IRS/Gov't @ "Work"...

motordavid · #1 01-05-2006, 04:21 PM

January 5, 2006

I.R.S. Audit May Be Cheaper Than Its Advice

By DAVID CAY JOHNSTON
Want to ask the Internal Revenue Service whether a wrinkle in rolling money from your 401(k) plan into another retirement account may result in additional taxes? Well, don't delay asking or it will cost you a lot more.

The I.R.S. charged $95 last year to rule in advance on unusual rollovers to individual retirement accounts, or I.R.A.'s. The new fees range from $500 to $3,000.

For the top fee, the increase is more than 850 times the inflation rate. But if you ask before the end of the month, the I.R.S. will charge last year's fee.

The higher fees were buried deep in a regulatory notice posted on the I.R.S. Web site Tuesday night and spotted by Ed Slott, a Long Island accountant who publishes a newsletter on I.R.A. tax traps.

Other fee increases include charging $9,000, up from $2,750, to entrepreneurs who want to make sure that their simplified employee pension plans are not too complicated. Multinational businesses that want an advance agreement on how much in taxes they owe on imported goods will soon pay as much as $50,000, which is 10 times the minimum fee last year.

And many fee discounts that taxpayers of modest means received in the past will be reduced or eliminated, the I.R.S. announced.

Not every fee is going up. Mutual funds, insurers and other mass marketers of retirement plans will have their electronic filing fees cut to $200 from $280.

Terry Lemons, an I.R.S. spokesman, said the fees were required under a White House directive, first issued in the Eisenhower era and updated during the Clinton administration. "We are supposed to charge fees that more accurately reflect the cost to us of delivering the service," Mr. Lemons said.

Mr. Slott, though, said, "The I.R.S. is charging bigger fees than I do."

He also said the higher cost of an answer from the I.R.S. might be a worthwhile investment for big taxpayers. But for the average American with an I.R.A. - who risks taxes, penalties and interest only if caught in an audit - Mr. Slott added that "it sounds like it may just be cheaper to mess up than to ask."

http://www.nytimes.com/2006/01/05/bu...pagewanted=all

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