The 43rd Try Was a One-Third Success

Posted on May 20, 2026 by Russ

Yesterday, I noted that I had made 41 tries to reach the IRS’s Practitioner Priority Service and received a “courtesy disconnect” each time.  Try 42 met the same fate, but to my surprise the 43rd try got me into the queue with a 15 to 30-minute hold time (it ended up being 24 minutes).

My first issue was why clients were receiving a refund of about $7,000 and the agent I spoke was able to determine the reason.  Their 2024 return had a refund, but for whatever reason–and without notifying the taxpayers–the refund was applied to their 2025 return.  (The return did not select this option.)  At least it wasn’t a misapplied payment [1].  The agent was helpful and got this issue resolved.

The second issue was the processing of a client’s tax return that had been selected for identity verification.  The client was unable to verify his identity with the Identity Protection Unit on a phone call, so he made an appointment at his local IRS office last October. He successfully verified his identity at that appointment and was told his return would be processed in about nine weeks. Well, it’s been far more than nine weeks and the return is still stuck somewhere.

From past experience I know that the first step to resolve this is to put a referral into the Identity Protection Unit to move the return into processing.  Unfortunately, the agent I spoke to refused to do that (even when I suggested it) stating that my client had not filed a return and needed to [2].  This is just a symptom of another major issue in dealing with the IRS today: many employees have little experience.

The lack of experience (overall) resulted from what happened last year with government buyouts.  The individuals closest to retirement took the buyouts; the employees left at the IRS (generally) have less experience.  The agent wouldn’t listen to my idea (perhaps he didn’t know how to make a referral).  Instead, I will be submitting a referral to the Taxpayer Advocate on this matter [3].

The remaining issues were for business returns, and I asked the agent to transfer me (he did).  You can guess what I heard when I was transferred: a courtesy disconnect!  I’ll be trying the business line tomorrow.  One out of three ain’t bad, right?

[1] If you accept a refund based on a payment that wasn’t yours, you have committed theft. I’ve had clients receive erroneous refunds; there’s a procedure to return such refunds.

[2] Having my client refile his return would cause another issue–there would now be two returns for the same tax year for this client.  He filed; we have proof he filed; we have proof the IRS received his return; and we have proof his identity verification went through.  This is an IRS processing issue, not a nonfiling issue.

[3] My client is in for a long wait. My understanding is there is a four-month backlog at the Taxpayer Advocate before his case will even be looked at.

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Don’t Call Us

Posted on May 19, 2026 by Russ

I need to speak to the IRS’s Practitioner Priority Service regarding (as of today) ten client matters.  I have been calling since May 4th–and calling the moment the phone lines open (7am local time).  It’s illegal for me to record the response, but here’s an accurate transcription of what the IRS said on my 39th attempt (and my first through 38th attempts):

We’re sorry, but due to extremely high call volume in the topic you requested we’re unable to answer your call at this time.  Please try your call again later or the next business day…  Goodbye.

Some of the matters I’m dealing with our time-sensitive, and I really do need to speak with a human.  But it appears that IRS staffing of their phone lines is very limited, and that leaves few options for practitioners.

I can keep calling, but due to hold times (if I ever get through) I need to allow at least two hours for the call.  I do have appointments scheduled most days, and that limits the number of attempts I can make.

(While I was typing this I made my 40th attempt. I received the same “courtesy disconnect” message.)

Another option–and one that I will have to choose soon with at least two of these issues–is to write letters to the IRS and send them via certified mail.  That preserves my client’s rights.  Of course, the National Taxpayer Advocate has noted that the IRS can’t timely process much correspondence, but two of these items have a firm 60-day deadline to fix so my choice is phone (and I am certain these can be resolved on the phone), mail, or for my clients’ issues to be conceded.  Sure, it may take months for this to get resolved (once I mail letters) but what choice do I have?  There isn’t one.

Meanwhile, the proposed IRS budget features a $1.4 billion cut.  IRS staffing is down by about one-third from early 2025.  As much as I like small government (and I do), the IRS needs to be correctly funded and that means a budget increase, not a cut.  Perhaps one day online services can fully replace humans, but that day isn’t today.  If you’re a taxpayer–and everyone reading this is–complain to your Representatives and Senators.  There are almost certainly areas of the federal budget that can be cut (given the reports of fraud); however, the IRS isn’t one of those today.

