Howard Knudsen CPA
@howard_knudsen
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Firm Owner. Certified Public Accountant. Former IRS Revenue Agent 2009-2019. Now I specialize in helping taxpayers. Obsessed with nutrition & healthy living
Sacramento, CA
Joined May 2016
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Soaking up that California sun in Pluto’s Cave in far Northern California off Highway 97.
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Why did I leave the IRS? In 2017, they took away my stack of rich person audits and gave me a stack of poor people audits. I couldn't stomach auditing poor people. My health collapsed. I tried to keep going, but finally after weekly hospital visits I quit.
#taxtwitter
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I used to audit the 1%, suddenly in 2017 I was auditing a guy living in his van and family that lost their home in a flood. Instead of CEOs I was auditing custodians. WTF?
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I just walked in. Packed my stuff in box and walked out on April 1. They thought I was crazy. They thought it was an April fools joke. I was done. I could never audit a taxpayer again.
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Before 2017 I was in the global high wealth group. After 2017, I was auditing pathetic little Schedule C activities. After a very poor taxpayer wept to me, I walked into the IRS bathroom and puked blood. I knew I didn't have long to go. Somehow I kept going until April 1, 2019
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@mrmoneysleeves
Indeed. I'm not only one. It was toxic environment. It wasn't always like that either.
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@Kathleen_Tyson_
Interesting perspective from outside of the US. Thanks for sharing, Kathleen.
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LOL I say "stack of audits" as if people know what that means. It was literal stack of folders. Each folder with a tax return and some basic info in it. My stack was approximately 30 audits at a time.
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@lewi3_lewis
Consider asking for a CNC "currently not collectible" status if they're old, poor and can't pay.
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@seoulbtc
Oh wow. Thank you. One day I'm just posting waterfall pics and then the next I spill my heart on twitter...
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Example of what I do now; a client has leukemia. She's hella sick & falls behind on filing tax returns due to her illness. The IRS proceeds with collection actions. I intervene, file the late tax returns, determine a corrected much lower tax liability and then get CNC status.
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2 years I represented a bunch of taxpayers who sold their primary residences and the IRS decided to tax them on the full amount of the sale rather than applying the home owners exclusion. The hardest was just getting the IRS to read my letters! Ultimately no tax was owed.
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@RUB1G
Expand customer service, make it easier to get tax issues resolved on the phone, which is huge problem for tax practitioners. Don't live in fear. It is not necessary.
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A client living in his car was saving up money for a deposit on an apartment. The Franchise Tax Board freezes his bank account for an unfiled tax return from 5 years ago (!!!). I file the return, he owes nothing, the state unfreezes his money and now he has an apartment.
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Beyonce was audited and a lot of her deductions were disallowed due to lack of documentation. An accuracy penalty was also applied. Save your receipts.
#taxtwitter
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It is very rare to have a former IRS agent called back to the IRS to receive an award especially considering I just walked out on April 1 2019. Honestly I never saw them honor a former agent.
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At the beginning of each audit or collection the agent will provide their manager's name and number. Keep that info. Often a manager is a release valve on pressure built up during an audit. If the agent won't listen, call the manager.
#TaxTwitter
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This story came out 6 months after I left the IRS. (I was not the source for the story!!!)
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A few years ago I picked up a new audit client who was undergoing a 3 year-3 tax return audit. "What happened?" I asked. The client said "I told the agent to fuck themselves when they called me." Well...there you go. Don't be an idiot & insult the IRS person.
#TaxTwitter
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At the IRS, were employees all protax progressive types or liberals or socialists? A few. Not many. Interestingly, at least half were "law & order" type conservatives who had a "the rules are the rules" type of attitude that you'd expect from your 1950s era Dad or a Cop.
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Learn from my failure. If you're working somewhere you feel unhealthy. Change jobs. Don't push through it. Don't take one day at a time. Change jobs. It's not about manning about and forcing it. Your health matters more. I should've quit the IRS in 2017 before my health issues
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A lot of expats fall behind on their tax returns. They travel overseas to teach or work & they don't realize the IRS taxes 100% of worldwide income Good news there's a forgiveness program that many expats qualify for called the Streamlined Foreign Offshore Procedures.
#taxtwitter
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Classic IRS audit that I would have - hobby loss - audited a guy who deducted $100K a year on strippers and travel to strip clubs all to "research" his new business venture (a strip club, of course). He got away with it for 6 years before being caught
#taxtwitter
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You pop open the mailbox and there's an IRS audit letter. It has a number and requests you give them a call to schedule an appointment. What do you do next? Call the IRS back? Toss the letter? Call the tax preparer or another POA? Think first.
