Work Text:
I wanted to write an analysis of Episode 6x15 “Death and Taxes”. Specifically, about Chimney and Maddie’s storyline where they get audited. Seeing as I have some experience with audits, I thought I might be able to talk about it.
To explain my background and why I have the relevant experience, I should mention that I am a tax professional with almost 15 years of experience. I have been involved in hundreds of audits. I am extremely aware of the procedures.
In the very first scene, both Chimney and Maddie receive letters from the IRS. This is the correct procedure for starting an audit. The IRS will not email or call you out of the blue. You will receive a letter first. The letters that Chimney and Maddie received were not right, however. When you receive notice of an audit, it will be a much longer letter. Those letters looked like they were only 1 page. Usually, the letter is 2 or 3 pages, depending on which letter is sent. The letter will detail why you are being audited, what the procedure is, and what your next steps should be. In addition, there will be enclosures with the letter. At a minimum, you will receive The Taxpayer’s Bill of Rights with your letter, which lists what your rights are under the law when dealing with the IRS.
There are 3 types of audits – by mail, in the office and in the field. Most audits are conducted by mail. These are simple audits with only 1 or 2 issues that aren’t complex. Usually, it’s something like you forgot to report income from a W-2 or you took a credit that the IRS doesn’t think you qualify for. The letter will list the documents you need to send and the address to send them to. You should always send copies, not originals, and you should always send them by certified mail so you can prove that you did send them. Mail unfortunately gets lost.
Field audits are the most complex audits. They usually deal with at least 3 complicated issues and require a lot of time and investigation. In a field audit, the Revenue Agent will come out to your home or business to interview you, tour your business and review your documents. There are usually multiple visits. When you receive the letter informing you of a field audit, you will be told to call the Agent to set up the first appointment. There will also be an enclosure called an Information Document Request. This will be a list of all the documents that the Agent is requesting in order to properly determine your tax liability.
Chimney and Maddie were given notice of an office audit. These are conducted by Tax Compliance Officers in an IRS office. The letter would have told them exactly why they were selected for audit and included an Information Document Request listing the documents to bring to the appointment. Office audits are in between mail audits and field audits. There are usually at least 3 issues which are somewhat complicated, but not overly so. The writers got this right – based on the issues that the Tax Compliance Officer mentioned, their returns would have been audited in the office. But as I said, these issues would have been listed on the letter. The IRS doesn’t like to keep you in suspense.
However, Chimney and Maddie aren’t married. They file separate returns. They are considered individual taxpayers. Because of this, they would NEVER have been audited at the same time. The IRS is anal about privacy, for good reason. Unless you sign a document authorizing someone to have access to your tax information, the IRS will not give it out. They would not let Chimney hear the details of Maddie’s return, or Maddie hear the details of Chimney’s. Besides, it’s not good interviewing practice. Interviewing them together allows them to collaborate on what to tell the IRS. You want each taxpayer’s testimony separately, so that you can compare them and see if there are any discrepancies. Unless Chimney and Maddie were married, this just wouldn’t happen.
During the discussion at the firehouse, people mention that the IRS does random audits. Not anymore. They used to randomly select taxpayers for research purposes. But that study is no longer done. People aren’t selected at random for audit. All returns are run through a very sophisticated computer program that analyzes the return for mistakes and possible fraud. When Buck says that you have a 0.6% chance of being randomly audited, he’s almost correct. You have a 0.6% of being audited, period. It used to be that the IRS audited a little more than 1% of all returns. But budget cuts and problems with employee retention have caused that to drop. This is why the IRS was given that large budget increase. It means that you’re more likely to get a person to answer the IRS’ phone lines because now they can afford to hire people for the call centers. It also means that the IRS has the money to improve their technology and audit more taxpayers. Since they are targeting returns that have problems, it’s more likely that the IRS will be able to collect more of the money that should be paid in taxes but isn’t. That lost money is called the tax gap and it’s a huge problem.