And my 41st attempt fared no better than my 40th….

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Bakumen Aoys!

Posted on April 30, 2026 by Russ

There are no typographical errors in the headline of this post.

A couple of recent news stories  out of California bring home that it’s time for anyone residing in the Golden Bronze State to seriously consider moving. First, the “Train to Nowhere,” a past winner of the Tax Offender of the Year award, will likely never get completed.  The price tag of this alleged high speed rail project is now $231 Billion!  Back in 2008, the price tag (when the ballot measure authorizing the project passed) was just $33 Billion.  That’s a 700% increase!

My personal view is this project will never get completed.  But if it does, California taxpayers are going to pay for it–and with a $35 Billion budget deficit there’s only one way taxes can go as far as Democratic politicians are concerned (up).  California already ranks near the bottom of states on tax policy, and things are likely to get worse.

Second, the so-called California “Billionaire” (Wealth) Tax appears to have made the November ballot.  The measure has already cost the state–many billionaires have voted with their feet, establishing residences in other states–and Chamath Palihapitya (a venture capitalist) noted that if the measure passes in November the state legislature could covert the tax to a tax on everyone.

(There are a couple of other certainties if the measure passes.  First, it will be tied up in the courts for some time, as whether or not it is constitutional is iffy.  The US Constitution authorizes income taxes, but it might or might not allow a wealth tax.  This measure would likely go to the Supreme Court.)

If you are a California resident, and your job and family situation allow you to consider relocation, I think it’s time for you to do so.

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Hurry Up and Wait

Posted on April 20, 2026 by Russ

Every year clients ask us this question:

I paid my tax via IRS Direct Pay (or you had my account debited).  Why hasn’t my payment come out yet?

The answer to this question is simple, and there’s nothing your tax professional can do about it.  The IRS can only handle so many debits a day, so many payments made for April 15th will happen in the days following April 15th.  Taxpayers need to allow up to ten business days for their payment to post.  It’s usually much less, but we’ve seen it take that long.

We also get this question:

Why hasn’t my New Jersey payment gone through?  You filed my return on April 15, and the IRS debited my account but New Jersey has not.

For whatever reason, New Jersey is by far the slowest state in the country to accept tax returns and extensions.  This morning, I have a list of eight New Jersey returns and extensions filed on April 15th that were accepted!  Some of these include payments initiated by us; others are returns with refunds or zero balances.  Yet these returns were not accepted until–at the earliest–Saturday, four days after being filed.  There’s nothing we or any other tax professional can do about New Jersey’s slow as molasses system.

The good news here is that a payment initiated on April 15th is considered made on April 15th even if it is accepted days later (this is true for the IRS and New Jersey).

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Bozo Tax Tip #1: If It Sounds too Good to be True…

Posted on April 10, 2026 by Russ

…it probably is.  That’s how the cliche goes, and it’s generally accurate.  If someone tells you:

  • If you invest $10,000 in [whatever], you magically get a $50,000 deduction;
  • If you buy $20,000 of Brazilian accounts receivable, you can get a $120,000 deduction;
  • Your home in the middle of the city is eligible for a conservation easement, and you can get a $100,000 deduction;
  • You can get a tax credit on undistributed long-term capital gains by using Form 2439; or
  • You automatically qualify for a self-employment tax credit;

Ask yourself a question, “Does this sound too good to be true?”

If you invest in something and it loses money, there is likely a loss available.  But (a) passive losses are limited to passive income (until you dispose of the investment) and (b) losses are limited to the amount of your basis (your basis begins with the investment amount). Here, a $10,000 investment likely limits your loss to $10,000.

If you purchase $20,000 of Brazilian accounts receivable, there’s no way you can get a $120,000 deduction.

Conservation easements are real, but (a) your house in the middle of Las Vegas or Chicago is almost certainly not eligible for one, (b) you need a reputable appraiser, and (c) this is a very high audit area where you need bulletproof records.

