Written By: Theodore M. David, Chairman, Emeritus
Current Items:
- Attention Non-filers, Under filers and Tax Cheats
- No Tips Lawyers
1) I’ll admit some of my tax bulletins are more about sarcasm than tax information. Maybe that explains why many people read them, but this one, dear friends and readers, is one you may want to share with your clients. Our system of tax administration relies on voluntary compliance. But you know as well as I do that some people are not complying. They come in different varieties, like the blatant nonfilers, for example. They boast they have never been part of the system and have been on the run their entire adult lives. Be careful to watch how assets are purchased in the name of children and grandchildren, keeping their wealth in a safe deposit box or under their Tempur-Pedic mattress. Under filers, on the other hand, figure that if the IRS isn’t satisfied with their attempt at filing a trimmed version of their real income, they should come and get them. Whether they are shaving their income or inflating their tax deductions, the result is the same. Lastly, there are simply tax cheats. These individuals bend the tax law to its breaking point by combining elements of non-filing and under-filing simultaneously. It’s such an easy game to play, considering the complicated tax laws and “positions” to be taken. Unfortunately, as is often the case, lawyers and accountants have been caught up as advisors in some of these nasty situations. But redemption for all of these people is at hand!
Now, to clarify, the IRS has a policy of voluntary disclosure, which may help these clients get some rest if they qualify. This bulletin is not about the voluntary disclosure policy. I know that was discussed in another bulletin, and you can find it in detail on the IRS website. This is much better than that. And it doesn’t take any research. While the demolition crews have been removing about a third of the White House to make way for a much-needed spectacular gold gilt ballroom, the wrecking ball has virtually done the same thing to the IRS. I hope you’re sitting for this one. In total, about 30,000 IRS employees have been gone since January 2025. Some of those were just fired, others were laid off, and still others took “buyout offers”. That amounts to between 25% and 30% of the Internal Revenue Service. The emaciated Internal Revenue Service now has about 65,000 to 75,000 employees. So now is the time for all good men to come to the aid of their party or perhaps to throw a party. With such diminished numbers which must have the consequence of reduced morale now is the time for all of these folks to come clean. If that was not enough add the fact that for the last month the government has been shut down. IRS does not refer to it as a shutdown but as a “lapse in appropriations.” IRS reminds: “the underlying tax law remains in effect and tax professionals should continue to help clients meet their tax obligations as normal.” So it looks like IRS employees are fewer in number and many are not in fact being paid. For nonfilers, underfilers, and tax cheats of all varieties this could be the opportunity that they have been waiting for. Join the system and get a decent night’s sleep.
2) There is some sorry news. The IRS has issued proposed regulations for guidance listing occupations where workers customarily receive regular tips under the new one big beautiful tax bill. With limitations these tips may be not taxable. And though I have looked carefully lawyers are not listed. Unless of course we can squeeze under the title called “entertainment and events” or “recreation and instruction”. So contrary to prior bulletins you should remove your tip jar from your conference room.
Questions or Comments should be sent to: Tdavidlawyer@gmail.com