Anyone who has to deal with the IRS, like your tax guys, knows that the services’ computer systems, they use five different systems, are to put it nicely antiquated. Compound that with the fact the fact that their information technology protocol is incredibly poor, you have a recipe for a political scandal. What I believe hasn’t been reported widely, Lois Lerner, former chief of the IRS tax exempt section, and center of the current IRS scandal, was simply following IRS protocol. Like all IRS computer users, she used her own discretion in deciding what should be saved and what did not need to be saved. When it came to saving her outdated emails, she followed customary for IRS practices by saving the messages on her computer’s local hard drive rather than a larger back-up system. Once her computer crashed, it became nearly impossible to retrieve the database of electronic mail communications. Because the IRS uses Microsoft’s Outlook email system, there is a limit on the amount space allowed on their servers to store their employees email. After you use your quota of space, which apparently is what happened to Lois Lerner, the story gets a little murky.
From Bloomberg Businessweek:
When an IRS employee’s e-mail account is full, he or she needs to decide what is an official work record and must be archived, in compliance with the Federal Records Act and other pertinent regulations. The archive is maintained on the employee’s computer—not on a corporate server—and is not part of the daily systemwide mail backup, which covers about 170 terabytes of e-mail data the IRS stores at three data centers. Before May 2013, those backups were stored for only six months; the data are now retained, which costs $200,000 per year, the IRS said. “An electronic version of the archived e-mail would not be retained if an employee’s hard drive is recycled or if the hard drive crashes and cannot be recovered,”
Missing emails are nothing new in Washington. Both the Clinton and the Bush administration both claimed that certain emails relating to the then political scandal of the day were erased. Government by its nature and design is inefficient. It should be no surprise that the IRS has problems with it computer systems. For example in 1913, thinking it was being overcharged by the steel companies for armor plate for warships, the federal government decided to build its own plant. It estimated that a plant with a 10,000-ton annual capacity could produce armor plate for only 70% of what the steel companies charged.
When the plant was finally finished, however - three years after World War I had ended - it was millions over budget and able to produce armor plate only at twice what the steel companies charged. It produced one batch and then shut down, never to reopen.
So the next time you receive an IRS notice indicating that you owe them money, stop for a second, and remember, this is the same organization that can’t recover its emails or for that matter can’t make armor plate either and give us a call.
Later this month I will be attending the IRS Nationwide Tax Forum in New Orleans. I gotta tell you this email deleted scandal will be the topic of discussion with fellow tax geeks. I will write to you next month about what others are saying.
When tax time rolls around do you find yourself pawing through piles of paper on your desk looking for credit card receipts from your business trip? Or are you upside down digging under the seat of your car trying to figure out where all your gas receipts are? Are you wondering if that coffee stained piece of paper is an invoice from a supplier? Do you have a vague feeling that someone, somewhere owes you money but, you just can’t remember who it is? If so, you’re probably guilty of operating with the Fly By the Seat of Your Pants accounting method.
Using this accounting method has a tremendous impact on your business's cash flow. Unless you have a system to track your business finances, you’ll always be operating in the dark and in danger of imitating George of the Jungle as he slams into a tree. Help is on the way. Go online. Free advertiser supported online accounting software is available. Probably the most popular software online is Wave. Here is a link to their website http://waveaccounting.com/. It is easy. Fairly comprehensive. Working with your tax guy is easy, too. Just invite us as a Guest Collaborator and we can both see your data, securely, in real time. Perhaps the best part is the automatic download your bank account into your accounting records limiting the amount of data input you have to do. Advantages? It is free. It is intuitive. No need to change the way you are doing business today. We like wave accounting so much we became a Wave accounting pro advisor. We have posted a link to wave accounting on our blog.
