Michael Gray, CPA's Blog

Tax and financial advice from the Silicon Valley expert.

Heard of the Kent State Massacre on May 4, 1970?

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  • mike   

The Kent State Massacre on May 4, 1970 is an example of how a protest can escalate with unintended results when a National Guard is deployed in response.

Students at Kent State University in Kent State, Ohio, staged a protest, along with many other U.S. universities, during May, 1970. President Nixon expanded the Vietnam war to Cambodia and announced college students would no longer qualify for draft deferment. Students could be called for military service after completing the current semester of studies at their college or university. Students felt President Nixon broke a promise made July 25, 1969 to withdraw troops from Vietnam.

The Kent State University protests started with about 500 students on May 1, 1970.

About midnight, people left a bar and began throwing beer bottles at police cars, injuring five police officers, and broke windows at business storefronts. They broke a bank window, activating the alarm.

The entire Kent police force was called to duty. Kent Mayor LeRoy Satrom declared a state of emergency and asked Ohio Governor Jim Rhodes for assistance.

On May 2, Mayor Satrom asked Governor Rhodes to deploy the National Guard to Kent. His request was granted immediately.

That night, there was a large demonstration on the Kent State University campus, and the ROTC building was burned down. Kent firemen and police officers were struck by rocks and other objects while attempting to put out the fire. The fire engine hose was slashed by protestors.

On May 3, some students came to downtown Kent to help with clean-up efforts. They weren’t all welcomed by local business people

At about 8 p.m., there was another rally held on the campus Commons. At 8:45 p.m., the National Guard used tear gas to disperse the crowd. At 11:00 p.m., the National Guard announced that a curfew had gone into effect. A few students were bayoneted by Guardsmen.

On May 4, a protest was scheduled to be held at noon. University officials tried to ban the gathering, and about 2,000 people gathered on the university’s Commons. The National Guard attempted to disperse the students. They used a bullhorn to ask the students to disperse, and were ignored. The crowd threw some rocks at the Guardsmen. Tear gas grenades were fired by the Guardsmen, which fell short of the crowd.

Students retreated over Blanket Hill and cleared the Commons area. The protesters threw rocks and other objects at the Guardsmen. More tear gas was fired.

After reaching the crest of Blanket Hill, the Guardsmen fired at the protesters. They gave no verbal warning.

At 12:24 p.m., Sergeant Myron Pryor turned and began firing at the crowd of students with his .45 pistol. Several other Guardsmen also turned and fired their rifles at the students. At least 29 of the 77 Guardsmen fired their weapons, using about 67 rounds of ammunition.

The protesters were shocked because they didn’t believe the Guardsmen would fire live ammunition at them. The students were unarmed, except for the rocks they threw.

Some of the students were shot while running away from the Guardsmen. Of those shot, none was closer than 71 feet from the Guardsmen. Of those killed, the nearest was 265 feet away. The furthest victim was 750 feet away.

Although the Guardsmen claimed they thought a sniper was shooting at them, it appears they were triggered by their own people shooting.

If you’ve ever played laser tag or a paintball battle, you know a “battle” can induce panic and friendly fire injuries.

Only one Guardsman was injured enough to require medical attention, 10 to 15 minutes before the shootings.

Four protesters were killed and nine were injured, all students in good standing at the university.

A subsequent investigation of the shootings by the President’s Commission on Campus Unrest found the Ohio National Guard shootings on May 4, 1970 were unjustified. There were no criminal convictions relating to the incident.

As a result, some new crowd control measures, such a rubber bullets, have since been adopted.

A photo of a 14-year old runaway, Mary Ann Vecchio, screaming over the dead body of Jeffrey Miller, who was shot in the mouth, won a Pulitzer Prize and became one of the enduring images of the ant-Vietnam War Movement.

The shootings lead to protests on college campuses throughout the United States and a student strike, causing more than 450 campuses across the country to close with both violent and nonviolent demonstrations. Over 4 million students protested.

Five days after the shootings, 100,000 people demonstrated against the war and the killing of unarmed student protestors in Washington, D.C.

In 1973, U.S. government and the North Vietnamese signed a peace treaty ending the Vietnam War.

