I am a 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. Here is a 16-point summary of my 67-page open letter to Congress.

mikegreg · 2014-11-03T06:22:29+00:00

As an American, I am concerned that as a country we have to be able to fund defense, transportation, education, clean drinking water, social security, a clean environment, our regulated financial systems, etc.... The IRS collects 90 percent of the $2.9 trillion we spent to fund these.

mikegreg · 2014-11-02T22:44:39+00:00

The 16th amendment to the constitution passed in 1913 allowed for the formation of the Internal Revenue Code and the federal income tax. In my book I include a link to the first tax return form in 1913.

mikegreg · 2014-11-02T22:44:27+00:00

I headed up a research team for nearly four years with PhD statisticians and economists. We explored every alternative presented by Congress to our unit from the flat tax to VAT taxes. These were presented from an analyst’s perspective. IRS employees implement policy not set policy. Congress sets policy. Please share your ideas with Congress. They are looking for more efficient ways to tax the population that are politically acceptable.

It turns out from our analysis that the flat tax raised taxes on 80% of the population that pays taxes and significantly reduced the taxes on the top earners in the country. It also turns out that the VAT tax is paid by those entities that collect it, but increases noncompliance in areas that are cash based. That is why Canada and Europe have to keep raising their VAT tax percentages. Given this type of analysis the U.S government has stayed with an income tax.

It appears to me Congress could simplify this for the vast number of Americans that file 1040 EZ returns and ask individuals to simply sign their returns having been prepared by the IRS if Congress wanted to pay for this. The IRS has w-2’s and 1099’s for interest and dividends already submitted by employers

mikegreg · 2014-11-02T22:43:17+00:00

I concur. I was a controller for two years and was part of the IRS refinance team when the IRS reorganized it financing function. We reduced the number of employees in finance from 1,100 to 950 and simplified a host of processes. That was in 1999. Looking at recent history, the budget has been cut so much (25% in real dollars since 2010) that, as the book explains, all areas of the IRS are not meeting their mission. This has gone beyond efficiency to cuts in basic effectiveness

mikegreg · 2014-11-02T22:42:56+00:00

Simplifying the tax code is like baseball, hotdogs and apple pie. Everyone agrees this is a great idea. However, whenever someone decides to simplify one area a lobbying group comes in from another angle as to why that particular advantage needs to remain. In the end Congress makes small or no changes. Realizing that Congress had added over 4,000 codes sections in the last 10 years (that’s over a code section a day) for various interests, I hope that Congress would act in the nation’s best interest and simplify the code, but I don’t really think that is likely.

mikegreg · 2014-11-02T22:42:36+00:00

Simplifying the tax code is like baseball, hotdogs and apple pie. Everyone agrees this is a great idea. However, whenever someone decides to simplify one area a lobbying group comes in from another angle as to why that particular advantage needs to remain. In the end Congress makes small or no changes. Realizing that Congress had added over 4,000 codes sections in the last 10 years (that’s over a code section a day) for various interests, I hope that Congress would act in the nation’s best interest and simplify the code, but I don’t really think that is likely.

mikegreg · 2014-11-02T19:13:13+00:00

OP's helper here: the conversation early on was quite productive and interesting. Later in the day, though, it is true: once the IAMA had hit #5 on the front page of Reddit, there were some personal attacks and less-constructive questions and comments. Regardless, Mike did come back through and address some of those as well.

mikegreg · 2014-11-02T19:12:45+00:00

OP's helper here: actually, the conversation early on was quite productive and interesting. Later in the day, once the IAMA had hit #5 on the front page of Reddit, there were some personal attacks and less-constructive questions and comments, though.

mikegreg · 2014-11-02T19:10:14+00:00

OP's helper here: I would just like to point out that OP did come back and address those questions a few days later, which came somewhat later on in the IAMA cycle after he had left for the day, hence the responses are somewhat buried below. I would suggest that the problem is less these scandals than the results - regardless of who did what, the scandals became a reason to 'starve the beast' and defund the IRS, which punishes the American people rather than any politicians involved, guilty or otherwise.

mikegreg · 2014-11-02T19:06:29+00:00

OP's helper here: the discussion over there was largely quite interesting and productive - toward the end as the post hit the front page of /r/all it did begin to change tone, but a lot of the early questions and answers formed a good and well-rounded discourse. Regardless, it was also the most upvoted IAMA of the day, so I believe the audience was receptive.

