RESPECT Act to protect against IRS asset seizures awaiting final Congressional action

With the 2016 election over, a lame duck Congress will return to Washington, D.C., next week to begin the job of wrapping up some pending legislation. One tax measure that passed the House earlier this year, but is still awaiting Senate action, is the RESPECT Act, which tax attorney Darrin Mish discusses in this guest post.

A bank customer working with a teller to complete a transaction. If some large withdrawals seem suspicious to bank officials, a person could end up having assets seized by the Internal Revenue Service. 

In a rare show of bipartisanship, the Clyde-Hirsch-Sowers RESPECT Act was passed unanimously this fall by the House of Representatives.
The intent of the Act is to protect U.S. citizens from having their assets seized at the mere whim of the Internal Revenue Service. 
As the law now stands, the government DOES NOT have to charge you with a crime to be able to seize money from innocent citizens.
How’s that for an ugly little fact?
Nasty, right? But it’s true nonetheless.
Here’s an even uglier fact:
Victims of these seizures must first prove they are innocent before they can get their money back.
Try doing that with a wiped-out bank account.
The IRS can get away with it because:
They don’t have to charge you with a crime to take your money. Instead, they charge your money with the crime.
You, as a U.S. citizen have certain unalienable rights that cannot be violated. Unfortunately, those rights do not extend to your money.
So, the IRS charges your money with the crime instead of you.
Make sense?
It doesn’t have to as far as the IRS is concerned.
There are real abuses taking place in this country. Abuses where children of innocent people get hurt every day. Under the current law, if the IRS wants your money, they can take it with no questions asked.
What Is the Current Law Though?
Under federal law, all cash transactions over $10,000 must be reported to the U.S. government by bank officials.
That counts for deposits as well as withdrawals. Anyone evading this reporting rule could be subject to having their bank account seized.
The name of this law is the Bank Secrecy Act. It’s also known as the Currency and Foreign Transactions Reporting Act.
The problem with it is that it’s often used to seize money from innocent people who are never charged with a crime.
It’s been on the books since 1970, and requires all U.S. financial institutions to cooperate with the U.S. government to help combat cases of money laundering and fraud. 
On the surface the law is a good one. It has stopped a lot of bad guys.
Remember former U.S. House Speaker Dennis Hastert?
From 2010-2012, he withdrew $50,000 or more from his bank account 15 times, allegedly to pay off sexual abuse victims. 
Hastert was eventually questioned by bank officials on the purpose of the withdrawals as per the law. Afterwards he changed his withdrawal patterns to several withdrawals of under $10,000 a piece to fly under their radar. In April, Hastert was sentenced to 15 months in federal prison in connection to the bank fraud case linked to the abuse allegations.
Which is a textbook example of structuring. He got busted. So, the law does work in most instances.
The Government Also Requires Banks to Report Suspicious Withdrawals of Under $10,000
Oh, oh. Did you catch that?
If your bank teller thinks your transaction looks fishy she can report it to the feds.
Which gives you even more reason to treat tellers like gold.
All the government needs to receive is just one of these snitch reports from a disgruntled bank teller to be able to seize your money.
Keeping in the good graces of your teller won’t protect you completely from having your money seized though.
The government is always scanning through bank statements hoping to catch unreported suspicious withdrawals. If they see something they think looks weird they can seize every nickel you have in your bank account.
Which is where a lot of good people get hurt by the law.
Sometimes the Government Gets It Wrong.
Let’s say you own a small business and you make deposits of $9,000 one day; the next day $4,000; the next day $8,000 and so on.
The government sees that pattern and asserts that it’s a false one. They claim that your deposits were all an attempt to keep from declaring the cash in one lump sum.
If your deposit pattern looks fishy to the IRS, then you’re guilty of structuring in their sight…
…and since you’re guilty, they have every right to seize your money.
In reality, it could be that you own a convenience store doing daily cash deposits. Some days are great, others not so much.
So, looking at your deposits over time it could look as if you are criminal structuring the deposits.
You’re innocent. But you lose anyways.
How the Clyde-Hirsch-Sowers RESPECT Act Will End IRS Forfeiture Abuse
Once the bill is signed into law, the IRS will need to prove criminal wrongdoing before they can seize funds from a bank account they believe is involved in structuring.
They will also be required to notify taxpayers of seizures as well as provide them with a post-seizure hearing within 30 days of taking your money.
While these steps may seem like small ones, they will do absolute wonders in protecting the assets and rights of all U.S. citizens.
So, let’s hope Congress can keep up this new spirit of bipartisanship well into the future. Good things will happen for our country if they do.
Darrin Mish is a tax attorney who has taught dozens of attorneys, CPAs and Enrolled Agents how to help their clients with tax problems. Grab one of best selling tax help books by searching “Darrin T. Mish” on Amazon.com. If you have an IRS problem of your own he invites you to visit his site at https://getirshelp.com/.