There really is a Form 2439, but it’s not a magic deduction or credit. It’s simply a notice of the capital gains that a mutual fund has not distributed but paid tax on.  You have to report the capital gain (and you do get a credit for the taxes the mutual fund paid). Generally, they’ll offset. (I’ve seen this form just twice during my 27 years of tax preparation work.)

Half the self-employment tax you pay is a deduction, and there were some tax credits (during the pandemic) for self-employed individuals.  But (a) you need to be self-employed, and (b) there is no magic credit today.  The 50% deduction of self-employed tax for the self-employed still exists, though.

I have had a client talk to me about every item I mentioned above.  And the cliche held: these were too good to be true, and other than the self-employment tax deduction and the two clients who really did need to file Form 2439, there was no magic bullet for my clients.

If something fails the ‘smell test,’ it likely is too good to be true (and is, thus, false).

That’s a wrap on our Bozo Tax Tips for 2026!  Please, please don’t do these.  Instead, be smart and remember it’s almost always a whole lot easier to just pay your taxes correctly.

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Bozo Tax Tip #2: Use a Bozo Tax Professional

Posted on April 10, 2026 by Russ

The IRS recently highlighted that taxpayers should choose tax professionals wisely; I agree.  I’ve had this as a Bozo Tax Tip in the past, but a new client highlighted this issue for me.  In the previous iteration of this “tip,” I noted:

Here’s another Bozo Tax Tip that keeps coming around. The problem is, the Bozos don’t change their stripes. In any case, here are some signs your accountant might be a Bozo:

– He’s never met a deduction that doesn’t fit everyone. There’s no reason why a renter can’t take a mortgage interest deduction, right? And everyone’s entitled to $20,000 of employee business expenses…even if their salary is just $40,000 a year. Ask the proprietors of Western Tax Service about that.

– He believes that the income tax is voluntary. After all, we live in a democracy, so we don’t have to pay taxes, right?

– Besides preparing tax returns, he sells courses on why the Income Tax is Unconstitutional or how by filing the magical $2,295 papers he sells you will be able to avoid the income tax.

– He wants you to sign over that tax refund to him. After all, he’ll make sure you get your share of it after he takes out his 50% of the refund.

– He believes every return needs at least three dependents, no matter whether you have any children or not.

If your tax professional exhibits any of these behaviors, it’s time to get a new tax professional.

Well, it’s apparent there are some new strategies in this area (well, at least new to me).  Julie (not her name) came to me two years ago because something struck her wrong about her former tax professional.  She was in that preparer’s waiting room and overheard the following:

“Yes, we guarantee that every client will get a refund of at least $2,000.”

Bluntly, that’s impossible.  Our job as tax professionals is to make sure your return is complete and accurate, and that your tax is the least that’s legally possible.  For most, a refund means your withholding and/or estimated payments exceeded your tax.  (Various tax credits–the Earned Income Credit and certain energy efficiency credits among them–can also cause tax refunds.)  A refund might not be a great thing; most of the time, it means you’ve given an interest-free loan to the government.  But Julie’s former tax professional wasn’t done.

“My clients never get audited–it’s a near guarantee.”

Julie knew that was wrong because her parents were randomly selected for an IRS research examination (audit).  The IRS conducts 5,000 to 10,000 of these each year; everyone has a chance of being selected.  (Over my 25-year career as a tax professional, I’ve had four clients selected for these kinds of audits.)  The IRS also conducts research audits into various professions; for example, they recently looked at employees in Las Vegas who worked at the clubs located in the major casinos.  (And given that tax professional’s guarantees, I suspect many of his clients will be audited in the future not on a random basis.)

Julie had enough and left–but there was one other thing she didn’t know (until I showed her this on her return from the previous year): She had used a “ghost” tax professional.  At the bottom of page two of Form 1040 is a place for a tax professional’s information (his or her firm name, address, phone number, Employer Identification Number (EIN), and the tax professional’s PTIN–the Preparer Tax Identification Number); on her return, that information was blank.

Don’t be a bozo.  If you use a tax professional, use an ethical preparer.  You may pay more for your return preparation and get a lesser refund (though the refund amount should be accurate), but you will rest a lot easier.