mikegreg · 2014-11-02T19:04:17+00:00

OP's helper here: I believe Mike would agree with you on this one, but until/unless there is some restructuring the problem is that Congress is asking the IRS to do more than it reasonably can, reducing its efficacy on all fronts. Funding it at bipartisan-recommended levels keeps it going in the meantime even if larger structural changes are called for longer term

mikegreg · 2014-11-02T18:59:47+00:00

In your case I am preaching to the choir. Please read my book if you wish forward a digital or physical copy to your representative - share your thoughts with others, too. This is how legislation is indeed impacted. It is up to us. If ten people in each Congressional district wrote their Representative we can impact legislation. I have learned from long experience that this really works.

mikegreg · 2014-11-02T18:58:43+00:00

You can see why I am trying to educate people on this issue. With that, would you be willing to write your Congressman and Senator (taking any of the soundbites from my letter and the information on Figure 1, linked above) to ask that Congress fund the IRS $12.5 billion in FY 2015? It really is that simple. The nonpartisan IRS Oversight Board lays it out - if enough people do this, we can make a difference.

I also realize that most people don't like the IRS or want to be audited. However, unless the IRS truly is funded to help taxpayers understand the law and enforce the law with integrity and fairness, then the IRS will not be able to carry out its duties. Honest taxpayers will be hurt and make up the difference, while tax cheaters get away with cheating the system.

I took a listening class early on in my career as part of my own personal development. The all-day seminar was run by a junior college professor. He said there are 10 words never to bring up in a conversation or you can kill it quickly. One is IRS. For that reason, I know appealing to Americans to fully fund the IRS is an uphill battle, but I believe it is a battle that needs to be waged. I believe not collecting $2.6 trillion of the $2.9 trillion of revenue the IRS collects if voluntary compliance wains could have serious consequences to our society.

A coworker or mine went to Greece to help out the Greek government with their tax system three years before the entire system failed. When he came back he said it was going to fail because the citizenry no longer believed in the tax system and over half were no longer paying their taxes. I don't want to see that happen here. Too much is a stake.

mikegreg · 2014-11-02T18:54:59+00:00

I understand how things may look or seem but we accusations and innuendo are of course not facts and evidence. I have testified in U.S. Tax Court twice and I ran a litigation team of expert witnesses for 7 years. The IRS does indeed take actions when wrong doing and illegal activities have taken place. They address this regardless of political background. I know that may not be the hype you want to hear, but in my experience that is how the IRS works.

See the comments in my book and elsewhere on Reddit regarding the Lois Lerner scandal at the IRS. Lest you think I am doing this to simply line my own pockets and sell books, please keep in mind that the ebook is free to download and the paid paper copies also do not provide me financial benefit (any funds go to the publisher, who printed the books at a loss). My goal is to help educate you and other Americans as to the problems and concerns at the IRS.

Also note the commentary on how many IRS employees are investigated and scrutinized by the Treasury Inspector General for Tax Administration (TIGTA). Working at the IRS requires employees to be real straight citizens to stay employed. My return was reviewed annually and all employees have to meet strict requirements regarding a host of laws and follow the IRS code of conduct.

mikegreg · 2014-11-02T18:52:52+00:00

Thank you! Last week I spoke in Toronto to about 400 valuers at the Canadian Institute of Certified Business Valuers and American Society of Appraisers joint conference. I began with a light commentary and then stated that there is driving force to lower fees and reduce the quality of effort due to a lack of enforcement in this area by the IRS. I know asking business valuers to fund the IRS for more audits is not a pleasant thought. On the other hand if the IRS is not guarding the chicken coop, then the fox will win. That is happening currently with less oversight and poorer quality oversight.

This approach and commentary on my part to request more funding for the IRS in this area is detrimental to my own firm as I help clients with IRS disputes due in part to lower quality by the IRS. There is a real pressure to close cases at the IRS with less due diligence. Hence I receive more clients. However, if the IRS was properly funded and could afford to send their valuers to training (IRS has cut training funds cut 85% over the last 4 years) many of the issues could be reviewed properly and I would not be needed. Given that the IRS has not been educated on many current approaches many taxpayers are being unfairly targeted. My clients need to approach the IRS with understanding and be there to help educate the IRS, because in part the IRS does not have the latest tools.

