Last month I reflected on the implications of the very low probability of tax returns being audited. My career started in 1979, and I remember the IRS being much more formidable. Of course, the memories of old people are notoriously unreliable, but I had data to back up the radical decline in audit coverage. Evidence that agents became less sharp over the years is purely anecdotal and not all that reliable, but if we ever get to have a few beers together, I can tell you some stories.
This reality really troubles me because back in the day when I encouraged people to be compliant I thought I was giving them good practical advice. Of course I recognized that I am much more risk-averse than the average entrepreneur. I decided to explore how current tax practitioners take the low audit probability into account. Their answers are actually heartening. They strive to do things correctly in accordance with the tax law without considering whether anybody is looking.
Some Interviews
I started out by interviewing Michael Brennan CPA of Berkowitz Pollack Brant (BPB). Michael is based in New York City. His firm FiveBridge was acquired by BPB in 2022. BPB has four Florida offices and wanted to expand its New York footprint. INSIDE Public Accounting ranks BPB number 56 in revenue in the United States.
I asked him what he told people the “percentage thing to do” is when it comes to tax compliance. He replied:
“You know, we do get that question asked often, especially by new prospect clients that are looking to, you know, see how aggressive we’re willing to be. Our response typically is the strategies that we cultivate, whether it be estate tax planning or income tax planning, are always done with the assumption that an IRS agent is going to be looking at every single line item on every single page.”
He added that whether the IRS is contracting or increasing its workforce does not change how his firm does things. They stand behind the strategies that they recommend.
We also talked a bit about what I call the HENRY problem. HENRY means high income, not rich yet. Your Henry or Henrietta might be making high six figures but if they are a first generation college graduate with substantial student debt and a spouse, kids and extended family members to take care of, you don’t want to talk to them about charitable planning and harvesting losses from their non-existent stock portfolio. The one thing that Michael suggested was a domicile change for lower state taxes. I think Henry and Henrietta are the targets of many dubious schemes.
I also spoke to Lucien Gauthier who runs the Boston Tax Institute. I should disclose that I am on the BTI faculty. We reminisced a bit about the eighties. When Lu was teaching about the Tax Reform Act of 1986, he handed out applications for tractor trailer driving school to the beleaguered practitioners for whom the world had been turned upside down. Lucien Gauthier does not think that the low audit rate is a reason to relax efforts to get things right. He compares the IRS to a blind pig hunting acorns and it just may be that your client is the acorn that it finds.
A Wider Net
I decided to do one of my unscientific surveys, and did not get that great a response, but it was indicative of a trend toward staying straight, Twenty-six votes out of forty-seven were for non-compliance not being worth the risk.
I reached out to #TaxTwitter which is what keeps me in touch with people who are struggling to keep people tax compliant. Here is the question I asked.
#TaxTwitter For tax pros. How do you deal with the knowledge that with reduced enforcement just about anything done on returns that does not create a mismatch will probably get by ?
— Peter Reilly (@peterreillycpa) August 5, 2025
I did get some confirmation of my observation.
That has been the case for as long as I have been practicing (1996). I can count the number of audits on one hand.
— harpua71 (@harpua71burner) August 5, 2025
Several of the answers almost made me embarrassed that I had asked the question.
It is called ethics – both personal and professional!
— Ooga K (@JerryKe06452906) August 5, 2025
The same as always. Our #1 core value in our firm is honesty. That’s not because we operate whether something will be caught or not.
— Kelly Bender (@lifeuntaxed) August 6, 2025
I prepare the tax returns the way I do, not because I care if the IRS looks at them, but for how I wish to be viewed when another firm takes over a client and evaluates my work.
I could make a lot more money if I didn’t think that way.
Can someone talk me into not caring?
— BigTaxDaddy (@FSteinCPA) August 5, 2025
There were also some practical observations. I had to bowdlerize one of them using ***. I sympathize with the intensity of the sentiment, but the particular word chosen is off limits.
1. I need to be able to sleep well, so every return must be defensible. enforcement is lax now, but AI will step into the void soon
2. The reduced enforcement has created a moist & welcoming environment for ******** who outright lie about what can be done, knowing they can get get away with it. They must be confronted and very few in our profession are willing with the exception of @TaxLeverage— Nick Chertock (@golfprogress) August 6, 2025
I take my ethics seriously, and whether or not the IRS can adequately do its job doesn’t change my ethical responsibilities. Of course, not everyone feels this way, so we end up having to “compete” with some pretty shady characters out there.
— Josh Youngblood, EA (@JoshYoungblood) August 6, 2025
I think most reduced enforcement will hit at the top. As you noted, mismatches will still be flagged—that tends to impact lower to middle-income taxpayers. I also think AI looks at trends will be more of an audit/exam draw. And “enforcement” in the form of a lien or levy is easy.
— Kelly Phillips Erb (@taxgirl) August 5, 2025
It’s been that way forever. I accept it.
Many clients are better off with Turbo Tax or H&R Block. An even greater number would be better off with Turbo Tax or H&R Block and then getting their return reviewed after being filed and only amended if the amendment helps them.
— Anthony (@myonlinetrust) August 6, 2025
This has always been the case…we, oftentimes, care more than our clients. It’s easier to sleep at night when you don’t have shady clients. One of the psychographic profiles we screen against for new clients is a healthy fear of the IRS
— Mike Shaeffer (@mshaeffer) August 7, 2025
We didn’t have a psychographic profile to screen clients at Joseph B Cohan and Associates in the eighties. Herb Cohan seemed to run the firm on two principles. Money coming in is good. Money going out is bad.
What Will Happen
To wrap this up’ I thought I would check out what sort of tax advice is being offered on TikTok. The funny thing is that it is for the most part not outright wrong. Many of the videos give really mundane advice like funding your retirement accounts.
When it gets to more exotic stuff. Well, you really can take 30% of your income and put it in a private foundation. That could be a great thing to do if you are already quite wealthy and want to be philanthropic, although to tell you the truth a donor advised fund is probably more convenient. It doesn’t do much for Henry or Henrietta. Charity begins at home.
If you buy a property and use it for short term rentals you can avoid the limitation on passive activity losses and get a big upfront deduction for bonus depreciation. If you want to do the bonus depreciation thing with a long term rental while keeping your day job as an engineer, marry a realtor or a contractor. The flaw in these schemes is that most people can’t handle the work that is involved and there is significant risk in being leveraged.
Running all your income into a trust that buys whole life insurance which you borrow against, on the other hand, that probably doesn’t work. Starting a side hustle to deduct a lot of personal expenses falls in the “it depends” category.
What is troubling is that with close to no enforcement, the things that don’t work mostly will work until the pendulum swings and enforcement ramps up. And then there may be wailing and gnashing of teeth.
Originally published on Forbes.com.
For great value continuing professional education. I recommend the Boston Tax Institute
You can register on-line or reach them by phone (561) 268-2269 or email vc@bostontaxinstitute.com. Mention Your Tax Matters Partner if you contact them.
For articles oriented toward tax professionals check out Think Outside The Tax Box.
