Ed Miller's Tax Article

[mmcd]

I'd just like to point a few things about the IRS and taxes more generally.

The IRS neither makes tax law nor decides what tax law means. When dealing with the IRS/taxes, it helps to look at it as an adversarial process. Congress and the Treasury Department make tax law and the Courts decide what that law means in questionable or ambiguous situations. IRS publications are great if you're just looking to avoid trouble, but if you are trying to pay the minimum possible without breaking the law, they are a very poor source to look to. Invariably, the IRS will interpret the law in a light that is most favorable to it (not necessarily correctly). Dealing with taxes and the IRS is like playing a game. You must follow certain rules, but those rules are a LOT wider than the IRS would have you believe. There is a huge difference between commiting fraud in the form of tax evasion and being aggressive when computing your taxes. There is also a difference between doing things that could potentially result in penalties/fines/interest from the IRS and things that could result in criminal liablity. Where exactly these lines lie is not readily apparent, so it would be ill-advised to do anything too questionable on your own if you don't have some degree of expertise in the area, but if you are looking at large tax burden, it would be well worth it to hire a competant professional that will act very aggresively on your behalf. Less than 2% of all individual returns get audited, and that <2% is NOT a random sampling of all returns. The IRS looks for certain red flags in deciding who gets audited, and if your return does not have any of these red flags, the chance you will get audited is very small. If make sure to stay below the line of potential criminal liability, then it really becomes a matter of weighing your savings against the cost of an audit (including penalties and interest should decide not to fight the matter in court) X the liklihood of an audit.

I've noticed a tendency on these boards to make the IRS seem a lot more powerful and scary than it really is, and this article had a bit of that tone to it.