Legislative follow-up: H.R. 5523, the  Restraining Excessive Seizure of Property through the Exploitation of Civil Asset Forfeiture Tools (RESPECT) Act, cleared the house by a 415-0 vote on Sept. 26. Its Senate companion bill, S. 3353, is pending in the Senate Finance Committee. If the RESPECT Act doesn’t make it through Congress and to the president’s desk this session, it must be reintroduced in the coming 115thh Congress that will convene in January 2017.

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RESPECT Act to protect against IRS asset seizures awaiting final Congressional action

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President Trump and your taxes

With Donald J. Trump’s presidential win, Republicans will be in control of the White House, House and Senate.
Get ready for changes to your taxes.

President-elect Donald Trump makes his victory speech early Nov. 9. He is joined on stage by, at right, his youngest son Barron, whose mom Melania is just out the frame, and at left VP-elect Mike Pence and his wife Karen. (Screenshot of Right Side Broadcasting YouTube video)

Here are some highlights of how your taxes might change in the near future. 
Huge cost of first plan: After Trump’s first tax plan was roundly criticized by even many in his own party as being too costly (the initial estimate was a $9 trillion budget deficit over 10 years), he revised it, essentially incorporating the House GOP proposal.
The changes made back in August cut the expenditures to around $6 trillion over a decade. Some calculations slash it even more, to just $3 trillion when dynamic scoring, which takes into account assumed economic growth, is uses.
Part of the savings came from bumping up taxes a bit.
From 7 to 3 tax rates: Currently, we have seven rates, starting at 10 percent and topping out at 39.6 percent for single filers making $418,401 or more and married filing jointly taxpayers making $470,701 or more in 2017.
How long will those rates hold?
How quickly can the Trump Administration, with guidance from House Speaker Paul Ryan (R-Wisc.), a former House Ways and Means Committee chairman, get its proposed revamp of just three rates and income brackets through that chamber and to the Senate for approval?

