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.