IRS Blows Millions of Dollars on Failed Effort to Chase Tax Scofflaws



Politicians like to work themselves into a lather over the "tax gap"—the amount of money the government says it's owed by taxpayers that doesn't get paid. The current estimate, based on 2006 figures, is that roughly $450 billion goes uncollected each year. That's an 83.1 percent tax compliance rate which (shhh…Don't tell anyone!) is probably the highest on the entire planet. But never mind. If government officials have to dig through the seat cushions for those elusive ducats, that's what they'll do. Even if they do that digging really, really badly.

The latest efforts at sofa cushion excavation involved a multi-million dollar Information Reporting and Document Matching Case Management System (IRDMCM—yes, really). The Internal Revenue Service spent $8.6 million on the scheme to squeeze information from banks, brokerage firms, and the like and square the data against individual sole proprietor and business returns.

The system doesn't work. It doesn't work in spectacular fashion. According to a report by the Treasury Inspector General for Tax Administration (Compiled in September but released last Thursday):

The IRDMCM System requirements were not sufficient. User Acceptance Testing generated a high number of problem tickets, 50 percent of which were to clarify requirements and businessrules. After a year of User Acceptance Testing, IRS officials acknowledged that the IRDMCM System could not effectively process business cases containing underreported income and could not be deployed into the IRS production environment.

This is the federal government we're talking about, and the IRS in particular, so wasted effort and resources on unusable systems are par for the course. What is surprising is the small payoff anticipated from this failed system.

Remember that the tax gap represents something in the neighborhood of $450 billion that the government wants to get into its sticky fingers. The Inspector General's report describes IRDMCM (pronounced, "whatthefuck?") as a missed opportunity that "could have potentially resulted in assessed taxes of $54.9 million." That's like digging at length through the sofa cushions, delightedly spotting a couple of centavos, and dropping them.

The Inspector General recommends that the IRS roll up its sleeves and try again, but the tax agency responds that "significant budget constraints could affect future work on the IRDMCM System."

Well. that's a crying shame.

Have you thanked a tax scofflaw today for keeping wealth that might be pissed away or even used against you out of the hands of the government?

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  1. The more you tighten your grip the more star systems taxpayers will slip through your fingers.

  2. In the private sector, if you made it all the way to UAT, spent a year on it, and finally concluded that the system shouldn’t have been sent to UAT in the first place because the design was inadequate to ever meet the system requirements, you would expect to be fired for rank incompetence and a failure to understand how the SDLC works.

    In the federal government, I assume the people responsible have already been promoted for their empire-building efforts.

    1. Their failure is being used as evidence that the IRS needs a bigger budget. So yeah, promoted.

      1. That’s how failure always works in government. They have every incentive to fail because it will be used as an excuse for a bigger budget and more power.

        1. Hey, if government were efficient, there’d be no reason to hire more people, collect more taxes, and extend its control.

    2. In government, incompetence is the numero uno asset for getting to the top of the shit pile. Lying all of the time to the point that you don’t even know yourself anymore when you are actually telling the truth is 2nd.

  3. Let’s just go to a flat consumption tax already and we won’t be having this conversation. Eliminate the IRS.

    1. It will never, ever happen. There are so many parasites in the IRS and (I’m sorry, but it’s true) private accounting firms and practices that the pressure to not implement a flat tax would be enormous. And that includes companies like Intuit and H&R Block and others. The tax compliance industry is massive. It’s like a non-violent version of the prison/rehabilitation industry that is built around the drug war.

      1. That’s an excellent point.

        I never considered including CPA’s in the slaveholder lobby member list, but damn – you’re absolutely right. They’re practically charter members.

        1. They’re some of the worst parasites out there. They would literally have no job without the tax laws. None. A few of them could become bookkeepers, that’s about it. Maybe some foreign tax experts. The rest would be on the streets with no useful skills whatsoever.

          They will fight any flat tax like demons.

          1. I agree with you, but I’m just dreaming about what should be done, not what will be done.

            If you would have told me 20 years ago that pot would be legal in 4 states and Washington DC, I would have laughed you to scorn. Anything CAN happen no matter how unlikely.

      2. Oh yeah. Imagine the screams of millions of people who have to do something besides “find” refunds for people who make $31500 a year and “need” an advance on their tax refund.

      3. Not to mention that how are they supposed to discourage our bad behavior, if they don’t have taxation variety?

        1. Exactly. It isn’t only the IRS agents and tax lawyers who have a vested interest in the current system. Politicians who can use the tax code to reward or punish people need the current system of “high rates, but with tax off for good behavior”.

          If we ever implemented a flat tax, the day after it was signed Congress would send up an exemption for people’s mortgage interest, assuming that it wasn’t one of the deductions already enshrined in the “flat” system.

  4. Remember when the Supreme Court believed that the federal government did not have the authority to enact an income tax without a constitutional amendment?

    Ah, those were the good ol’ days.

    1. As there is such an amendment, I think they probably still believe that.

      Had the 16th amendment not passed, they probably would have evolved on the issue by now.

  5. The current estimate, based on 2006 figures, is that roughly $450 billion goes uncollected each year.

    I don’t believe this ludicrous, preposterous figure for one second. That comes out to about $1,500 for every single person in the country.

