When economic times are tough most American families curtail their spending habits, save more of their hard earned dollars and purchase only the necessities. Government should act similarly, unfortunately for taxpayers it does not. Faced with massive deficits growing at a record pace, federal and state governments are searching for every tax dollar it can find through increased audits, rather than looking for ways to reduce unnecessary spending and make government more efficient.
According to a federal and state tax analyst for H&R Block’s Tax Institute, “in times when more revenue is needed and the tax gap widens, absolutely the Internal Revenue Service is going to step up audits.” Another federal tax expert and Ohio State University professor recently stated, “you’re not going to find a document that says this, but it’s very clear that in a budget deficit, increased tax collection is another source of revenue.”
Since the end of the first session of the 83rd General Assembly, many House Republicans have been contacted by their constituents – individuals and businesses – regarding encounters with Iowa Department of Revenue officials conducting tax audits, billing and collection activities. Individuals, non-profits and small businesses who believed they were playing by the rules; operating under the same procedures they had for years are now being audited and questioned for the first time. In some cases, they’re being told they owe tens of thousands in back taxes, penalties and interest to the government dating back 10 years. Many complaints members of the legislature have received are similar, my filing behavior hasn’t changed and I pay may my taxes, why now? Why at a time when we are struggling to make ends meet is this happening?
Accordingly, House Republican Leader Kraig Paulsen penned a letter to Iowa Department of Revenue Director Mark Schuling asking these very questions. Specifically, the Republican leader questioned whether or not the Department has changed the scope and procedures on how it conducts its audits, if it establishes quotas of any kind or has increased audit activity as a result of Iowa’s ailing economy and projected budget deficits. The answer? No…sort of. The Department’s answer on quotas is somewhat unclear. While the Department claims there are no quotas it does admit “The Compliance Division does establish goals for hours spent, revenue established and revenue collected….based on the number of employee hours available for the audit programs…”
During these turbulent economic times individuals and businesses should not be undeservedly targeted.
As stated in the Republican leader’s correspondence, House Republicans believe all Iowans must pay their taxes but also must be treated fairly and respectfully. And, those responsible for enforcing Iowa’s laws should do so accurately and consistently. During these turbulent economic times individuals and businesses should not be undeservedly targeted. The hours and energy spent on complying with burdensome Department of Revenue paperwork and interviews, are hours not spent working to build small businesses that create jobs and contribute to Iowa’s economy. For individuals, it’s time away from work without pay, income eventually spent on goods and services the economy depends upon being consumed.
It is important for taxpayers to educate themselves on the rules and guidelines of the federal and state tax code. This can be confusing and frustrating. For information on federal tax compliance tips, individuals can visit www.irs.gov. To receive information on state tax compliance tips, individuals should visit www.iowa.gov/tax Moreover, if you’re trying to navigate through the grueling audit process, know your rights. The Iowa Department of Revenue has created a website outlining taxpayer rights, this information can be accessed at http://www.iowa.gov/tax/educate/78619.html