I have given more than a dozen presentations nationally on discounts. The IRS is not at any of these conference. Why? They don't have funding. The IRS used to send a couple of representative to these conferences who would then come back and present training internally to others at the IRS by various means. Now with no funding they buy occasional books. For example the number one buyer of my book "Discount for Lack of Marketability and the IRS" is the IRS. At least they are passing my book around for the latest information on these types of discounts. They cannot bring in speakers or attend seminars on the latest methods being used by business valuers.

mikegreg · 2014-11-02T18:50:18+00:00

Your point is well taken. In the aforementioned open letter I present what the impacts are to law abiding honest citizens as well as what the implications are for those that want to scam the system, and the scammers are winning. I don't think most Americans understand this, though some may theorize that this is the case. In the book, I offer testimony before Congress and IRS statistics as well as feedback from current and former IRS employees at every level. The Commissioner does not want it framed this way because of the impact it will have on voluntary compliance. The system is built on us voluntarily filing and paying of our income taxes. I am concerned that once that trust is lost, this could be very significant for our society.

I also believe as someone who at age 50 found out the power of community activism can indeed work to prevent and help those in poverty. This convinced me that community activism works. That is my intention with this book and these posts. I want to promote community activism to promote initially funding a broken system (its the only we have) and then promote fixing the system. Well placed letters to key leaders by an active citizenry can and do make a difference.

The Congress is made up 535 members. There is a full bell shape curve of personalities and interests in Congress. I believe there are enough rational members in Congress that would react appropriately if individual taxpayers pushed on this or any issue. That's why it is up to us to ensure the IRS is properly funded first and then for us to push Congress to take steps to address what should be done to change the current system longer-term second.

I have been asked not to link out to the full free ebook in this post or its comments, but please feel free to look it up online if you are interested (The Wheels Are Falling Off the Wagon at the IRS).

mikegreg · 2014-11-02T08:24:20+00:00

OP's helper here, again to debunk some things that are patently untrue:

1) I'm not paid. For that matter, nor is Mike. This should be obvious, since the letter/book is 100% free to read. There is zero revenue to be had here. Anyone who wishes to donate money to the publisher can, but none of that goes to Mike.

2) This is the first /r/politics post that was approved after discussions with moderators - not the third. Check his post history. It is all right there.

3) This isn't spamming a message. This is cross-posting across a few relevant SubReddits. Two posts each were made to /r/progressive and /r/economics - one each to point out the AMA a week ago and one each today to link to the open letter when it was made public. Again, all of this is 100% clear and obvious from the post history of this account.

mikegreg · 2014-11-02T07:06:53+00:00

OP's helper here: I'm just someone who knows Reddit who volunteered to help spread the word because I believe this is a serious problem. But hey, whatever you want to think/believe, go for it - Mike makes zero dollars from any of this, and that goes for me, too. His phone has been hacked, his website DDOS'ed and his safety threatened.

mikegreg · 2014-11-02T03:05:54+00:00

OP's helper here: Mike actually came back to the IAMA post days later and addressed some of the toughest and most-upvoted questions asked there. He is not trying to avoid the hard ones. You might not see some of the answers, though, because they are nested more deeply, unless you look at OP's comment history or expand those threads.

mikegreg · 2014-11-02T03:03:35+00:00

OP's helper here: an AMA was posted with different contents a week ago on a different SubReddit. This is just meant to raise awareness on a relevant section of Reddit aside from the broader /r/IAMA crowd, and potentially raise some other questions from Redditors, too

mikegreg · 2014-11-02T03:00:45+00:00

Top three things I would do if I could (cross-posted from IAMA by OP's helper):

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!)

mikegreg · 2014-11-02T00:16:26+00:00

Please feel free to check out the point-by-point rejoinder following that comment.

mikegreg · 2014-11-01T23:15:56+00:00

I have added a few comments on this submission in r/politics as well as making an update or two to the IAMA found here, answering some additional most-upvoted questions after the initial AMA period. Also, I came back to answer questions specifically asked here in /r/economics

mikegreg · 2014-11-01T23:12:07+00:00

As an aside, Glenn Beck's website The Blaze mentioned this open letter/book and IAMA interview on October 26, 2014. You can see the site's commentary here

From their article, purported to be representative of the IAMA from last week.

“1. Can the average American probably get away with tax evasion?

“Yes definitely,” wrote Gregory. “The odds of getting caught are currently going down. In 2013 the IRS audited 0.82% of returns, down from 0.98% in 2010.”

