exploring policy implications nationally - that continues to this day.

Address issues related to inversions

do you think the treasury's new regulations were enough? abbvie seems to not be inverting anymore.

That remains to be seen - any laws made by people will be met with people intending to circumvent the intention while meeting the letter.

Fund the IRS properly

Even the freaking IRS is asking for a handout.

The IRS isn't asking for a handout - the IRS is saying: given unfunded mandates and the mission presented to the organization they don't have the funding to carry out their tasks. We have to ask: is it important for the IRS to carry out its mission? If not, so be it. If it is important to collect 2.9 trillion dollars, then we all have an interest in ensuring the IRS is adequately funded.

Do you see a collusion between paid tax preparers (such as H&R block and Intuit) and the IRS to keep the tax code complicated?

I believe that the industry of tax preparers appreciates having a more complex tax code to keep them in business. I don't believe the IRS wants a more complex tax code.

My Dad is an accountant, has been for 50 years. He has always wanted a simplified tax code. Too many loopholes that corporations take advantage of and he feels the complexity of the codes hurt individuals. He really feels bad about the current state of the IRS. He has seen most of the good agents leave. Now it's cutthroat, with young agents who won't compromise.

The IRS has 11 divisions dealing with external stakeowners. Small business self-employed has concerns with issue resolution. The commissioner has an advisory committee appropriately named the IRS Advisory Committee made up of accountants like your father. They have recommended to the commissioner that the current resolution system in SPSE be revamped because it is not working. I concur with his overall observation.

What's your opinion on a government owned website that allows citizens to calculate and file taxes, skipping these middle men? Is the tax code too complicated, such that this would be a disaster? Or do you see this as something simple that is not done for political reason?

The IRS is not funded to initiate or create this type of an option so when the IRS went to efiling returns they partnered with the private sector and their software to incorporate changes in tax law. Could the IRS do this? I believe they could. Is there any interest on the part of policymakers given the private sector's current domination of the market? I don't think so. Write your congressman!

Do you believe that reptilians are in fact running the IRS?

I have not had any experience with lizard people, but to be fair: I have spent limited time in Washington, DC.

why can't the IRS take evidence by email or some other digital means? i had an audit go into 3-4 years and spent $200 printing crap at Fedex and sending it to the IRS and then having it sit in the mailroom

The IRS has 13 different divisions, 11 deal with external stakeholders - each has its own policy. In some instances the IRS will accept electronic information and the IRS does use and accept faxed materials. The IRS is prohibited from sending you electronic responses without your initiative/permission.

If the IRS were funded properly to allow this to happen with encryption (such as with the Criminal Investigation Division) this would indeed make things much easier for the American public!

Hi, with the tax code being near impossible to understand by any one person, how does the IRS keep everything in line then? How do they prosecute anyone without forgetting about some obscure part of the code?

The IRS has 13,200 revenue agents and about 2,000 specialists. I managed 1/4 of the country's specialists in engineering and valuation issues, with specialization comes an added degree of due diligence and accuracy. It's like if you go to a doctor you get referred to a specialist - the same thing is true at the IRS.

There has been talk of simplifying the tax code for a long time. Has it ever, in your memory, actually happened? Has the legislature ever passed a bill that significantly reduced the complexity of the tax code?

Good questions! No. And ... maybe, I honestly don't know for certain, but clearly the trend is the opposite direction.

Did you read David Foster Wallace's 'The Pale King', which examines the droll lives of IRS employees?

I have not! Would you recommend it?

I am an American expatriate living overseas. While I am very familiar with IRS Publication 54 (you better believe I've studied that thing) which addresses the taxation of foreign-earned income, it is nevertheless disheartening to be surrounded by people from all over the world and be the only nationality among them that still has to pay income tax, despite not being physically present in the US.

My question for you is this - are expatriates more likely to be targeted for auditing since they qualify for a certain amount of tax exemption?

Also, for someone who is an employee of a foreign entity (non-US company) what document(s) will the IRS accept as a declaration of my income in lieu of a W2, as this company is not required to produce such forms?

My question for you is this - are expatriates more likely to be targeted for auditing since they qualify for a certain amount of tax exemption?

Not to my knowledge. I'm not aware of any filter like that.

