What the IRS doesn't need to know

In the United States we have an annual ritual of filling out a long, intrusive report governed by opaque rules and convoluted language known as a tax return. It's tempting to get on a rant about what I think of paying nearly a third of my income to a bloated, corrupt, greedy government, an entity which I personify in the form of a certain red-haired floating fat man who screams "He who controls the spice, controls the universe!" I could comment on politicians who are quoted in the media for backing simplification of our tax code. I believe they are being truthful and will simplify the hell out of it. Someday, the 1040 will be just 2 lines:

How much money did you make last year?_______

Send it in.

Kick ass!

However, I'm going to focus on just one line in the tax return. It is right next to where you sign your name. It says "occupation". I've prepared hundreds of tax returns and never filled in this blank. 99 times out of 100 no one questions why I don't fill this in. But when the 100th person says, "Most intellectual tax preparer god, tell me, why do you not fill in this blank?", I always say:

It's none of the government's goddamn business.

That answer is usually good enough and it sometimes even makes the victim of the current legalized wallet-rape feel a little better. They just got robbed and forced to open up minute details of their lives, but they exercised just a smidge of civil disobedience. You've got to find the silver lining somewhere.

Some people, though, still feel uncomfortable and ask "But couldn't I get audited?" I answer, sure you could. At any time. Do I believe this would be the trigger? No. If you file late every year, have a dozen small businesses, none of which ever make a profit, yet still manage to pay a $25,000 mortgage every year and deduct half of that for home office expense, then, yes, I think you are treading on thin ice. But none of my clients have ever been audited.

Since I'm an obliging sort, if a client feels they need to fill in the blank, I don't discourage them. I like to be helpful, so I have a prepared list of possible occupations that one could use on their tax return if they are so inclined:

• Dark Overlord of the Underworld
• Corporate Whoremaster
• Paranoid Crank
• Nemesis of the Conservative Right
• Tiny-brained wiper of other people's bottoms
• Olive hollower
• Bathroom stall inspector
• Bad Mutha-Fucka
• Galactic Emperor of Grated Cheese
• FDA Inspector for canned whoop-ass
• Director of Marketing for Secret Shadow Government
• Temptress of the Righteous
• Director of Jack-O-Lantern Quality Assurance (seasonal)
• Lead Developer of Barroom Bully Taunting
• Super-hero sidekick
• Bong safety inspector

Use these at will, taxpayers. Make up your own. And if you get audited, I did not say this. I was never here.

Lola's writeup is for entertainment value only, and not to be taken seriously, especially by people in certain occupations.

The IRS likes to audit people in cash businesses (including tips: hairdresser, waiter or bartender) and certain professionals (doctors, lawyers and accountants).

So, I'm a lawyer. I'm better off leaving the "occupation" line blank, right? Wrong.

Leaving the "occupation" line blank is itself a red flag. See Frederick W. Daily Surviving an IRS Tax Audit, (Nolo Press 1999).

Worse, the IRS has ways of identifying people who are trying to be cute. Occupations are identified not only by the "occupation" line, but also by 1099s issued by payors. For example, if I settle a lawsuit, the insurance company makes out a check to me and my client, and identifies the settlement to the IRS as a payment in connection with a lawsuit. Failure to report that income (or if my numbers don't match the insurance company's numbers, which could just be an honest mistake) together with a blank occupation line on my return, would guarantee that if the IRS audits only one in a million taxpayers this year, I will be one of the audited.

So how can you tell if are you at risk? Read the MSSP for your industry (if there is one).

The IRS has special guide for auditing taxpayers in particular industries which the IRS believes are not complying with tax laws, called a Market Segment Specialization Program (MSSP). For lawyers like me, there is an MSSP called "Lawsuit Awards and Settlements".

MSSPs are fascinating analyses of money flows in particular industries. MSSPs are available at http://www.irs.ustreas.gov.

Surviving an IRS Tax Audit, Chapter excerpt: http://www.nolo.com/lawstore/products/product.cfm/objectID/03BC593B-B5C8-4DE2-AF47B59EDE66B907/sampleChapter/5