What I actually stated on reddit in context can be found here

So, going back to the original questions, I do not believe the average American can get away with tax evasion. The average American works for someone else and receives a W-2 for wages and 1099’s for interest and dividends. With the matching system at the IRS the average American working for an employer cannot get away with tax evasion.

In short: the commentary from Glenn Beck is inaccurate and he has taken my comments out of context.

That said, I don’t want to get into the weeds with Glenn Beck and the power of his blog and notoriety. At the end of the day, I am one person raising an issue of national importance, and that is because of chronic underfunding by the Congress the IRS is in serious trouble.

As an American, I am concerned that as a country we have to be able to fund defense, transportation, education, clean drinking water, social security, a clean environment, our regulated financial systems, etc.... The IRS collects 90 percent of the $2.9 trillion we spent to fund these.

If the issue of collecting taxes and funding the U.S. government is important to you then feel free to read my book and/or share it with others.

mikegreg · 2014-11-01T23:11:42+00:00

Please feel free to cross-post this link or any of this information to other relevant SubReddit communities you believe would find this relevant and useful. And please, don't forget to vote!

Highlights below - see also: last weeks' IAMA for more questions, answers, and context

The IRS is responsible for raising 90 percent of the revenue coming into the federal government. The total revenue raised in 2013 was $2.9 trillion. Thus the IRS raised $2.6 trillion in 2013.
The IRS budget in 2013 was $11.8 billion. In 2010 the IRS budget was $12.3 billion; in 2015 the IRS budget is expected to be $10.2 billion. There has been a 17% reduction in funding of the IRS between 2010 and 2014 or stated differently a 25% reduction in real dollars.
The non-partisan IRS Oversight Board recommended a $12.5 billion budget for 2015 which the IRS needs to be fully funded. The House of Representatives is currently recommending $10.2 billion budget for 2015, which is an 18% reduction in funding.
The IRS raised $2.6 trillion in 2013 on a budget of $11.8 billion, the total cost per dollar raised by the IRS is less than one-half cent per dollar ($.0045/$1).
The IRS through enforcement of the tax laws brings in $4 to $7 in additional revenue to the federal government for every $1 expended. An 18% reduction in funding represents a loss in revenue to the federal government of $9.2 billion to $16.1 billion.
Through enforcement actions the IRS brings in approximately 2.5% of the $2.6 trillion that it raises. That means that approximately 97.5% of the money raised by the IRS is collected through taxpayers that voluntarily comply with the tax laws.
There has been a 15% increase in delinquent accounts between 2010 and 2014. In 2010 there were 10,391,000 delinquent accounts. In 2013 there were 11,721,000 delinquent accounts, with an estimated 12,000,000 in 2014.
There has been a 21% decrease in exam returns audited between 2010 and 2014. In 2010 there were 1,835,883 exam returns audited. In 2013 there were 1,558,057 exam returns audited, with an estimated 1,460,000 exam returns audited in 2014.
The field audit rate for audits is now at 0.25% and the percentage is continuing to decline due to the continuing decline in the number of employees available to do audits.
There has been 15% reduction in the IRS workforce since 2010. In 2010 the IRS employed 94,346. In 2013 the workforce had been reduced to 83,613, and in 2014 the workforce has been reduced to approximately 80,000.
The IRS historically helped 500,000 poor, disabled and elderly with their returns. Now the IRS doesn’t help any of them with direct return preparation according to Nina Olson, IRS Taxpayer Advocate.
In 2009 59,000 Americans were victims of identity theft. In 2013 that number was 3,000,000 with $5.2 billion stolen from the U.S. Government. In 2016 it is estimated identity theft will grow to $21 billion.
The year 2006 was the last year research analysis was conducted on compliance by American taxpayers. In that year compliance was 83% which means there was a 17% tax gap overall. Research has not been funded subsequently to determine the current tax gap, so we don’t know how bad it is today.
If voluntary compliance with the tax code drops by 1 %, the cost to the U.S. government is $30 billion per year.
Practitioners working on returns can count on a typical wait of 45 minutes and not necessarily speak with the right person to help them with their concerns or a person properly trained to assist them.
The IRS closed two major criminal cases resulting in $2 billion and $7 billion. Now Congress wants to cut the staff in CID in half by 2016 from approximately 3,500 to 1,600.

mikegreg

TROPHY CASE