Next, we see Chimney and Maddie at the IRS office. I was floored. Seriously, I have never seen an IRS office that nice. IRS offices are institutional at best. The chairs are uncomfortable, the colors are drab, it’s definitely a government office when you go. Also, no American flag. There’s usually a flag. And there rarely is a receptionist sitting out in the waiting room. That would be a security concern and frankly there aren’t enough secretaries to be wasted on something like that. Instead, you come to the waiting room and there’s a phone that you can use to call the IRS employee who has summoned you there. They will come out and bring you back to their office.
I was kind of surprised by the demeanor of the Tax Compliance Officer who was conducting the audits. IRS employees are pretty friendly! The IRS hires people with customer service skills to deal with taxpayers. It’s important to make the process as pleasant as it possibly can be. Why? Because that’s what Congress wants, and the IRS has learned that taxpayers who feel they have been treated fairly and with respect are more likely to agree to any adjustments to their tax liability. If you understand what has happened, why it happened and why you have to pay more money, you’re more likely to admit that you made a mistake and start making payments. It’s just good policy.
Again, that office was way too nice. Nobody gets a nice desk like that. You get a metal and fiberboard desk in a cubicle. That was the other thing that wasn’t realistic. Like I said, the IRS is anal about privacy. They would not conduct an audit in an open room where anyone could overhear what was being discussed. Instead, you are in a private cubicle.
Then, the Tax Compliance Officer doesn’t even interview them! She just starts accusing them of fraud. Not how it goes! If the auditor is friendly and puts the taxpayer at ease, the taxpayer is more likely to tell the auditor what they need to know. They are also more likely to slip up and tell the auditor things that they might not have said otherwise. A normal interview starts with the auditor explaining what the taxpayer’s rights are and explaining the step that the audit will take. The IRS doesn’t want taxpayers to be surprised. You should always know what’s going on and what’s going to happen next. Then, the auditor will ask questions about financial and personal items relevant to the audit. They might ask where you work, what you do, how many children you have, etc. They will ask specific questions related to the issues mentioned in the letter. They may also ask probing questions about other issues that they think might be a problem.
Once the interview is done, the auditor will review the documents you have brought. They will make notes and make determinations. With an office audit, there’s usually just 1 appointment and you get the determination that day. You will probably be expected to be there all day. Once the auditor has made a determination, they will issue you a report. This will be in 2 parts. The first part will be the recalculation of your tax liability. It may also include penalties and interest. The 2nd part will be an explanation of all the changes made due to the determination. Auditors try to put this in as plain language as possible. They will review both parts of the report with you. They will make sure that you understand why they made the changes to your tax liability and why they assessed any penalties. Then they will tell you what your options are, depending on whether you agree with the report or not.
In the show, they just didn’t do that. It was so stupid! The IRS is not going to allow you to make the changes necessary to correct your tax liability. They are going to make those changes for you and tell you what you owe. The IRS runs on the principle of “Trust but verify”. Most taxpayers they trust. But if you’ve been selected for audit, that trust is gone, and the IRS is going to verify what you actually owe. It was so unrealistic. Besides, how would a taxpayer know how much interest they owe? And if the taxpayer is allowed to correct their tax liability, they aren’t going to assess penalties, even if they are warranted.
Then there was the scene with the tax preparer. When he suggested that Chimney and Maddie get married for the tax benefits, I raised my eyebrows. Getting married would most likely cause them to owe MORE, not less. If they get married, they get certain deductions and credits based on 2 times the rate for single people. But if they aren’t married, one of them can claim Jee-Yun and file as Head of Household. When your filing status is Head of Household, you get larger deductions and credits for some things, like the standard deduction and the Earned Income Tax Credit. So, with one of them filing as single and one of them filing as Head of Household, they would probably come out better. I get that the writers want Chimney and Maddie to have a reason to get married, but it wasn’t a wise reason.
Anyway, these are my thoughts. I hope you learned something, if only not to trust TV writers to know what they’re talking about.