#taxtwitter
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Recent small win. I had CNC Currently Noncollectable Status granted for an elderly disabled client with dementia normally never filed due to only receiving SSDI. The IRS was going to garnish her disability income due to failure to file a return from a decade ago.
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To this day, I am still very happy with 8 out of 10 years at the IRS. The training was beyond measure and nothing the private sector would ever provide. 2 solid years of training and instruction. If you're a recent college grad in accounting you could do worse.
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If you used Turbo Tax or H&R Block & have Schedule E income from an LLC, partnership, S Corporation or Trust, check your tax return to ensure you received the Qualified Business Income Deduction on line 13. I'm seeing returns missing this deduction.
#taxtwitter
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How are tax returns selected for audit? The "Dif Score." The higher the "dif score" the higher your chance of being audited. Long term losses, round numbers, deductions for travel, meals and cars all lead to a higher Dif Score.
#taxtwitter
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@disgustedtedly
@LoverOfBooks123
There is something about death and taxes. I’m sorry they added to your already tragic situation 🙁
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What specifically does an IRS agent do? Primarily we used Internal Revenue Manual Section 4.10 and it is (99%) publicly available right here.
#TaxTwitter
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I converted 99% of clients over to paying online, but a small percentage insist on mailing checks that take literally weeks to arrive and then they blame me for not receiving the checks. No longer. I'm letting all legacy payment clients go. My life is too short to chase checks.
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TAXPAYER RIGHTS are covered by Publication 1. If you get audited force the IRS employee to read Pub 1 to you before the audit or collection process. It makes a difference when they know that you know what you rights are. I do this in all my own audit rep jobs.
#taxtwitter
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What is the best day and time to call the IRS?
Evenings 5:00 PM to 7:00 PM Pacific time Tues-Thurs. Sometimes Friday afternoons are great because less calls in but sometimes less people are answering calls as well. Mondays and Tuesday mornings are challenging.
#taxtwitter
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...so I started the business basically to do what limited good I can in within our fucked up tax system. Does it count as redemption? Maybe not, but all I can do is try. So it goes.
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The smartest tax attorneys (top 20%) know the IRM and quote it back to IRS agents to criticize aspects of the audit. Huge pains in asses, but incredibly smart to know the manual. "According to section 4.10.5.104142534 you can suck a dick, Howard."
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Random note - tax pros: always be nice to IRS reps. They put up with taxpayers' abuse, to some degree, but they can easily submit a referral the Office of Professional Responsibility for rude behavior from a POA. It is NOT something good to have on your record.
#taxtwitter
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Not happy with my accounts receivable balance. Pay your tax professional or don't get filed. I get the feeling people are waiting until the 15th to pay the IRS and pay me. Its not a package deal. Next year I have to start asking for deposits.
#TaxTwitter
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Years ago I audited a paid of S Corps that sold materials. Each company had a super similar name, which enabled the shareholders to double deduct expenses paid by 1 company, claiming it for both. How'd they get flagged? Balance Sheet reconciliation errors.
#TaxTwitter
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@tunedhuman
Thank you. It is what it is. At least I'm free now and have a tiny CPA practice. I'll take it.
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In the beginning I thought being the low cost option was the way to break into the market. It resulted in me building the wrong portfolio of clients. People who wanted a good deal rather than a good CPA. If you're starting out. Don't be like me.
#taxtwitter
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Tax Preparer Penalties. Is that something to worry about? I imposed this penalty more than most other IRS agents, but it was against really bad stuff not mistakes or even negligence. Some fucked up examples follow.
#taxtwitter
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The EA is the future. The CPA is no longer necessary to operate a successful tax practice. I only earned my CPA because I was already working at the IRS doing audits. Earning an EA + tax prep experience is the more efficient route.
#taxtwitter
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Typing the words "currently, I am not taking new clients" to a new contact feels sooo good. Just a few years ago I took every flaming dumpster that rolled in the front door. No more. Now I pick my dumpster battles judiciously.
#taxtwitter
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@MiekoGavia
You get it. That is most likely the reason. Good job walking away with a refund of any size. Statistically very rare.
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Imagine you get a huge information document request from the IRS, asking for every receipts to every deduction you took. What do you do? This where the POA can negotiate a reasonable sample size for the document saving you hundreds of hours of time. That's what I do
#taxtwitter
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The IRS published the number of agents its employs as 7,928 in 2023. Down from 8,307 in 2022. Only 2,142 of gun wielding special agents.
The reports of 87,000 new agents are highly exaggerated.
#TaxTwitter
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While many people fear the IRS, California's Franchise Tax Board is much worse. I actually get more clients being harassed by the State of California than the IRS. Welcome to California.