Also, for someone who is an employee of a foreign entity (non-US company) what document(s) will the IRS accept as a declaration of my income in lieu of a W2, as this company is not required to produce such forms?

I don't know. You might try IRS.gov and put in 'declaration of income' to start a search.

I read somewhere that the IRS has enough information just from business payroll tax filings, that for the average taxpayer filing a 1040A or EZ the agency could fill out a return and send it out. Assuming no major changes in situations like buying a house, is this true/workable? I'd love to get a letter from IRS with my 1040 already filled out. I could review it for accuracy and sign it and return it.

But I realize that H&R Block, et am, will never allow that to happen.

Yes, more or less. There are other countries in the world (Netherlands, I think?) that have properly funded their tax systems and have been proactive to address this type of situation - could it be done here? I think it could. It would mean a funded mandate from Congress.

Let's say someone is due a refund, but didn't file years ago, what then?

Also, what is your opinion on a flat tax, VAT, and luxury taxation?

Let's say someone is due a refund, but didn't file years ago, what then?

There is a three-year statute of limitations you can explore at IRS.gov

Also, what is your opinion on a flat tax, VAT, and luxury taxation?'

The IRS has conducted research on all of these areas. Flat tax: found to be politically unacceptable by Congress because it increased the tax rate for about 80% of Americans. VAT: found internationally to increase level of non-compliance by those who run cash businesses, causing rate of the tax to increase over time. Luxury taxation: any tax on any articles should be explored to determine the impact on the items being taxed and on those who are being taxed to insure unintended consequences are evaluated before implementation (and proper application).

So why such the lid on you guys? Why can't you lobby Congress just like any other American can? Why can't you give tax advice either?

IRS employees are civil servants constrained by the Hatch Act and have a Code of Conduct that sets policy (would suggest reading up on that to learn more) - the basic idea is that we should be there to carry out the policies of the US government and not to lobby for ourselves - we are to be non-partisan, independent and dedicated civil servants. FWIW, I myself have someone review my return every year, too.

Are you worried about getting in trouble?

In coming out with my book/open letter I have had two people contact me regarding my own personal safety and with regard to taking down my website and/or moving my financials because there will be people who are very unhappy with the information in the book. I discussed this with my spouse and we agreed to go forward and hope for the best. I think the issue is big enough and the IRS could crash without adequate funding. And there are those who want to see that happen - and they do not have a backup plan.

Do you believe politicians (on both sides) like a complex tax code because it's how they are able to provide favors to their pet industries, initiatives, etc? Does a straight and simple tax code takes some power away from politicians?

There are many examples of Congress caving to lobbyists and perpetuating industry- and/or company-specific tax breaks, ultimately at the expense of the American people. A tax code not being amended daily (as we have now) would definitely reduce the number of loopholes!

If you were given the reins, how would you allocate and spend the limited budget that the IRS currently has?

That is a really tough one - I was a controller and over 97% of our budget is actually earmarked by Congress, giving only 3% discretion within the field. I would look into how we can apply resources to best increase voluntary compliance, which in turn brings in more revenue to the Treasury and combats tax evasion.

By the way, here is a PDF of this year's desired budget - hard to say without more research exactly where to add, subtract and rebalance.

How do I report a business owner that has 4 nearly full time employees that he pays under the table to avoid taxes?

Whistleblower program here

What do you see as the biggest source of uncollected revenue for the US?

International tax.

what is your opinion on the Fair Tax plan?

Ah, consumption/value-added tax - I worked in research for 4 years and we actually analyzed this. Look at the rate of the VAT for the EU and Canada and you can see the rate has continued to increase due to lack of compliance due to those who operate on a cash basis. Presenting that to policy makers in Congress, the issue dropped.

So, I'm simple terms, what are the issues with the IRS? I understand being underfunded, but are things not being enforced, people slipping under the radar?

You can see a few main points from the open letter here - full book out next Thursday - but in the meantime: the short answer is yes.

Take the problem of identity theft: In 2009 there were 59,000 identity thefts from the IRS associated with fraudulent refund scams. In 2013 there 3,000,000 amounting to $5.2 billion in theft. It is projected there will be $21 billion by 2016. Should the IRS be funded to prevent this from happening?

