IRS Should Be Asking For Cooperation Not Volunteering
Professor Manhire presents a four cell quadrant that illustrates the choices available to taxpayers – cooperate or evade – and the IRS – audit or don’t audit. He notes that the ideal situation is one in which the taxpayer cooperates and the IRS does not audit at all or at least not very often is the ideal. Lots of audits of compliant taxpayers feels like harassment. Audits of non-compliant taxpayers will have them “busted” which is unpleasant, whereas non-compliant taxpayers not being audited make the rest of us feel like chumps.
So it would be less confusing if the IRS were to say that the system is based on “cooperative compliance”. Since most people cooperate, enforcement resources can focus on those that do not. It actually sounds like a pretty good idea. We’ll see if it takes off.
Too Much Assuming Leads To Over Quarter Million Late File Penalty
I think that the result in this case is rather harsh. Given how compliant the taxpayers were once they got their act together, I think the government should have been satisfied with the late pay penalty. The problem would have been easily avoided if they had been more proactive in communicating with their professionals and if the professionals had been communicating with one another. You can’t tell from the decision why the proactivity was not happening. There may have been an understandable desire to minimize fees. If that is the case it was kind of a penny wise, pound foolish result.
I think that you could use this case as an object lesson in why you might want to consider involving a professional as at least a co-executor, if you have a significant estate. At any rate, you should try to arrange things so that your advisers and heirs/executors will work as a team.
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Over and over again courts have said that there is nothing sinister in so arranging one’s affairs as to keep taxes as low as possible. Everybody does so, rich or poor; and all do right, for nobody owes any public duty to pay more than the law demands: taxes are enforced exactions, not voluntary contributions. To demand more in the name of morals is mere cant.