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@fuckyouiquit
More like $1.5 trillion a year. I worked as an IRS revenue agent for 10 years. $150 billion is a gross understatement. The amount of tax cheating in this nation is astounding.
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"Little old lady letters" - a term I use for a demand letter sent by the Franchise Tax Board to a slew of retired people, mostly women in my case, demand they file a tax return based on an estimated amount of income that they never earned.
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Do you have anxiety? I was talking to my CPA friend (non-IRS) and he also suffers anxiety and wants a better job. Is this specific to being a CPA? Being a millennial? Why do so many of us have anxiety? Obviously the way we're living isn't right if this is so common.
#taxtwitter
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@Dieter75
@VoyageInfini
They had the money to pay. Money. I used to work in a casino accounts receivable. They didn't waste their time on small fish. They collected on the unpaid whales. It's only business. Nothing personal. The casino and the IRS had that in common.
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If your business or activity loses money for more than 3 years, does it make the activity a hobby or even a target for audit? No. Is a history of losses a red flag? Yes, but it is one factor of many in the dif score. Lots of businesses lose money for years.
#taxtwitter
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CAN I TALK TO YOUR MANAGER?!?!? Is an ok request to make during or after an IRS audit. I'm seeing cases of taxpayers getting very screwed by IRS agent trainees and processes. The system is so broken. IRS Management knows it. Don't be a victim.
#taxtwitter
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Cancer free. Well worth the colonoscopy screening. Take that, anxiety. Go get your butt checked.
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@dieworkwear
@xank_the_tank
lol didn't see that coming. 🤣 It's so funny how other people want to define your page to you. It's your fucking Twitter page. You'll tweet what you want. Keep up the good work,
@dieworkwear
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In 2017 a radical change occurred along the chain of management from the front line manager to the IRS Commissioner. A lot of people left during those years
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Internal Revenue Code 280E denies deductions for most expenses for illegal businesses, which included cannabis/marijuana related businesses. The reclass of marijuana from Schedule 1 to Schedule 3 will be a gamechanger for these types of businesses and their CPAs.
#taxtwitter
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My office landlord is raising my rent 250%?!? This is despite having a mostly vacant office building in a neighborhood of vacant office buildings. This increase destroys my business model. I'm going back to the home office.
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@CatskillJulie
@mrmoneysleeves
On the inside there's been a lot of promotions out of the general program into specialist groups that audit larger, more complex taxpayers and now there is a undersupply of general auditors.
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Got another former H&R Block client who failed to get the Qualified Business Income Deduction for their partnership business income. I keep seeing this problem. Not good.
#taxtwitter
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NEWS ALERT - Colorectal cancer (colon cancer) is the
#1
cause of cancer death for men under 50. I'm fasting & prepping for my upcoming colonoscopy. I don't expect anything, but with a family history it's the smart thing to do at 40. Early detection is the best medicine.
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On the TV & Radio there's always ads about some company that will "fight" the IRS for you. Listen, once you're fighting the IRS rather than fighting whatever the problem is, you are already losing. Focus on solutions. Conflict is not your friend.
#taxtwitter
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In 2018 we had an "Empire Strikes Back" themed motivational campaign to boost productivity among the agents. I asked "isn't the Empire the bad guy in Star Wars? Are we identifying with the bad guy?" I wasn't fitting in very well at that point..
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Fuck tax return revisions. I’m getting so frustrated by clients submitting one more document or changing some number. Soon to be former clients…
#TaxTwitter
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@HatfieldsMama
Indeed. It was worse before the 8867. In San Diego a ton of tax clinics opened up on the border to pump out fake small Sch C profits for immigrants, hence all the residency questions on the 8867.
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IRS Audit Update - no changes. Yay. Did I fight them? No. Yell? No. I just provided the paper trail to document numbers on the tax return. It worked. It helps when one number ties to another. It also helps dealing with a human being in person.
#taxtwitter
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@GRomePow
My former office landlord raised my rent 250% late last year, so I closed the office and only work from home. My former office sits vacant.
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Each tax audit typically focuses on 3-4 lines of the tax return not the entire tax return. Large, unusual and questionable deductions get looked at. Travel, meals, entertainment, gifts, cars and anything FUN is a potential red flag.
#TaxTwitter
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At least when I was an IRS agent I could compel the taxpayers to pay. Fuck this accounts receivable..
#taxtwitter
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The client earned only $1300 a month in disability income and the IRS proposed taking about $300 a month, leaving her less than enough to pay the rent and her food bills. She was granted CNC.
#TaxTwitter
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When selecting taxpayers for audits the IRS subtracts an estimated cost of living for the taxpayer's location and from their reported taxable income. It's called the "Cash T" and if it is negative the risk of being audited is higher.