“Big, Beautiful Bill” isn’t a slam-dunk

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  • mike   

The House Ways and Means Committee has released “The One Big Beautiful Bill” that includes a “wish list” of President Trump’s tax legislation proposals. On Friday, May 16, conservative Republicans joined Democrats on the House Budget Committee to block the legislation, 16 voting in favor and 21 against, from reaching the House floor for a general vote.

The bill would extend most the tax cuts enacted in the Tax Cuts and Jobs Act of 2017 that would otherwise expire after 2025. In addition, the bill includes tax breaks for some tips, overtime and Social Security for four years. The Social Security break would be a $4,000 tax deduction for seniors making less than $75,000 per year.

The bill would also restore 100% bonus depreciation and the expense election for research and experimentation expenses.

In order to partially compensate for the tax cuts, the bill includes about $715 billion in cuts to Medicaid and the Affordable Care Act. States would implement work requirements in 2029 for childless adults on Medicaid who don’t have a disability, requiring them to work for 80 hours per month. Beneficiaries who earn above the federal poverty limit would make co-payments of up to $35 for doctor visits.

The Congressional Budget Office estimates about 8.6 million people could lose their insurance coverage.

Other compensating items include repealing Biden’s student loan forgiveness plans, so more student loan borrowers would be required to repay their loans, and repealing energy incentives (including the $7,500 credit for certain new electric vehicles), enacted under the Biden Administration.

Ironically, conservative Republicans on the House Budget Committee voted against the proposal because they wanted bigger cuts for Medicaid, joining Democrats, who oppose the Medicaid cuts.

Representatives from states that impose income taxes and those from states that don’t impose income taxes are also arguing about how much the ceiling for the itemized deduction for state taxes should be. The limit would be increased from $10,000 to $30,000 under the Ways and Means Committee proposal.

Remember tax legislation is a negotiation with some constraints. House representatives will continue to negotiate the details of the “One Big Beautiful Bill”. None of the Republicans want the 2017 tax cuts to expire, so it’s likely tax legislation will be enacted this year.

Write your representatives in Congress to let them know your concerns for the tax and budget process. https://www.congress.gov/members/find-your-member

Greatest scientist of her time slain by a “Christian” mob

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  • mike   

The city of Alexandria in Egypt was one of greatest centers of learning in the ancient western world.

The city was founded by Alexander the Great, and the family of his named successor, Ptolemy, became the rulers of Egypt until the death of Cleopatra VII, so the culture of the city was a mixture of Greek, Egyptian and Roman.

The Library of Alexandria contained all of the known “books” of that time. Scholars came from all over the world to study there. The Library was accidentally burned by Julius Caesar during his conquest of Egypt and most of the books were moved to the Seraphium. The Alexandran Museum, a type of university, was housed in the Library and, later, the Seraphium.

The Seraphium was destroyed in 391 AD by Theophilus, the archbishop of Alexandria, under orders from the Roman emperor to destroy all pagan temples. (The Emperor Constantine adopted Christianity as the religion of the Roman Empire.) The Seraphium was destroyed because it included a temple of Serapis. Theophilus later built a church on the site.

Hypatia was the daughter of Theon of Alexandria, an eminent mathematician and astronomer, and author of a student edition of Euclid’s Elements. Theon was the last known member of the Alexandran Museum. Hypatia succeeded her father as the leading teacher of science, mathematics and philosophy of her time, and one of the first women to teach those subjects. Her lessons included how to design an astolabe, a portable astronomical calculator, that would be used until the 19th century.

Hypatia was a philosopher in the Neoplatonic school, a belief system in which everything emanates from the One.

Her lectures became immensely popular, including attracting Christian students. Some of those students became leaders in the early Christian church and incorporated her ideas into their Christian faith. Her student, Synesius, became a bishop in the Christian church and incorporated Neoplatonic principles into the doctrine of the Trinity.

Hypatia became very influential in Alexandria’s politics, and was often consulted by the city’s leaders. She was a close friend of Orestes, the governor of Alexandria. Although Orestes was a Christian, he didn’t want to cede power to the church.

Theopolis was succeeded as archbishop in 412 AD by his nephew, Cyril. Cyril continued his uncle’s attacks on other faiths. Cyril competed with Orestes for control of Alexandria. The struggle for power came to a peak following a massacre of Christians by Jewish extremists. Cyril led a crowd that expelled all Jews from Alexandria and looted their homes and temples.

