From the moment Heritage Foundation economist Stephen Moore’s imminent appointment to the Federal Reserve Board was announced by President Trump, Washington has been in full pearl-clutching mode. This week, the anti-Trump media found what they think is the smoking gun that will bring him down: a $75,000 tax lien. The only problem is that it’s the IRS that is wrong, not Steve Moore.
First reported on Twitter by Heather Long of the Washington Post, Moore has an IRS tax lien filed against him totaling just over $75,000. The problem stems from a mistake Moore made on his taxes several years ago.
Under the law at the time, a taxpayer was allowed to deduct alimony paid to an ex-spouse but was not allowed to claim child support payments. Moore deducted both, which is the type of honest mistake you see a lot at tax time. The IRS disallowed both the legitimate alimony deduction and the illegitimate deduction for child support. The $75,000 represents back taxes, penalties, and interest for the disallowance of both deductions.
As reported by Katy O’Donnell of Politico, Moore does not dispute the back taxes, penalties, and interest for the child support deduction. But he is (correctly) unwilling to pay back taxes, penalties, and interest for his completely allowable alimony deduction. In fact, he has intentionally overpaid the IRS in subsequent tax years in the hopes of a settlement: “The IRS owes us money; we don’t owe them money — we had a $50,000 overpayment on our taxes,” he said, dubbing the experience “like the audit from hell.”
If all this is true, it’s the IRS who is in the wrong here, not Moore. The longtime supply-side economist made a mistake on his taxes. Let he who is without sin cast the first stone when it comes to tax return errors. The IRS is asserting that it wants to disallow not only his mistaken tax deduction for child support, but also his legitimate deduction for alimony payments.
It gets worse. The IRS kept sending correspondence about the matter to an old mailing address, one it never updated despite subsequent tax filings from Moore. He never saw the multiple IRS letters because he didn’t live at that address anymore. It’s like a plot thread from the 1980s movie “Brazil.”
As an IRS enrolled agent who has prepared taxes for nearly two decades, I’m familiar with this type of story. A taxpayer makes an honest mistake, the IRS computers start spitting out letters to which there is no reasonable appeal to a human being at the agency, and things spin out of control. This nightmare of a faceless bureaucracy churning letter after letter, leading to tax liens and levies, is a good argument against increasing the budget for the IRS. Until it can straighten up its act when it comes to correspondence audits, which this probably started out as, it has no business hiring more tax agents to snoop into our returns.
As for the tax media, it would be a good idea to be as critical of an IRS that clearly screwed up here as they are of Moore, who is caught in a Kafkaesque trap of bureaucratic incompetence. But he’s a Trump appointee, so the rules of fairness probably don’t apply anyway.
Ryan Ellis (@RyanLEllis) is president of the Center for a Free Economy.