Also: The IRS historically has prepared tax returns for taxpayers seeking its help, particularly for low income, elderly, and disabled taxpayers. Ten years ago, it prepared some 476,000 returns. That number declined significantly over the decade, and the IRS recently announced it will no longer prepare returns at all.

We are playing politics with an agency that collects 90% of the revenue for the federal government. Taking a gamble on drastically cutting the IRS budget and not exploring the consequences is a risk that America cannot afford to take.

Wow

Glad to see we are raising awareness - that's just the reaction I hope others will have and take action based on!

Correction. Your agency was playing politics with the elections by targeting harrassing and silencing groups deemed a threat to the incumbent administration. Then proceeded to obfuscate and allegedly attempt to hide evidence from congress.

That is the most egregious acts of politicization that an Agency that has it's own court system could enact against the American people.

In my mind this much power over Americans lives should never be given to an agency like this. What's more scary is now IRS agents are well armed. Do you see how it is that congress and the American people have such a distrust of the Agency?

I agree with budget cuts. Until the IRS can comply fully with congressional investigations and clean up their act, they deserve no additional funds. We also need to find out who, at the administration was coordinating this.

To be fair, I have interacted with IRS agents, support and managers and they are very nice and professional people. My experiences, whether I owed or was due a return, were always professional and courteous.

My thoughts are to institute a fair tax, drop the rates and loopholes, and institute a minimum tax, where everyone must pay something and as such have a stake in how their government is ran. When the government comes knocking for more money, there will have to be accountability.

1) Playing politics: Look at what she has to say and note that the investigation continues - let's not jump to conclusions. There have been 12 investigations so far and no criminal activities found, but clearly some mismanagement by the IRS.

2) Budget cuts: these budget cuts impact the American people, not enforcing tax law against those who break it and not helping people who need and deserve it.

3) Glad you have had a good experience with the IRS!

4) Regarding your thoughts, the world of tax is very complex and before applying any solution it is important to vet the impact across all the tax returns filed each year to avoid unintended consequences. Reducing loopholes is absolutely key.

Almost all of us pay in. There are those who say 50% of Americans don't pay federal taxes - and people have turned it into an urban myth. I don't understand that because the facts don't demonstrate this. Personal comment: even my brother-in-law who has some disabilities and cannot drive a car but can be a dishwasher (made $13,000 last year) paid $700 in federal income tax. So where does this not-paying-50% come from?

Thanks very much for doing this.

Do you think the "flat tax" has any foothold in becoming even possible. Even if you don't, could you summarize the implications please?

Good question - responses here and here

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I would say that they don't - they enforce the tax law and millionaires are audited at a higher rate. That said, the rich are good at changing the law, and corporations are good at lobbying for loopholes.

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No - but there are a lot of good qualified people out there who can! And if we better fund the IRS, they might be able to go back to helping more people with their taxes, too.

will you please do my taxes? i can pay in tacos

But I just had tacos! Still, thank you!

Do you think the targeting of the Tea Party members was political or just good audit procedure? As a CPA I think it just makes sense to look closer at people who openly proclaim they don't like taxes.

I think it was not political and was poor management by the IRS and I do think it was wrong. There is a lot about this in my open letter, too, but for now: it's been corrected and we should move on and fund the IRS to carry out its mission properly.

The IRS targets those taxpayers that need the most enforcement based on objective standards and not political standards - hard to do that just based on a name, but I do see your point - it's just that the IRS is and needs to be apolitical (but remember: employees vote!).

Thanks for the response.

You're very welcome!

And are in a union that funds democrat campains. I agree the IRS needs to be more apolitical and be removed from unions.

The IRS does not fund Democratic campaigns. Can you clarify?

Mike. I said in a union......that funds Democrat campaigns. The NTEU. Thanks.

EDIT: Thank you for doing the AMA. I appreciate it, even if we disagree on some points. You shall be known as good guy taxman. Reddit can we come up with a new meme here? :)

Ah yes, the NTEU funds candidates regardless of party concerned with the same issues as NTEU members - to be fair, though: most of those candidates are democrats. Thanks for your thanks, and for clarifying!

Good guy taxman - excellent! (My helper says: someone put him up in /r/AdviceAnimals)