Orestes refused Cyril’s attempts at reconciliation and Cyril’s monks were unsuccessful in an attempt to assassinate Orestes.

Hypatia was an easier target. She didn’t have guards protecting her. She was a pagan who publicly spoke about a non-Christian philosophy. A rumor spread that she was preventing Orestes and Cyril from settling their differences.

In March, 415 AD, Peter the Lecter and his mob captured Hypatia, dragged her into a church, stripped her naked, and hacked her to pieces. To avoid having her venerated as a martyr, they cremated her remains.

Despite those efforts, Hypatia was remembered and revered as a martyr by the Christians of Byzantium, and today she is a symbol of Enlightenment values.

The story of Hypatia is still important today. Some fundamentalist Christians and other groups reject science. The Trump administration is withdrawing funding from scientific research at the National Science Foundation and the National Institutes of Health, and attacking academic freedom. We are also seeing a resurgence in censorship and book banning.

The abandonment of freedom of thought and expression could lead to a new dark age for the United States.

No taxation without representation!

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  • mike   

On December 16, 1773, in Boston, Massachusetts, American colonists dumped 342 crates of tea in Boston Harbor to protest a tax on tea and the monopoly of the British East India Company on the tea trade.

The Boston Tea Party is an example of the tradition of resisting tyranny and defending human rights in America.

The English Parliament believed it had the authority to impose a tax on the residents of its American colonies. It relented and eliminated taxes previously imposed under the Stamp Act and the Townshend Acts. The Tea Act was passed on May 10, 1773, principally to bail out the British East India Tea Company, which was on the edge of bankruptcy after experiencing financial setbacks in India.

Parliament didn’t expect any resistance, because the tax was only three pennies per pound of tea (remember a penny was worth something back then), because the tea would be much cheaper than any alternative, including the tax.

American colonists resented the tax, because they had no representation in Parliament. They declared, “No taxation without representation!”

On November 29, 1773, Samuel Adams invited “every friend to his country, himself, and posterity” to attend a meeting at Boston’s Faneuil Hall to discuss how to best face this threat to American liberty. 5,000 out of a total population of 16,000 attended the meeting.

When Governor Hutchinson refused an appeal by the owner of the ship, Dartmouth, to return to England, members of a crowd proceeded to the ships to dump the tea.

The Boston Tea Party was one of a series of events that led to the American Revolution and, eventually, the United States Constitution.

Today, many Americans, including (Republican) Senator Paul Ryan, are expressing outrage that President Trump is imposing worldwide tariffs by Executive Order, without enabling legislation being enacted in Congress. (Remember tariffs aren’t paid by foreign exporters, but by United States importers, and are likely to be passed through to consumers.)

Under the United States Constitution, the “power of the purse”, including enacting tax legislation, is supposed to reside in Congress. Tax legislation is initiated in the House of Representatives to assure representatives close to their constituents will debate tax proposals. Although U.S. Presidents have imposed tariffs in the past, they have been targeted to certain imports, not broad based tariffs on virtually every country in the world.

President Trump has “paused” most of his proposed tariffs for 90 days, except a 10% tariff on all imports and a 145% tariff on imports from China. China has imposed a retaliatory tariff of 125% on imports from the United States.

Trade between the United States and China has virtually stopped.

President Trump claims to have the authority to impose broad-based tariffs because he has declared a national emergency under the International Emergency Act. (The power to impose tariffs isn’t specifically stated in the International Emergency Act.)

Also, the current situation it doesn’t seem to be a sudden, unforeseen crisis that Congress cannot act quickly or flexibly enough to address that is a true emergency. Although Congress has been debating whether to adopt a resolution declaring there is no emergency, it seems the Republican majority will support President Trump and won’t adopt the resolution.

A dozen states, including Oregon, Arizona, Colorado, Connecticut, Delaware, Illinois, Maine, Minnesota, Nevada, New Mexico, New York and Vermont, have filed a joint lawsuit in the U.S. Court of International Trade in New York to stop President Trump’s tariff policy, saying it is unlawful and has brought chaos to the American economy. We’ll eventually find out what the courts say and, if they rule against President Trump, whether he follows their ruling.