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Bozo Tax Tip #3: Not Remitting Payroll Taxes

Posted on April 9, 2026 by Russ

A couple of years ago, I received a visit from a member of the IRS’s Criminal Investigation unit.  It turns out a client, call him Larry, had worked for a company that decided to not remit payroll taxes.  The loss to the government just from Larry’s wages was more than $100,000 and Larry was far from the only employee of that company.  As far as I know, the IRS investigates every case where payroll taxes are not remitted.

Of course, it’s easy for the IRS to find out.  Every employee is going to be filing a tax return (like Larry) claiming his withholding. The IRS will quickly see that there isn’t any withholding.  Sometimes it can be an honest issue (like the time when the IRS “helpfully” changed a client’s Employer Identification Number without telling him).  Other times there’s an error within IRS systems.  But a lot of these cases end up as just plain theft.  This is a crime that has as close to a 0% chance of success that I’m aware of.

My business has employees and payroll, and I’m a check signer (and I’m an owner).  I am personally liable for the trust fund taxes.  We use a reputable firm for our payroll taxes because the only thing worse than paying payroll taxes once is paying them twice.

And it’s not just the IRS that takes a dim view of not remitting payroll taxes.  Every state department of revenue (or taxation) has the exact same view.

If your business is having tough times, not remitting payroll taxes is absolutely, positively one of the worst possible choices (if not the worst) you can make.  Don’t do it!  But if you did, don’t say I didn’t warn you when two nice looking individuals in suits knock on your door and tell you that you have the right to remain silent.

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Bozo Tax Tip #4: Procrastinate!

Posted on April 8, 2026 by Russ

Today is April 8th. The tax deadline is just seven days away.

What happens if you wake up and it’s April 15, 2026, and you can’t file your tax? File an extension. Download Form 4868, make an estimate of what you owe, pay that, and mail the voucher and check to the address noted for your state. Use certified mail, return receipt, of course. And don’t forget your state income tax. Some states have automatic extensions (California does), some don’t, while others have deadlines that don’t match the federal tax deadline (Hawaii state taxes are due on April 20th, for example). Automatic extensions are of time to file, not pay, so download the extension form and mail off a payment to your state, too. If you mail your extension, make sure you mail it certified mail, return receipt requested. (You can do that from most Automated Postal Centers, too.)

By the way, I strongly suggest you electronically file the extension. The IRS will happily take your extension electronically; many (but not all) states will, too.

But what do you do if you wait until April 16th? Well, get your paperwork together so you can file as quickly as possible and avoid even more penalties. Penalties escalate, so unless you want 25% penalties, get everything ready and see your tax professional next week. He’ll have time for you, and you can leisurely complete your return and only pay one week of interest, one month of the Failure to Pay penalty (0.5% of the tax due), and one month of the Failure to File Penalty (5% of the tax due).

There is a silver lining in all of this. If you are owed a refund and haven’t filed, you will likely receive interest from the IRS. Yes, interest works both ways: The IRS must pay interest on late-filed returns owed refunds. Just one note about that: The interest is taxable.

NOTE: If you reside in a federally declared disaster zone, you have an automatic extension of time to file and pay.

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Bozo Tax Tip #5: 300 Million Witnesses Can’t Be Right!

Posted on April 7, 2026 by Russ

For tax bloggers like myself, the saga of Richard Hatch was a godsend. His antics were, well, remarkable.  One tip I can give any celebrity: Be careful about your taxes. The IRS loves going after Bozo tax celebrities. So here’s the story for those who have never heard of Richard Hatch.

For a tax blogger, people like Richard Hatch are wonderful. Hatch, for those who don’t remember, was the winner of the first Survivor and won $1 million. About 300 million individuals worldwide saw Hatch take down the $1 million.

Hatch received a Form 1099-MISC for his winnings. In the United States, winnings from contests are taxable. Hatch claims that CBS and/or the producers of Survivor promised him that they would pay his taxes. (Both CBS and the producers of Survivor deny this charge.)

And this case is still active, and Mr. Hatch owes a lot (allegedly) to the IRS (see below).

Here’s what I wrote back in January 2006 when Hatch was convicted:

Mr. Hatch has cemented a place in the Bozo Tax Criminals Hall of Fame (a website I’ll create one day). Let’s look at his stupid not so good actions.

