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ONLY TREASURY EMPLOYEE UNION MEMBERS ARE QUALIFIED TO COLLECT TAXES

May 02, 2007

The National Treasury Employees Union hates the program to farm out tax debt collection to private (and, incidentally, non-union) tax collectors. Yesterday the head of the union, Colleen Kelley, issued a new press release, Congressional Support Continues to Build For Halting IRS Private Tax Debt Collection. The release quotes the call by Ways and Means Chairman Rangel stop the program and concludes:

This call was echoed by President Kelley. "In light of the continuing controversy swirling around this program, the rational course for the IRS to take is to halt this program immediately," she said. "It is time to return the work of the IRS to the professional and dedicated IRS workforce and provide the agency with the resources its needs to collect outstanding tax debts."

One member of that professional and dedicated workforce ran into trouble in Tax Court yesterday. Barbara Trimble-Gee was a manager of an IRS examination group in California. Perhaps she found some inspiration there when she did her own tax return.

Ms. Trimble-Gee ran a cleaning business on the side. It doesn't appear to have been a big moneymaker. From the Tax Court opinion:

On her 2001 and 2002 Federal income tax returns, petitioner reported the income and expenses of the cleaning business on Schedules C, Profit or Loss From Business. On her 2001 Schedule C, petitioner reported gross income of $5,745 and expenses of $28,026. On her 2002 Schedule C, petitioner reported gross income of $2,377 and expenses of $28,045.

That kind of Schedule C is just jumping up and down for IRS attention, and sure enough, it got some.

In January 2006, respondent issued petitioner a notice of deficiency. For the taxable year 2001, the notice disallowed claimed deductions for $16,815 of depreciation and section 179 expense; $4,031 of car and truck expense; and $323 of interest expense. For the taxable year 2002, the notice disallowed claimed deductions for $2,977 of depreciation and section 179 expense; $10,390 of car and truck expense; $1,302 of meals and entertainment expense; $329 of travel expense; $898 of wage expense; and $5,202 of "remaining expenses", which consist of items such as rent, supplies, and utilities expenses.

For an IRS examination group manager, Ms. Trimble-Gee didn't seem to know very well how to back up her deductions:

For 2001, respondent determined that 35 percent of the Astro Van's use was for trade or business purposes. Petitioner, in contrast, contends that the business use was 63.88 percent. To support her contention, petitioner introduced, inter alia, a document titled "Weekly Expenses" that includes notations such as "Vallejo/SF 18th", "San Leandro 9/22", and "Riverside 5 - 7th". According to petitioner, these notations represent business trips taken in the Voyager or the Astro Van. The document does not indicate the distance between petitioner's home and the destinations listed, however, nor does it describe the purpose of the trips. In addition, it is not always clear whether a particular trip was made in the Voyager or the Astro Van.

The taxpayer/IRS agent also failed to take into account the uncanny abilities of Tax Court judges to read maps and do arithmetic - including adding 2 and 2:

We also note that petitioner indicated Riverside, California, was approximately a 500-mile round trip from her home. When asked how it was economically feasible to travel that distance for her cleaning business, petitioner explained that she hoped to obtain a large cleaning contract that would enable her to relocate to southern California. Petitioner gave no details about her efforts to obtain such a contract, however, and petitioner acknowledged that her sister lived in or near Riverside at the time.

The Tax Court concluded that business use of the van fell below 50%; if property isn't used 50% for business, it can't be deducted under Section 179. The court disallowed her deductions and assessed penalties for negligence.

The moral? If you use a vehicle for business, it's best to keep a log, or at least a detailed record of your business trips -- even if you are a member of the "professional and dedicated IRS workforce."

Cite: Barbara A. Trimble-Gee, T.C. Summ. Op. 2007-68.

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