Ask the Razor

The Internal Revenue Service has identified 800 employees whose tax returns will face closer scrutiny, part of an effort to make sure IRS employees are filing truthful returns and complying with tax laws. The agency said Friday that these employees “face an examination on Schedule C issues, most of which are already under way.” A Schedule C deals with reporting profits or losses from a business and is filed if the taxpayer or his or her spouse runs a business.

An IRS spokesman declined to say precisely what prompted the IRS to flag the employees for review, but said that the agency had some questions about their returns. The 800 employees are just a fraction of the 115,000 full- and part-time employed by the IRS. IRS Commissioner Mark Everson said the agency is taking extra steps to make sure IRS employees are following the law. “The multistep initiative will include a new review of tax behavior of IRS employees, a deeper IRS compliance and auditing effort for employees and an expanded education and outreach effort inside the agency,” the IRS said. Earlier this year, a review found that “about half of the 25 employees identified had tax compliance issues following an investigation of their Schedule C filings,” the IRS said. “Several employees in the inquiry have already lost their jobs.”

So, are people who run their own businesses generally more or less intelligent than the norm? And would a full-time IRS employee be likely to know the tax law better or worse than the average American? There are two possibilities. One is that two-thirds of one percent of the IRS staff are both smart enough to be entrepeneurial and stupid enough to blatantly cheat. The other is that these IRS employees know perfectly well that the very foundation of the IRS is a charade and behave accordingly. Both are possible, but Occam’s Razor favors the latter, even if one ignores the evidence provided by other IRS agents who are openly condemning their lawless former employer.

I never thought much about the IRS one way or the other until they accidentally took money out of my bank account for a return I’d already paid. It wasn’t much, but I called them and told them that they’d made a mistake and asked for the money back. The IRS agent admitted the mistake after looking things up, then told me to take that amount off next year’s return without accounting for it. Incredulous, I asked him why they didn’t just put the money back. “Oh, we don’t do that,” he said. Thus began my journey into the bowels of the federal income tax charade.