For some of you, this might be seen as no news at best and even possibly as bad news.  Don’t like giving the bad guys any help might be how some feel.  I can understand to a point, but have to think why would someone have this thought? For me, it’s good news for two reasons. 

The first is we must interact with the IRS being a CPA Firm and that hasn’t been easy for quite some time.  More help hopefully will mean better customer service in answering phone calls within a reasonable amount of time. The second is that yes, as a tax-paying citizen, let’s crack down on tax cheats. I’m not worried about passing an audit and the good business people I know are not either. Yes, it will take some time to deal with an audit, but if that is what it takes to get better compliance, then I’ll deal with it.

So why would someone have the mindset of not wanting the IRS to be in a better position to crack down on tax cheats? My first thought is that they don’t want to get caught being one.  My second thought is, how are these same people with the rest of their business? With the rest of their lives? From my experience, those who do cheat on taxes tend to cheat on other relationships in their lives as well, even with the people that you would think are a lot closer to them.

So is cheating on taxes a character flaw? I don’t know, just what I’m seeing as I work and talk with different people and hear their opinion about the IRS, taxes and the health of their business, their relationship with people around their business, and in some instances, their personal relationships.

I can put clients into three main buckets when it comes to this subject.  The first group is those that are not only in compliance but care about being in compliance to the point that they are making an effort to do so. These clients tend to pay bills fully and employees on time and care when something is paid late. Overall their business and lives seem to be very stable with little drama.  They normally keep good records and get us our information timely and completely without much follow-up on our part if at all. They also seem to be polite and display respectful characteristics.

“The first group is those that are not only in compliance but care about being in compliance to the point that they are making an effort to do so.”

The second group isn’t avoiding taxes, they just don’t really care to make any effort. Unfortunately, this spills over to other parts of their business and they just tend to be sloppy in everything. They tend not to communicate very well and have to be reminded multiple times to get information from them. When you try to discuss tax strategies, they seem not to be caring too much, especially in their follow-up to implement any strategy. They are usually last minute or late in filing their taxes as well.  Their business might do well because they are very talented, but is not doing as well as it could and sometimes even takes major hits due to carelessness. These people tend to have a lot of relationships 

The third group actually cares very much about taxes and goes to a great extent in avoiding them.  Some do this by trying to take every last legal strategy they can while others will go beyond and want to take deductions that are not deductions at all or not claim revenue whenever they don’t feel they will get caught by not doing so. These same clients seem to be the most stressful, have multiple business issues many times revolving around employees or contractors and some have problems with personal relationships as well. The sad thing about these clients is that they are hurting their businesses and you see it in their business valuation. A lot of these clients are very smart, but sometimes to the point they are just outsmarting their selves. Either they spend too much time-fighting taxes that they are losing that time where they could be improving their business and generating more revenues or they took unethical tax deductions/underreported revenues that directly reduce the value of their company at a much greater amount than the tax that they were able to avoid.  They end up taking on all this extra stress to only come out further behind than if they just focused on improving their business. In short, these people seem to be takers and look to take advantage of all their relationships.

What is your relationship and mindset with taxes?