We are already seeing large protests across the United States. If President Trump’s tariff policies continue, existing inventories of imported goods will be exhausted and American consumers will find they can’t find the clothing, toys, sports equipment, furniture and other imported products they are accustomed to buying on the shelves, which could lead to bigger crowds at protests and Town Hall meetings.

More unhappy voters seem to increase the possibility of “flipping” seats in Congress in the 2026 mid-term election and the Republicans losing their control of the House of Representatives.

Will Christmas be cancelled this year?

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  • mike   

(What about back-to-school shopping?)

Maybe you should take care of back-to-school and holiday shopping now, while retailers have merchandise to sell.

Toymakers, children’s shops and specialty retailers have paused orders for the winter holidays in response to President Trump’s 145% tariff on imports from China.

Almost 80% of all toys and 90% of Christmas decorations sold in the United States are made in China.  97% of clothing sold in the United States is imported, with about 27% imported from China.

Shipments from China have virtually stopped.

Retailers need to place their orders several months in advance in order for merchandise to arrive in time for the holiday season.

Unless President Trump relents on his tariff proposals, there might be very few items on the shelves of retailers for back-to-school and holiday shopping.

Since most retailers earn their profits during the holiday season, the retail outlook for 2025 seems bleak.  Some retailers are consulting bankruptcy attorneys.

The United States Senate voted down a Democratic resolution to block the tariffs, 49 – 49, on April 30, 2025, so the decision is now solely President Trump’s.

(San Jose Mercury News, May 1, 2025, Section A, p. 3, “Senate votes down resolution to block Trump’s global tariffs”, Section C, P. 9, “Retailers fear tariffs will affect Christmas toy sales.”)

Will U.S. income tax laws become suggestions?

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  • mike   

There are a lot of reasons to question the viability of the federal income tax system during the Trump administration.

President Trump HATES the federal income tax system and suggested he might repeal it during his 2024 Presidential campaign. He would prefer to replace it with “simple” tariffs. But tariffs simply can’t generate as much revenue as the income tax system for funding the federal government. The federal government collects about $2.2 trillion in income taxes. Imports to the U.S. for 2023 were about $3 trillion. When tariffs are imposed, that import number will fall. There isn’t enough scope to raise the same revenue with tariffs. (And, incidentally, tariffs shift the tax burden from high income individuals, who spend less of their income, to the poor and middle class, who spend most of their income.)

Meanwhile, Trump’s speeches have confused many taxpayers about their obligations. While working at a CPA firm this year, I heard some of the clients thought the IRS was being disbanded and they no longer had to file an income tax return.

That simply isn’t true. If you study the budget proposals in Congress, income taxes are still scheduled to provide most of the revenue for federal programs, notably the Department of Defense.

The IRS is one agency that hasn’t been eliminated by the Trump’s Department of Government Efficiency (DOGE), although it has been seriously wounded.

With additional funding enacted by Congress, the IRS grew from about 79,431 employees to 102,309 during the Biden administration. With increased staffing, taxpayers who called the IRS saw a decrease from 28-minute wait times a few years ago to about 3 minutes during the 2025 tax season.

That additional $80 billion funding has since been cut to $40 billion, most of it already spent.

DOGE layoffs plus about 20,000 IRS employees who accepted the administration’s deferred resignation offer will reduce the IRS’s staffing to about 60,000 to 70,000 employees.

Three IRS Commissioners have resigned since the beginning of the year, most recently because of disagreement with the Trump administration’s plan to use IRS records to track undocumented aliens living in the United States for deportation.

When they learned that IRS records were no longer confidential, some undocumented aliens decided not to file a 2024 federal income tax return.

The leadership for modernizing the IRS has also resigned, since funding for their efforts has been eliminated.

Decreased staffing means decreased enforcement. Decreased enforcement leads to decreased compliance and decreased tax collections.

Taxpayers see less risk of not complying with the tax laws.

This year, federal income tax return filings fell by nearly 1 million (about 1.1%) and about 200,000 more taxpayers have filed extension forms, compared to last year. (Natural disasters, including the Los Angeles wildfire, also contributed to the decrease in 2024 income tax returns filed by April 15.)

