Beware The Power of The IRS
By Pete Fisher (02/04/07)
The holiday season is over and we made into the New Year. The W2 statements arrive and for the next two months people will be scrambling to have their taxes filed to avoid the massive penalties that the IRS imposes with interest rates that would make even a Mafia Don blush with shame. With taxes on gas, food, goods, community, state, federal, Social Security, Medicare, services, and a multitude of other fees and taxes, our backs are breaking and the last thing we need is a government sanctioned street gang to burden us any further.
With federal tax, state tax, and property taxes all due by the late spring, the burden is becoming a bit more harder to bear the past several years for many Americans who never had issues paying taxes before. And with that comes the growing number of people who are being audited and penalized as the IRS now audits at a rate of approximately 20%.
I have grown up never knowing anyone who was really in trouble with the IRS with the exception of folks here and there who found they owed money and griped about it. The past few years I have know a couple of people, both professionals by the way who found themselves on the losing side of the IRS for simple oversights.
One man I knew took his 401K savings out to pay his mortgage after his unemployment check fell short of supporting his mortgage. Upon taking the money out, he was taxed at a very high percentage before the check was even cut. So he figured he would take his losses and go on. He found when he filed his taxes that he was also not getting a refund back because this money he received placed him in a higher bracket, and the penalties he received caused him to owe the IRS about $3,000. He found another job, a lower paying one than his previous job lost to outsourcing that forced him to travel 5 days a week.
He called the IRS and tried to get in for a meeting to discuss some payment plans, but explained he needed to perhaps do it over the phone. Triple taxation with penalties, they would not listen to him and he asked them to release his bank account because he needed his money to survive. They refused. And he almost lost his home but for friends and family who bailed him out. But had he not had that help it would have been gone. A small penalty I can see. But a tax rate that makes the mob look benevolent is a shame to our government and a bane to our citizens
They said they would not discuss it further as he owed them. After 3 more months of trying to persuade them otherwise, the IRS now had his bill now at $5,000 due to “penalties and interest” and interest on the penalties and interest. So he made an appointment with the IRS and made payments plans. He missed one payment for whatever reasons, and without notice his paycheck was zapped at a rate of $500 per month. However, the interest and penalties did not stop. They figured he had enough money, forget his home and children. He did nothing after that and paid without a fight to the tune of over $15,000.
Another man I know sent his taxes into a local tax joint that ended up out of business. After 5 years he received a $3500 tax bill for a return that was supposedly never sent in. He found the IRS had done his taxes for him and figured he owed them. As he sat on the phone with them and faxed them the returns, they still argued he never filed. So he informed them he was going to take a vacation retain a tax attorney and get to the bottom of this.
He came home from vacation, and there was a letter from the IRS that needed picking up from the Post Office. It was sent back because no one picked it up. 10 days later he went to use his debit card and found he could get none of his money. The IRS, without a hearing or face-to-face meeting, had taken advantage of the fact he told them he would be out of town. They simply froze all of his checking account with no other notice leaving him to scramble to get money for his mortgage, utilities and cars. They told him it was not their concern, and by the way the penalties and interest have now reached $12,500 dollars. After spending a deal of money he hired a lawyer and after getting to the bottom of things found the IRS owed him, not the other way around. So they had to release his bank lien and send him a check.
But he only had 21 days to get this accomplished at a cost of $2500.00, or he would have lost over $7000.00 they had frozen. The IRS told him after all, it was THEIR money.
Reduced to having to borrow money from friends and family to pay the attorney his 50% prior to any work being done. But again, no hearing, no court date, nothing, just a seizure of funds as easy as Saddam or Stalin could have walked in and taken some mans’ property and assets.
But he did not get to impose the same rate of penalties and interest on the IRS that they imposed on him for their mistake. When the IRS errs, it is a mistake. When we err, it is a criminal act punishable by heavy fines and even imprisonment. And this IRS practice has become so prevalent that many companies are set up now to take between $2500-4500 dollars to get you out of the mess. Not to mention the tax attorneys and CPA firms that do the same.
With all the tax loopholes out there for big money, there remain fewer for the Middle Class. If you are in a state of poverty, you can get the debt erased. If you are not, the IRS figures you are not in dire need if you cannot pay your rent or mortgage until you present them with a notice of foreclosure or eviction. They will not work with you to free your assets unless you can show a hardship, and not being able to pay your living expenses is not considered hardship until it throws you out on the street. But by that time they already have your money and they are not going to give it back.
So why is it that with taxes one is considered guilty until proven innocent? Why does the IRS have the power of seizure that is illegal in police and military actions? Why can they impose penalties and fees that have an interest rate high above most Usury laws? And they get away with it using terror tactics like account levies that most people just scramble to pay off to get the IRS off their backs. Some commit suicide, others end up paying five times the amount they were owed with paychecks docked at high rates for years. Or for the small business owner having an IRS agent go directly to their clients and collecting money owed. Oh yes, it happens all the time.
Because of their tactics, people freeze up with fear and trying to negotiate with them is difficult because they know that there is a 99% probability that you do not know the tax laws and will bow to their wishes. They show no feelings, no sympathy, like cybernetic creatures they simply take without remorse or reason other than their own suspicion many times.
I am a proponent of taxes, just fair taxes. We could virtually eliminate the IRS by having a flat tax with nut the pages and pages of forms. We could save millions and millions by taking the taxes directly out at a fixed rate, with no loopholes or hiding funds, just a flat rate for citizens, businesses and imports. No hours and hours of paperwork just pay it out and be left of it. Our politicians always cry about tax reform but none of them seem to want it fixed. It’s an operation like Capones’ and brutal tactics bring in money. But think of how much we could save by eliminating tens of thousands of these strong arm jobs.
But is say write your Congressmen and Senators, and make this an issue every election until something is actually done. Millions of Americans are being terrorized every day, but from not radical Muslims, or Cold War spies, but by our own government.
Leave the IRS intact to catch tax evaders, and criminals as a smaller entity and hold them to the same penalties and fines when they have not given someone a proper refund. Make them pay the attorney fees when they are wrong, and take the power of seizure from them unless there is a hearing and a court order. Maybe the audits would lessen and the tax terrorism would stop or at least be greatly reduced.
Give us a flat tax or fair tax, and keep the IRS around only for going after real criminals and take their power from over the citizens. Reform our laws and reduce the need for the IRS except for blatant and truly criminal activity.
After all, what better way to catch a thief than to place another one on his trail?
Pete Fisher
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