Revenooers’ End Run On Microsoft
Seems IRS’ recent deportment in dealing with Microsoft has got Senate Finance Committee Chairman Orrin Hatch (R-UT) all riled up. Hatch wrote to Commissioner Koskinen, last week, complaining of IRS’ use of a private law firm to help out in a pending audit of the software giant.
Under the law, of course, IRS is empowered to make inquiries, and eventually assessments of taxes, relative to a taxpayer’s income tax return filings. And in this regard, IRS can examine books and records, and take testimony for purposes of determining the propriety of a return which has been filed. IRS can also issue summonses, ordering taxpayers to appear before IRS, and to produce books, records and to render testimony.
And indeed, a year ago, IRS issued temporary regulations stating that persons with whom IRS contracts for services may be included as among those designated to receive summoned books and records, and to take testimony.
In general, then, the Secretary of the Treasury has quite broad powers to delegate authority under the Internal Revenue Code which says that any such delegation is limited to an “officer, employee, or agency of the Treasury Department” unless Congress expressly grants broader authority.
But Microsoft has recently opposed the enforcement of IRS summonses, claiming an abuse of process because IRS had improperly (in Microsoft’s view) overstepped its bounds in retaining a private law firm to help get answers from the corporation.
In his letter, Hatch claimed that the IRS temporary regulations (which allows private contractors to question a witness under oath and ask the witness to clarify objections or assertions of privilege) is an unprecedented expansion of the role of outside contractors in the examination process, and thus a violation of the Internal Revenue Code.
Hatch notes that IRS has over 40,000 employees whose job it is to “enforce” the tax laws, including more than 36,000 whose job it is to deal with audits and collections. Nevertheless, IRS hires private contractors, spending millions of taxpayer dollars.
We’ll see how far Hatch gets with this, including his inquiry as to whether this practice will be used against other taxpayers.
CONSULT YOUR TAX ADVISOR – This article contains general information about various tax matters. You should consult your CPA regarding the implications to your own particular situation.
Jeff Quinn, the author of this article, is a shareholder in Ashley Quinn, CPAs and Consultants, Ltd., with offices in Incline Village and Reno. He can be reached at 831-7288, and welcomes comments at [email protected].