Decreased staffing also leads to more frustrated taxpayers, who won’t be able to get their IRS questions answered and problems resolved.

On February 19, 2025, President Trump issued Executive Order 14219, Ensuring Lawful Governance and Implementing the President’s “Department of Government Efficiency” Deregulatory Initiative, which suspended issuing new regulations by government agencies, including the IRS.

The IRS recently issued Notice 2025-23, withdrawing final regulations issued during January, 2025, making basis-shifting via partnerships “transactions of interest” and requiring special disclosure of these transactions. These transactions are a way to shift the tax basis (cost for sold assets or tax deductions) from non-deductible items, such as corporate stock, to tax deductible items, such as equipment.

The American Institute of Certified Public Accountants complained the regulations were too complicated. Of course, these artful tax-dodging structures are also complicated, generating substantial fees for tax advisors.

Instead of cleaning up the regulations, the IRS is withdrawing them, so these transactions no longer have to be disclosed, and these abusive taxpayers can go on their merry way, avoiding paying income taxes. The Treasury estimated last year that the transactions could potentially cost taxpayers more than $50 billion over a 10-year period.

The withdrawal of these regulations is an indication of a reduced IRS commitment to enforcing our tax laws. In other words, our tax laws might become merely “suggestions”, inviting “aggressive” tax positions and “substantial compliance” for matters such as properly documenting charitable contributions and business expenses.

After all, no one is looking!

Are tariffs a form of “corporate welfare”?

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  • mike   

On Wednesday, March 2, 2025, President Trump announced a series of “reciprocal tariffs” on imports from about 90 countries, in addition to a baseline 10% tariff on imports from all countries.

(Notably, a retaliatory tariff isn’t being imposed on imports from Russia, and a 10% retaliatory tariff is being imposed on Ukraine. Trump says there are no imports from Russia to impose tariffs on because of sanctions relating to the war in Ukraine.)

The baseline tariff is scheduled to be effective at 12:01 a.m. on April 5, 2025 and the other reciprocal tariffs are scheduled to be effective at 12:01 a.m. on April 9, 2025.

The U.S. reciprocal tariffs were determined to be about half of “tariffs charged to the U.S.A., including currency manipulation and trade barriers.” This “unfair advantage” is roughly the trade deficit (imports from a country exceeding exports to the country from the United States) divided by total imports from that country. (CNBC.com, “How did the U.S. arrive at its tariff figures?”, April 3, 2025.)

For example, the U.S. trade deficit for China was about $295.4 billion and total imports from China were about $438.9 billion, resulting in an “unfair advantage” of 67%. Half of that would be a U.S. tariff for goods from China of 34%.

Many of the countries with very high “unfair advantages”, like Vietnam (90%), Cambodia (97%), and Bangladesh (74%), have poorer populations who can’t afford high-priced goods from the United States. These countries are being harshly penalized by President Trump’s tariffs, essentially because of their high poverty rates.

What is the rationale for tariffs on imports from other countries?

The purpose of tariffs is to “protect” U.S. businesses and U.S. workers from “unfair” low prices of imports, partially due to lower wages paid workers in other countries. President Trump says he is trying to encourage moving production to the United States and building factories in the United States that will hire American workers.

What seems like a “benefit” to some (U.S. companies that charge higher prices and U.S. workers paid higher wages) is a “cost” to others (American consumers who would otherwise pay lower prices.)

For example, according to the American Apparel and Footwear Association, about 97% of clothing sold in the United States is imported, mostly from China. Rebuilding the infrastructure for that industry would require a major investment by U.S. companies, and the technology to do so isn’t readily available in the United States. (NCES.com, “What percent of clothes are made in other countries?” June 20, 2024.)

The tariff tax is not paid by foreign producers, it’s paid by American importers, who will probably mostly pass the cost on to consumers. The penalty for foreign producers is reduced sales because of higher prices in the United States marketplace.

So, one way of looking at tariffs is as a subsidy or “corporate welfare” favoring U.S. businesses and workers paid by American consumers.

Want to vote? Get a U.S. Passport

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  • mike   

President Trump issued an executive order on March 25, 2025 requiring proof of citizenship for voters in U.S. federal elections.