Income Tax Rate

Single Taxpayers’ Income

Married Jointly Filing Taxpayers’ Income

12%

up to $37,500

up to $75,000

25%

$37,501 to $112,500

$75,001 to $225,000

33%

$112,501 and up

$225,001 and up

No, I didn’t forget the head of household filing status. Trump’s plan will eliminate it, along with the Alternative Minimum Tax and the federal estate tax.
And while Trump’s original 0 percent rate is now gone, he promises that other provisions will mean that low-income Americans will have an effective income tax rate of nada nil.
Other tax tweaks: The wealthiest taxpayers will get another tax break in addition to the almost 7 percent ordinary income tax rate cut. With the promised repeal of the Affordable Care Act, or Obamacare, now a certainty, the health care law’s additional 3.8 percent surtax on net investment income also will be gone.
Capital gains taxes will remain, says Trump, at the existing rates. That means meaning no tax for those in the lowest bracket, 15 percent for filers in the 25 percent bracket and a top 20 percent capital gains levy on folks in the highest income bracket.
Deduction revisions: As for deductions, Trump wants to increase the standard deduction for single taxpayers to $15,000; double that for joint filers. For the coming 2017 tax year, those amounts are $6,350 and $12,700, respectively.
In addition to hiking the standard deductions, personal exemptions will be discontinued, which are $4,050 for each taxpayer and his/her spouse and dependents on 2016 and 2017 returns.
Itemized deductions will remain, as will limits on those amounts. While current law calls for a phase-out once you make a certain amount for your filing status, Trump’s plan will cap itemized deductions at $200,000 for married joint filers or $100,000 for single taxpayers.
Lots of lower income families lose: With all these changes, who will be the big winners? And losers?
The Tax Policy Center’s analysis says that while almost all taxpayers will see some savings, nearly 47 percent of Trump’s tax cuts will go to the richest 1 percent.
And because the Trump plan gets rid of some deductions that large families currently tend to rely on, studies have suggested his plan could end up raising taxes on millions of families.
New York University law professor Lily Batchelder, in a report published Oct. 28, says that Trump’s plan would significantly raise taxes for millions of low- and middle-income families with children. The tax increases, according to Batchelder’s analysis, would be especially large for working single parents.
Trump’s tax plan would affect about one-fifth of families with minor children and about half of all single parents, Batchelder says in the paper published by the Tax Policy Center. That means, she writes, as many as 8.7 million families with school-age children could actually see a tax hike under the proposal.
Businesses go first: Then there are businesses taxes. That section of the Internal Revenue Code is likely to be addressed first since the relocation of U.S. multinational corporation to foreign headquarters was a major topic during those few times when policy was discussed during the campaign.
Trump argued that the solution to the business headquarters’ relocation issue, known as inversions, is to make huge cuts to the business tax rate, from 35 percent to 15 percent.
Companies also would be able to immediately deduct the cost of assets they purchase, rather than being forced to depreciate those costs over a number of years.
Pass-throughs on tap, too: Trump also proposed changing the treatment of what are known as pass through entities, but exactly how is unclear.
Currently, businesses that operate as S corporations and partnerships allocate, or pass through, income to the owners, who then pay tax at their individual tax rates on their personal tax returns. Many of Trump’s own businesses are set up this way.
These so-called pass-through entities under on version of Trump’s tax plan would pay the 15 percent business tax rate. Trump’s unified business rate also would apply to sole-proprietors who file Schedule C with their 1040s.
So the business tax rate for all companies of all sizes would drop from a possible 39.6 percent under current law to 15 percent, regardless of what the owner’s individual tax rate is.
Or would it?
Tax reform or another loophole? After this provision was added, questions and criticism of this apparent new loophole arose.
In addition to noting how Trump would benefit personally, others also pointed to the possibility probability that a lot of high wage earners would quit and then sign on with their companies as self-employed freelancers to get the 15 percent tax rate.
That prompted the Trump tax advisers to remove all references to pass-through taxation from the campaign’s website, noting simply that, “The Trump plan will lower the corporate tax rate from 35 percent to 15 percent, and eliminate the corporate alternative minimum tax.”
Welcome to tax reform, President-elect Trump.
Some GOP hurdles to clear: Now that Trump is officially America’s 45th president, his tax advisers will start working in earnest on the legislative specifics.
But even with Republicans in control of Congress and the White House come January 2017, Trump’s tax plan still faces some hurdles.
Many in the GOP remain worried about the deficit, which Trump’s tax plan would, as noted earlier, add significantly to what Uncle Sam owes. Will the tax cutting faction override the Party’s deficit hawks?
For argument’s and this post’s sake, let’s assume tax cuts get the go ahead early in the Trump Administration.
Although it probably will be relatively easy to push the changes through the GOP Congress, 2017 still is likely to be a transition year. I’d count on the tax code staying as is for the first year of Trump’s administration.
But by this time next year, get ready for the new Trump tax system’s effects.

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President Trump and your taxes

Election Day 2016 is here. Finally. Vote!

Nov. 8. Election Day 2016. Blessed relief, at least from one of the most divisive campaigns for the White House in modern memory.