    How many years has the government been fighting Warren Buffett, trying to get that hypocritical scumbag to pay the billion dollars in back taxes that he owes? I’m pretty sure that there aren’t 450 other Warren Buffetts out there in America.

    1. $1500?

      That would be EASY.

      I could probably get there with the federal mileage allowance and the charitable deduction alone.

      I wouldn’t even have to get into hiding income.

    2. If you are in the 25% tax bracket, that’s only an extra $6000. If you count all of the things that you are supposed to pay taxes on it’s pretty easy to get there.

  6. Here’s what I can GUARANTEE you:

    The people who claim to understand the tax laws don’t think in a systematic enough way to even DESCRIBE their requirements to someone who can code them.

    Here’s something else I can GUARANTEE you:

    That it will never occur to the people who can’t describe their requirements that changing the tax code to reflect what you CAN code to test for would raise overall receipts.

    I’ve been reading federal regulations and OMB circulars a lot lately. And it’s like they write these things with absolutely no thought at all towards what they can test and what they can enforce with reasonable effort. They just wish. It’s crazy.

    1. Why should they do anything but wish? It’s easier, and they have the monopoly on violence to enforce anything they want. What are you gonna do about it?

      1. Right, but you would think they would prefer rules they can enforce to rules that people can safely ignore.

        Let’s say you have perfect access to 1000 data points about a taxpayer, imperfect access to 500 more, and no access at all without gumshoe verification to another 2000.

        If what you really want is power and control, you should write all your rules so that they can be verified using only the first 1500 points. Preferably, just the first 1000.

        Because then you can take your database and write SQL code that gives you total control without much investment in enforcement or even much competence on anyone’s part after you demonstrate the basic competence of writing the code.

        If you’re out there writing incredibly complex rules that even you don’t fully understand and enforcing them requires the 2000 data points you don’t got, that hamstrings you and makes being a dick a lot of effort. I just don’t see why you’d want to do that. I’m sure randomly picking guys out to brutalize using the audit system is good for some laughs now and then, but I’d be focused on attaining total control.

        1. They’re way too stupid and disorganized for that, thank Jeebus.

          Their system is so retarded because that gives individual IRS agents power. They get to interpret shit however they want. The reason they can’t work in a common way towards the common goal of total control is the same reason we can’t have a communist society: we’re all individuals–including them–and we just won’t do that.

          Be very glad that’s the case, because if they could work together like that, it would be terrifying.

        2. The purpose is not to raise the maximum amount of money. The purposes are 1) get votes, and 2) exercise arbitrary power by making the the rules are so complex that everyone is breaking the rules.

          1. “exercise arbitrary power by making the the rules are so complex that everyone is breaking the rules.”

            This is another underlooked motivation. The IRS will not tell you in advance whether your interpretation is correct. It’s “leave alone or zap”

            For many people, the response is to try everything they can think of, then hope they don’t get a letter in the mail.

            Selective enforcement does increase the short-term power of the enforcers. But it also teaches a fundamental disrespect for the law that extends towards its arbitrary enforcers.

    2. ^THIS^

      I can only imagine the hell of trying to gather requirements from the IRS in order to write a program that can determine if a return is valid or not.

      You can bet good money knowing that every meeting you have results in different determinations depending on who shows up.

      1. I know some tax accountants, and that is exactly what they say dealing with the IRS for clarification is like. Put in a call, see what answer you get back, and how it differs from the last call they made.

        Their job is essentially to get between the taxpayer and the IRS and be the buffer for dealing with the insanity.

        1. Depending on what it is, the IRS are not that difficult to deal with. I don’t really trust any lawyer when they tell me ‘I’m an expert! You need me!’. I’ve always done my own taxes, but when I was doing 1099 contracting I got thousands of dollars behind. I called the IRS myself and worked out a monthly payment. I paid it off and that’s that.

          I remember talking to an immigration attorney about my wife’s permanent residency. He told me ‘Don’t try to do this yourself! You’ll get into trouble! They won’t approve it, I’m an expert!’. Well I did it myself and it got approved with no problems.

          Lawyers are more full of shit than anyone outside of politicians and bureaucrats. Which explains why most politicians and bureaucrats started out as lawyers.

          1. That extends to every level of goverment. If you don’t like what the person at the DMV tells you, try again with a different person.

            I remember trying to get my wife a driver’s license when she had a green card but also an expired passport. The first four times we went, we were told that we needed four different pieces of evidence/forms in order for them to process our request. When we went back for the fifth time, the agent didn’t ask for any of those documents, she just gave her a license, then went on her break.

  7. My buddy’s step-aunt makes $89 every hour on the laptop . She has been without work for 8 months but last month her check was $14034 just working on the laptop for a few hours. check out here. ????

    1. Is she paying her estimated SE tax on that check? If not, then she shouldn’t be talking about it so openly – the IRS has ways of finding out.

  8. They just need to make it easier for friends and neighbors to turn each other in. Then off to the gulags. After all, it worked so well for the Soviets. Yeah, that’ll increase tax revenue…

  9. Kinda scary when you think abotu it man.

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