Here’s a link to the order. https://www.whitehouse.gov/presidential-actions/2025/03/preserving-and-protecting-the-integrity-of-american-elections/

“Documentary proof of United States citizenship” includes a copy of:

  • a United States passport;
  • an identification document compliant with the requirements of the REAL ID Act of 2005 that indicates the applicant is a citizen of the United States;
  • an official military identification card that indicates the applicant is a citizen of the United States; or
  • a valid Federal or State government-issued photo identification if such identification indicates that the applicant is a United States citizen or if such identification is otherwise by proof of Unites States citizenship.

This order is controversial and will probably be contested by the states in the courts. As I understand it, the states are supposed to determine how to qualify citizens for voting in federal elections.

Whether or not the executive order holds up, I highly recommend that U.S. citizens should get a U.S. passport. It’s not just for traveling. It is official proof of U.S. citizenship. You generally can apply for a U.S. passport at a U.S. Post Office.

Remember, U.S. passports expire and must be renewed.

A Real ID is a good substitute for a passport, but it doesn’t have the same weight for proof of citizenship. A U.S. passport can be used as proof of citizenship when applying for a Real ID.

The enforcement for Trump’s effort to deport illegal aliens seems to be largely based on racial profiling.

If I was a nonwhite U.S. citizen or English was my second language, I would carry my U.S. passport at all times in case identification is requested by an ICE agent. I would also get U.S. passports for minor children, and keep copies of the passports in a safe, but accessible, location, in case they are lost or stolen.

(U.S. permanent residents and other noncitizens should also carry their identification at all times to show legal alien status.)

It’s not pleasant to have to prove citizenship or legal status, but it can help avoid unpleasant situations, like being arrested and imprisoned or deported without due process.

“Just in case”, get a U.S. passport or check when yours expires.

How IRS employees helped eliminate a $250,000 tax bill

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  • mike   

Here is the story of one of my biggest “taxpayer wins”. The names and amounts have been changed for confidentiality.

My client, Bob, was experiencing financial difficulties. His antiques store was experiencing losses.

He was embarrassed to come to me to have his income tax returns prepared, because it would be hard to pay me.

In 2010, he sold the building that housed his store for $1,000,000 and moved the business to rented space.

Based on an information report for the sale of the building that it received, the IRS prepared its own tax return for Bob. There were no deductions for the cost of the property or the selling expenses. It made “worst case” assumptions, prepared the return for a married person filing a separate return, and taxed the gain as ordinary income with no itemized deductions or personal exemption deductions. A ballpark of the bill was $250,000. California would also eventually assess tax based on the IRS report.

IRS Collections started garnishing funds from Bob’s bank accounts.

Finally, he came to me to help with his problem.

When I prepared his income tax returns, there was no tax due!

I applied to the IRS for audit reconsideration. Remember, they had already assessed the tax plus penalties and interest.

The IRS agreed to reopen the case and audit Bob’s tax return. They accepted the tax return I prepared as filed and reduced his tax to zero.

For some reason, they didn’t eliminate the penalties for failure to file and underpayment of tax.

After some correspondence back and forth, I applied for help from the Taxpayer’s Advocacy Office at the IRS. One of the purposes of that office is to help taxpayers resolve problems dealing with the IRS. The Taxpayer’s Advocacy Office eliminated the penalties for Bob’s tax return, and he was able to recover all of the money that was garnished by the IRS.

(Needless to say, my fee for doing this was more than ten times what the tax return preparation fee would have been if Bob just had me prepare his tax returns in the first place.)

Yes, what I did for Bob was impressive.

But I couldn’t have done it without having competent and cooperative people at the IRS to work with.

Have you ever had to call the IRS with a problem or a question? It can be a frustrating experience, having to wait a long time on hold or hoping to be available when you are called back. What if there were even fewer people available to answer taxpayer calls?

The latest blow to the IRS is in the Continuing Resolution budget legislation passed by Congress and signed by President Trump on March 15, 2025 to keep the U.S. government open. The Continuing Resolution eliminates $20 billion of IRS funding previously approved by Congress in the Inflation Reduction Act of 2022.

The original appropriation was $80 billion. $20 billion was previously eliminated by Congress in other budget legislation, so only $40 billion is left. The appropriation was to be allocated over a 10-year period and was to be used by the IRS to modernize its operations, rebuild its declining workforce, and improve taxpayer compliance. As of September 30, 2024, the IRS spent about $9 billion of the funding, including about $3.7 billion for employee compensation.