#TaxTwitter
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#taxtwitter
A return client offered me $250 to prepare a 1040 w/ 3 Sch E rental properties. Not reasonable. Not even close. Goodbye. Fellow preparers, what would you do in this situation? Is negotiating price from this low point even worth it?
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I apologize for an emotional outbursts about the failure of the Big 4 Accounting firms and AICPA to improve working conditions for their staff. A bit out of character. I stand by our need for a union to negotiate better pay and working conditions.
#taxtwitter
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Anxiety is my struggle. Even with managing my workload, taking time to exercise & hot tub I still got hit by a panic attack this morning. My tax brothers/sisters, am I alone in this? How do you manage it?
#TaxTwitter
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How to lose an appeal of an IRS audit:
Fail to
1. request an appeal in writing.
2. provide requested documents to the auditor
3. address specific IRC code sections used by auditor to make adjustments.
or 4. Submit irrational legal arguments
#TaxTwitter
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In my previous career as an IRS Agent, the civil fraud penalty was more often applied in situations when taxpayer's failed to report income or assets and rarely in cases where taxpayer's deducted personal expenses or failed to document deductions.
#taxtwitter
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1. DO NOT IGNORE THE LETTER. The IRS will not go away. They'll take their time, but they'll followup with more letters and things will escalate. Eventually they could make an audit decision that is very negative for you without your input.
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@bhallcpa
I audited a ton of "RE Professional" Schedule E loss returns. Its low hanging fruit. The IRS would run a program to select anyone with high W2 income (who probably worked fulltime) and a huge Sch E rental loss. We stopped doing it after 2016 for some reason...
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If you decide the call the IRS yourself. This is your opportunity to make the IRS person read the Taxpayer Rights Publication 1 to you and provide their manager's name and number. Then you say you don't feel comfortable answering questions until you've spoken to your POA.
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Biggest IRS Audit I conducted - 5 year non-filer. High income corporate CFO. Should've faced the fraud penalty, but they wisely made a large estimated tax payment at the first appointment, so management waived it.
#TaxTwitter
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In my past career, I audited over 100 hobby losses (it was my jam) and the first question I always ask was "do you have a written business plan?" I've heard "I have one in my head" so many times...not a smart answer. A good way to lose money
#taxtwitter
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Not good. I'm working too much and have developed a bad attitude. I'm at the "I'm only one person! How can you ask this of me?!?" point of tax season.
#TaxTwitter
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I appreciate the wisdom from my fellow CPA on
#TaxTwitter
#taxtwiter
Thank you I've finally had the courage to part ways with my 10% of clients who were the biggest headaches. My life is easier and sales are up, despite the drop in workload.
@LoganGrafTax
@cbriancpa
@profjackc
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I just saw a cyclist's dead body underneath a city bus on Club Center. The cyclist appears to have been in the marked bike lane. What a way to die. The guy left home never expecting it would be his last ride. Appreciate your time here on Earth. You never know when your last
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For a brief moment the CI unit in my office was focusing on sex trafficking among massage parlors. This is a genuine problem, but the IRS only had the resources to scrape the surface of the issue despite being perfectly situated to shut it down.
#taxtwitter
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In the case I worked on it was easy. The massage parlor deposited tons of cash and didn't report it. No need to prove sex trafficking. The owners were ruined in taxes, penalties and interest.
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I'm over 40. I got my blood tested. Everything is good. If you're over 40, please get a check up. If you don't do it for yourself. Do it for your family or friends....but really do it for yourself. You deserve it. Your body deserves it.
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Years before I worked at the IRS I knew fools who thought they could stop paying taxes because the tax code was "illegal" or some other bullshit. The IRS took EVERYTHING they had. One guy went from living in a 4 bedroom house to a studio apartment. Not worth it.
There are always morons who try to claim that the US income tax system is a voluntary system.
It is not. The taxing agencies have the power and authority to collect taxes as set by the legislative bodies.
If someone tries to convince you that you do not have to pay taxes, run.
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@dick_nixon
As a former IRS agent I can confirm that most small fish get away with cheating here or there. People who stick their dick out get stomped by the man.
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lol. Most common mistake I see if taxpayers forming an LLC the moment they form a business idea. The State of CA charges $800 a year, minimum, just to exist as an LLC. LLC typically = more taxes not less....at least in California.
#taxtwitter
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Did you know you have the RIGHT to Quality Service from the IRS? It's one of the Taxpayer Bill of Rights that was passed in the 90s. What is Quality Service?
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Why get a POA? They act as a barrier between you the taxpayer and the IRS. Only a fool talks to the IRS alone. Good fraud cases are built on interviews with the taxpayer.
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