Is the IRS Unconstitutional?

They come around with almost the same annual regularity as Christmas or New Years – the arguments that the US tax system is illegal, unconstitutional or, one of my favorites, dependant on the voluntary participation of the tax payer.

This year the anti-tax/anti-IRS voices seem particularly loud as they rally around a couple of the more visible candidates for the Republican nominee for president – Ron Paul and Mike Huckabee. While Huckabee’s tax proposal might be a softer version of Paul’s slash and burn vision of the IRS, both have attracted the admiration of disgruntled tax payers of all stripes.

But under its current charter the IRS feels secure. With equal regularity although with perhaps a little less attention, comes the IRS’s rebuttal to these accusations. The Truth About Frivolous Tax Arguments is a fascinating read. It goes way beyond the “Oh, please” reaction that would be mine if addressing these arguments were my responsibility. The document meticulously examines and refutes the most common of these arguments.

IRS Playing Santa to the FedEx Drivers

Here’s the situation – FedEx, like many companies, likes to hire drivers on a temporary, part-time basis as independent contractors. Having workers under this status saves companies money in lots of ways such as vehicle maintenance, overtimes and in taxes. And when companies save money the stockholders are happy. Win-win, right?

Wrong, says the drivers. The workers’ voices are being drowned out in all the money-saving joy. When workers cost less that means that they receive less. All that money saved in denied benefits, vehicle maintenance and taxes has to be made up somewhere and that place is usually out of the workers’ pockets.

And when it comes to taxes you know that the IRS wants to get involved. Last week the IRS ordered FedEx to pay regular employee taxes for these workers that it had previously labeled as independent contractors. The back taxes and fines total $319 million for 2004 through 2006. Further investigation may result in more. FedEx promises to appeal the decision.

Mileage Deduction Increase for 2008

If you drive for a living you know how expensive it can be. Besides the obvious rising cost of gas there are other expenses to worry about like maintenance, tolls, parking and insurance. You might feel just a little less strain from these expenses next year because the IRS is raising the mileage deduction rate from 48.4 cents per mile to 50.4. Two cents isn’t a lot but every little bit helps.

Of course it wouldn’t be the IRS if there weren’t a list of exceptions and qualifications. In this case, the deduction doesn’t apply if you’ve used any depreciation method under the Modified Accelerated Cost Recovery System (MACRS), after claiming a Section 179 deduction for that vehicle, for any vehicle used for hire or for more than four vehicles used simultaneously.

For more information check out IRS.gov.

Uncollected Billions

As the IRS continues to be under increasing pressure and scrutiny during this latest political season, one ex-agent says that he knows where a lot of uncollected tax money is – real estate partnerships.

According to a recent article in the NY Times, Jerry Curnutt says that the Service fails to collect billions of dollars annually from real estate partners that deliberately underreport their income. Even though this would be a relatively easy problem to fix Curnutt, who retired in 2000, says that the IRS is letting billions go and the problem seems to be worsening.