Now all modernization activities have stopped and DOGE is initiating at least a 20% reduction in the IRS’s workforce after April 15 and by May 15, 2025.

430 of about 1,900 employees at the Taxpayer Advocate Service are slated to be cut, in addition to 90 employees who have already accepted the voluntary buyout offer.

With a dramatic decrease in the number of people working at the IRS, we can expect a big decline in tax audits and compliance with the tax laws and a big decline in the guidance and taxpayer support services provided by the IRS. According to Biden administration officials, the agency will conduct about 400 fewer audits of U.S. businesses and 1,200 fewer audits of high income individuals each year, which could add $140 billion to the national debt over the next decade.

After the Trump Administration guts the IRS, there will be fewer people available to help taxpayers resolve their problems. In many cases, they will remain unresolved and they might have to pay additional income taxes, interest, and penalties, or pay attorneys to litigate unnecessary disputes.

Having lost its funding for modernization, the IRS will have to continue operating with antique computer systems.

That doesn’t seem like “Government Efficiency” to me.

How do you feel about this? Let your representatives in Congress know. Remind them that, when you can’t get help from the IRS, you’ll be reaching out to them for help with IRS problems.

Consequences

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  • mike   

Parents teach their children that their actions have consequences.

In physics class, we learned an action generally is associated with a reaction. These actions and reactions are described as physical laws. Among other things, we rely on them to fly airplanes and orbit space stations.

Economics describes the consequences of actions in the marketplace. Although President Trump says he doesn’t “believe in” the “laws” of economics, he can’t escape them or intimidate his way out of them.

President Trump and his team have conducted a series of actions in the very brief time of his second presidency, including imposing tariffs, closing down USAID, proposing to close the Department of Education, and severely reducing personnel in other departments, including the IRS and Veteran’s Affairs. Congress is working on a budget that would severely reduce Medicaid and food assistance programs.

We are seeing natural consequences of these actions that are isolating the United States and hurting U.S. businesses and residents.

The response of Canada, Mexico and China to U.S. tariffs is to impose retaliatory tariffs. China is imposing a 15% tariff on U.S. agricultural products. During President Trump’s first term, U.S. agriculture suffered billions in losses, requiring a bailout by the federal government. It’s likely to happen again. China also has suspended U.S. lumber imports and blacklisted 15 U.S. companies.

After the first Trump administration imposed tariffs on China’s goods, China shifted its trade partnerships to buy most of its soybeans from Brazil and Argentina instead of the U.S and reduce its exports to the U.S.

When USAID was shut down, millions of dollars of shipments from U.S. farms that were in the process of being shipped were left to rot, leaving U.S. farmers “holding the bag.” USAID annually buys about $2 billion in food aid from U.S. farmers. If farmers can’t depend on being paid, they won’t plan crops for USAID.

Canada has been sending about 75% and Mexico about 80% of their imports to the United States. Now both countries are seeking alternative trading partners. Canada is considering joining the European Union and selling crude oil to Europe and Japan.

President Trump’s imposing and then pausing tariffs has created confusion and uncertainty for investors. On Monday, March 10, 2025, the Standard & Poors 500 index fell 2.7%, 9% below a record set during February and erasing all the gains it made since Election Day.

Live Congressional Town Hall meetings are being scaled back or converted to “virtual” meetings after angry constituents mobbed the meetings because people are unhappy about the power given to Elon Musk as the (unelected and unapproved by Congress) head of the Department of Governmental Efficiency. They are also afraid the tariffs imposed by President Trump will lead to higher prices and that government benefits and services are being cut and will be cut further.

President Trump is insulated from these consequences, but representatives in Congress aren’t. The mid-term elections will take place in 2026. During his first term, the Republicans lost control of the House of Representatives during the 2018 mid-term elections.

If we’re still allowed to vote (President Trump has asserted control of the Federal Election Commission), unhappy constituents could seek to stop “slash and burn” government reform and isolationist foreign policies by voting Republicans out of office.

Michael Gray, CPA's Blog

Tax and financial advice from the Silicon Valley expert.