BREAKING NEWS: IRS Hiring 700 Revenue Agents in 2016… Is This Good News for Your Tax Return?

Editor’s Note: One of the many benefits of being a Member of The Oxford Club is having access to our growing list of Pillar One Advisors.

In an exclusive interview, our newest Pillar One Advisor – Jack Cohen, CPA – recently revealed three ways to avoid a stressful and costly IRS audit.

Check out the interview below for some valuable information on how to outsmart big government and legally protect your wealth.

This is a must-read for all Members.

– Rachel Gearhart, Managing Editor

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I recently had the opportunity to interview Jack Cohen, a former top IRS agent and current CPA. He clued me in to the fact that the IRS is on a hiring binge. It’s looking to hire 700 revenue agents in 2016.

At first glance, it seems like a step to add efficiency to a cumbersome government process.

But I quickly learned it should be taken as a warning.

I convinced Jack to let our readers in on what this seemingly simple job posting really means.

JAY: You were a top tax agent for 33 years at the IRS, where you managed some of the largest and fiercest corporate audits in the nation. So I can’t shake the feeling that the phone is bugged. Is that possible?

JACK: Eh. No, I don’t think so.

JAY: Okay. That’s reassuring. Kind of.

A few weeks ago, the IRS announced it would be hiring 700 new tax agents. And in a memo to workers on May 3, IRS Commissioner John Koskinen called it “a good development for our tax system.” Why is the IRS making this move now?

JACK: IRS gets the directive from Congress to get money to support the country.

It hopes for voluntary compliance from citizens – meaning everyone pays up. But if the IRS has a presence and there is a threat of an audit to citizens, they are more likely to pay what they owe.

Over the years, there has been no increase in the budget, so the IRS has less money. The biggest cost for the IRS is salaries. It doesn’t have enough to pay for new employees and has far less for audits and collections than it ever had before. If it hires people, it will have more audits, more compliance and thus more collections.

Truth is, the IRS makes more money hiring agents – it’s known it all along. But this is where politics come in: It wants people to be compliant, but it doesn’t want people to think they are being picked on. It’s a balance. No one likes the IRS. No one wants to be associated with it. But it’s a necessary evil. And the IRS decided the time to act is now.

JAY: This hiring spree sounds good if you are looking for a job, but what you’re saying is it should really be looked at as a warning, right? A money grab?

JACK: It will be hiring a lot – and that’s what will be advertised, but the truth is some people will quit.

It used to be people would keep working a government job until retirement. But today, workers are more apt to quit for two reasons:

1. Young, enthusiastic workers realize it’s not easy to work for the government. The government is illogical. New talent want to do audits that will bring in the most money, but they are given direction to work on audits that appear to be illogical to the young.
2. Pensions changed. It used to be that the civil servant would get a pension based on an average salary and the number of years served. The new system is very portable. It’s government Social Security plus a 401(k)-type plan – there is no incentive to stay anymore.

The idea is the new revenue agents will pay for themselves with the increase in audits and collections from taxpayers. And the mere perception that there is a higher chance of being audited will result in an increase in more carefully and correctly filed returns, equating to more revenue for the IRS.

But there is really only one hope for the IRS.

JAY: What is that?

JACK: Hire me back.

JAY: Not after this interview.

JACK: Yeah, you’re probably right.

JAY: It seems we don’t really hear about the average Joe getting audited anymore. Will the new agents only be targeting returns from, say, large corporations that ignore international tax laws? Or should my mom be worried?

JACK: They’ll have audit coverage in as many areas as they can to let you know as a taxpayer you can be audited, or you will at least know someone who is getting audited. So they will spread out the coverage as much as they can over personal, small business and corporate returns.

JAY: Okay, I’ll warn my mom tonight. After all, I’d like to think most Americans do their best to fill out their 1040 returns properly. But let’s face it, it’s complicated. Especially if you are self-employed, own a business, receive an inheritance, etc. So what are the top three red flags our readers should be aware of that could trigger an audit?

JACK: Let me say that I do believe the vast majority of people are honest and want to comply, especially businesses, but sometimes they make mistakes and it’s not their fault. But unfortunately it opens them up to the stressful audit process.

The No. 1 red flag is not filing a return. It’s harder to escape a paper trail these days.

A lot of times clients don’t come in to see me until the wolf is at the door.

I had a lady call me on a Friday night saying that the IRS was levying her Social Security and bank accounts. I told her to come in on Monday morning. She shows up and she is a little 89-year-old Asian woman. Turns out she owed $500,000 to the IRS. I told her there were two possibilities as to how this would play out.

1. It would turn out that it was a big clerical mistake.
2. We were getting married.

Turns out she was playing the stock market and was selling stock that showed up as $1 million in income until she filed and showed how much she paid for the stock. Pretty impressive considering she was a cabdriver and 10 years older than dirt. In the end, you know how much she paid?

JAY: ZERO?

JACK: Zero.

JAY: Well done.

The second red flag is what’s called a “DIF score.” The IRS conducts sample audits, and based on the results from those audits, it comes up with a system on how to grade returns that are most likely to have an error. For example, it could be a high contribution but low income or a casualty loss that proved to result in an error more often in the sample. The higher score for certain errors resulted in a new red flag. This is called the differentiation score, or the DIF score.

The third red flag is no matching documents. If the government receives a 1099 form (miscellaneous income) on you from a business and you never filed one, that will stand out in a bad way.

JAY: Thanks for the look into the bowels of the IRS. Sounds like there will be many more eyes on the 2016 returns next year.

JACK: There will be. And you’re welcome.

With The Oxford Club’s mission of liberty through wealth, we want to show our readers not only how to invest their money, but also how to protect it legally. Paying the bare minimum in taxes is your civic duty.

The main objectives of tax planning are simple: Minimize taxable income, find every deduction and apply every credit available. As long as you remain tax-code compliant, there’s nothing immoral or illegal about aggressively minimizing your tax bill. Time and time again, the courts have said that there is nothing sinister in arranging affairs to keep taxes as low as possible. No American citizen owes any public duty to pay more than the law requires.

The bottom line is that tax strategizing for your wealth is completely acceptable… Not only that, but it should be mandatory for anyone wanting to build serious wealth.

That’s why The Oxford Club, along with Jack Cohen, put together a special survival guide. In it, Jack will show you how you can avoid each danger with the best possible strategy for your maximum benefit. Your tax-savvy knowledge of the personal return can lead to savings you never imagined. Plus, you will have all the tricks of the trade so you won’t have to worry about those 700 new pairs of prying eyes.

The report is called “The American Taxpayer’s Survival Guide: Outsmart Big Government With Fortune-Building Secrets.”

As a Chairman’s Circle Member, it’s yours free.

And as a special bonus for being a Chairman’s Circle Member, you also receive a FREE 30-minute consultation with Jack himself to help you come up with a low-risk tax-reduction audit plan.

To access “The American Taxpayer’s Survival Guide,” simply click here. To take advantage of your free 30-minute consult, call Jack at 702.255.2330 or email him at tracy@yournevadacpa.com.