1. Hatch goes to accountant #1, find out that he owes over $300,000 in taxes. He goes to accountant #2, and the tax bill is around $240,000. (At his level of income, some differences in taxes owed is normal.) He then asks accountant #2 what his return would be if he didn’t declare the $1 million in Survivor winnings. Accountant #2 makes Hatch sign a statement that he won’t file that return (it showed Hatch getting a $4300 refund). He filed that return.

2. The IRS amazingly discovers his tax evasion. (With perhaps 300 million witnesses, even the most inept attorney could prove he won $1 million.) He’s offered a plea bargain: pay your taxes, and we’ll let you off fairly easily on the jail time. He accepts the plea initially, then changes his mind.

3. The case goes to trial. Hatch claims that CBS should have withheld taxes. His attorney might want to ask any seasoned accountant about what you should do if taxes aren’t withheld but should have been. (Answer: you pay the taxes.)

4. Hatch’s attorney can’t find the OJ Simpson jury. (Hat tip: Roth Tax Updates)

5. Hatch is found guilty. Roth Tax Updates speculates that his sentence will be around 3 years in jail. Oh, he’ll also have to pay those taxes, and interest and penalties. The maximum possible sentence is 13 years in prison and a fine of $600,000.

Hatch is now serving his prison sentence of 51 months. He recently appealed his conviction, though chances of it being overturned seem slim.

2008 Update: And they were slim. Last February, Hatch’s appeal was denied. As you might expect, 300 million witnesses can’t be wrong.

2009 Update: Richard Hatch continues to look for that needle in the haystack. He’s filed another appeal, though to this non-lawyer it’s more likely that he’ll be released after serving his 51 months at ClubFed than getting a favorable ruling.

2010 Update: Mr. Hatch was released in mid-2009. He then violated the terms of his release and was sent back to ClubFed. Finally, in October, Mr. Hatch was released. He’ll be spending the next couple of years in his home state of Rhode Island.

2011 Update: As part of his sentence, Mr. Hatch was supposed to amend his tax returns and declare the $1 million of income. He neglected to do that. Judge William Smith didn’t neglect to give Mr. Hatch a piece of his mind this past March: He sentenced Mr. Hatch to nine more months at ClubFed. Following his release from ClubFed (in December), Mr. Hatch will have 26 months of supervised release.

2012 Non-Update: Mr. Hatch was released from prison in late December 2011. He has filed a writ of certiorari with the Supreme Court. The chance of the Supreme Court taking his case is about the same as a blizzard in August in Las Vegas. The writ was denied.

2013 Update: Mr. Hatch’s non-payment of taxes extends north of the border. Mr. Hatch owned a piece of property in Sydney, Nova Scotia. That property was sold in a tax sale after Mr. Hatch didn’t pay the property taxes on it for at least six years.

2026 Update: Per the Providence Journal, Mr. Hatch now owes $3,293,471.56 plus statutory additions and interest.  This is from a court ruling from March 17th.  Yes, Mr. Hatch won $1 million and now owes three times the amount!  Mr. Hatch is going to file an appeal, but yikes!

I cannot overemphasize this: If you are a celebrity, pay your taxes. If you are in the news, pay your taxes. If you have publicity showing you won a large amount of money, pay your taxes.  IRS employees watch television, too.

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Bozo Tax Tip #6: Remitting Sales Tax Is an Unnecessary Activity

Posted on April 6, 2026 by Russ

Imagine you are running a business. Times are tough and you need to make some serious cuts in expenses to stay afloat. Or perhaps you are just greedy. In any case, let’s suppose you neglect to pay your payroll tax. Well, even many Bozos know that neglecting to pay your Federal payroll taxes is the quickest possible trip to ClubFed for a tax crime. So, no, that is not what our Bozo today decided on.

Instead, he decided not to remit sales tax.  States like that just as much as the IRS likes when you don’t remit federal payroll taxes.  It’s a very quick way to visit your state’s penitentiary.

Yes, if you are collecting sales tax, you must remit said sales tax to the taxing authority.  If you do not, you are committing a Bozo act. Just like with payroll taxes, state governments always go after people taking “their” money.

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