EDIT 3: As promised, here is a link to the free open letter

EDIT 2: OP's helper here 3 days later - I forwarded some additional high-voted questions to Mike, which he then answered by email and which I just added to the AMA. These answers include a detailed response to a bullet-pointed critique, reprising themes addressed in part in this earlier response made during the active IAMA period. Here are his three suggestions for immediate changes that could be made to improve the IRS. He also answered a number of questions in r/Economics where this AMA was cross-posted. I do hope latecomers to this AMA realize that Mike does not profit from this AMA or book - if anything, quite the opposite. I will be back one more time to update this AMA with links to the full free digital version of the open letter. Thanks again!

EDIT 1: Thanks for all of your questions - feel free to keep asking and voting, but I have to depart for today. I am leaving for a trip but will try to get back on here to answer some additional questions a few days from now. If you want a free digital copy of the full open letter, drop back by this coming week for the link! I had a great time today and was very impressed by the diversity and high caliber of the questions and do hope my answers were informative. If you want to see change: remember to write your congress(wo)men and get out the vote!

Michael Gregory here! IRS Employees are forbidden from lobbying Congress, leaving former agents and insiders like myself to raise the alarm about what is happening to and within the agency. With that in mind, I have written an open, public and free letter (summary here and extended excerpt here) to our leaders titled The Wheels are Falling Off the Wagon at the IRS in hopes of drawing much-needed attention to an ongoing crisis impacting American taxpayers.

I am excited to be with you Redditors today and hope to answer as many questions as possible. Please feel free to read more below and ask me (almost) anything about this open letter and otherwise! I am also being assisted today by a veteran Redditor who will help me address Reddit-specific questions (ducks and horses?).

My short bio: At the IRS, I was a specialist and territory manager for 23 states. I have testified in US tax court, written several books and twice won IRS Civil Servant of the Year awards. I have a BS, MS and MBA and am currently a qualified mediator with the Minnesota Supreme Court. In my younger years, I also worked for the US Army Corps of Engineers and was a sewer inspector.

My Proof: https://twitter.com/MikeGregConsult/status/523167713305583616

Context: This publication was made to raise awareness and motivate voters for the upcoming elections. Congressman Darrell Issa, the wealthiest man in Congress and Chairman of the House Committee on Oversight and Government Reform, has investigated the Lois Lerner Tea Party concerns with a dozen investigations costing over $12 million and collected over 67,000 emails while not finding any illegal activity at the IRS. There certainly was mismanagement, poor decision making and inappropriate acts by the IRS. These should be addressed. However, while focusing on this headline-catching case, the Committee has lost focus and severely underfunded the IRS. This cripples the agency hurts law-abiding taxpayers who want and need help from the agency – it also allows identity thieves and criminals to go unprosecuted, all at the expense of everyday Americans.

Disclaimers: While I can give my opinions on tax law and the state of the IRS, I cannot give you tax advice. I am open to other questions but am hoping to focus on the pressing political issues surrounding the current state of the IRS, its dysfunctional elements and how we can improve the agency for the benefit of honest US taxpayers.

Resources: For more about me and other books I have written, you can visit my website at MikeGreg.com. For a preview, click here - for a free digital copy of this open letter, stay tuned on Twitter or my blog. Hard copies of the book can also be purchased from Birch Grove Publishing on Thursday – any donations for the digital copy you may wish to make will go toward reimbursing the publisher for costs of production.

Comments: 2111 • Responses: 68  • Date: 

mough600 karma

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

mikegreg1017 karma

  • 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!)

HJonGoldrake318 karma

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?

mikegreg602 karma

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.

IUhoosier_KCCO28 karma

Address issues related to inversions

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

mikegreg61 karma

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

powernut-12 karma

Fund the IRS properly

Even the freaking IRS is asking for a handout.

mikegreg15 karma

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.

phiber_optic0n355 karma

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?

mikegreg485 karma

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.

Kazooguru248 karma

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.

mikegreg127 karma

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.

OpticalDelusion115 karma

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?

mikegreg134 karma

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!

vrgr23251 karma

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

mikegreg457 karma

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

alent1234225 karma

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

mikegreg139 karma

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!

Earthboom133 karma

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?

mikegreg136 karma

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.

xwing_n_it130 karma

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?

mikegreg140 karma

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

brkbrk125 karma

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

mikegreg77 karma

I have not! Would you recommend it?

victorykings112 karma

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?

mikegreg32 karma

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.

dcviper104 karma

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.

mikegreg76 karma

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.

SteevoR59 karma

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?

mikegreg99 karma

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).

LiquidCoax42 karma

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?

mikegreg75 karma

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.

pingy3433 karma

Are you worried about getting in trouble?

mikegreg58 karma

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.

sychou31 karma

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?

mikegreg38 karma

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!

TheBeardedGM6 karma

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

mikegreg10 karma

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.

Masterewok4 karma

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

mikegreg6 karma

Whistleblower program here

phiber_optic0n3 karma

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

mikegreg5 karma

International tax.

Arpikarhu2 karma

what is your opinion on the Fair Tax plan?

mikegreg2 karma

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.

Artector422 karma

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?

mikegreg11 karma

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.

aes0p815 karma


mikegreg3 karma

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

photoddgrapher-8 karma

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.

mikegreg1 karma

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?

Sewidd2 karma

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?

mikegreg2 karma

Good question - responses here and here

_flips_0 karma

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

mikegreg1 karma

But I just had tacos! Still, thank you!

diegojones40 karma

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.

mikegreg2 karma

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!).

diegojones41 karma

Thanks for the response.

mikegreg1 karma

You're very welcome!

photoddgrapher0 karma

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

mikegreg1 karma

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

photoddgrapher1 karma

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? :)

mikegreg1 karma

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)

[deleted]0 karma


mikegreg2 karma

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.

[deleted]0 karma


mikegreg2 karma

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.