N.H. earliest votes: Three small communities in rural New Hampshire, as is tradition every four years, cast the first 2016 presidential ballots of the day just after midnight Eastern Time. Under state law, towns with fewer than 100 voters can open voting locations at midnight and close them as soon as all registered voters have cast their ballots.
Dixville Notch voters opted for Hillary Clinton over Donald Trump 4-2. Libertarian Gary Johnson got one vote. Clinton also won in Hart’s Location, taking 17 votes to Trump’s 14, with Johnson getting three.
Meanwhile, Millsfield is Trump country. The Repulican nominee won that N.H. hamlet 16-4, with Bernie Sanders getting one write-in vote.
The combined very early Granite State tally gives Trump the edge 32-25.
Now it’s up to the rest of America’s voters who weren’t among the more than 46 million early voters in 28 states and the District of Columbia.
Tax matters to decide: If you’ve made your ballot decisions, great. Get to your polling place today. If you need help finding it, the Voting Information Project, HeadCount or Rock the Vote (yes, it’s still around) can help.
If, however, you’re still making up your mind and some tax info could help you decide – you are at a tax blog after all – then the ol’ blog has some items you might find useful.
No, sorry, we still don’t have Donald Trump’s tax returns. If he doesn’t win tonight, we’ll never get a glimpse of the Republican candidate’s 1040s. 
We do have, though, 30 years of Hillary Clinton tax returns, as well as a decade of filings from her Democratic running mate, Virginia Sen. Tim Kaine. Trump’s VP, Indiana Gov. Mike Pence, also shared a decade’s worth of his taxes.
You also can see what Trump and Clinton had to say about their taxes, sort of, during their three televised debates, the final of which took a “nasty” turn. There also was the lone head-to-head by the Kaine and Pence.
State measures, too: And don’t forget about more local election concerns. In addition to U.S. House and Senate candidates, 154 statewide ballot measures will be decided today.
My previous post on some of the key tax-related initiatives, which range from marijuana and tobacco taxes to ground-breaking climate change and sales tax questions, includes an interactive map you can use to find details on ballot questions in your area.
Yeah, there’s a lot to be decided today. And it’s all important.
So do your final voting review and get to your polling place!
You also might find these items of interest:

Oregon collects almost $26 million in marijuana taxes
Bloomberg taking effort to tax sugary drinks nationwide
Texas town’s ballot measure seeks to remove city questions about candidates’ delinquent taxes

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Election Day 2016 is here. Finally. Vote!

Nov. 8 is a big day for tax-related ballot measures

Americans vote tomorrow for our 45th president. Finally!

Do you know where your polling place tomorrow is? If not, HeadCount can help.

While that’s the biggest decision, millions of folks across the country also will have a voice Nov. 8 on a variety of consequential issues via ballot initiatives.
Ballotpedia reports that this Election Day, there are 162 statewide ballot measures in 35 states. Eight measures were decided in pre-November elections, leaving 154 measures to be decided tomorrow. 
Politicking for pot, other smoking taxes: Marijuana always gets a lot of attention at election time. (I still blame “Reefer Madness” for the fixation.)
Whether to legalize pot for recreational use and tax it is on ballots in Arizona, California, Maine, Massachusetts and Nevada.
But there are myriad other tax-related questions voters will be asked to answer tomorrow, including the possibility of tax hikes on slightly less controversial smoking products.
One of them is California, the state that gave us the first tax ballot initiative, Prop 13, back in 1978. This year, Californians are facing 17 ballot questions, the most of any state.
Among the issues is a proposal to increase the Golden State’s cigarette tax by $2 per pack, bringing the total tax on this less controversial inhaling up to $2.87 per pack.
Measure 56 also would allow California to levy equivalent tax increases on other tobacco products and electronic cigarettes.
Taxing the wealthy: Then there are the state initiatives to address, in part, this election’s larger political issue of income inequality.
Voters in California, Oregon and Maine will decide on state tax increases on their wealthier residents and corporations.
Maine, Colorado, Arizona and Washington voters also will decide on minimum wage increases.
Service sales tax backlash: Missouri voters tomorrow will be the first in the nation to decide whether to amend their state constitution to prohibit sales taxes from being expanded to services. If approved, taxing jurisdictions would not be allowed to tax things such as auto repairs, haircuts, legal work and financial accounting.
The proposal is the Show Me State’s way of fighting back against efforts nationwide to extend taxes beyond goods.
Traditionally, sales taxes have provided the financial foundation for state and local governments. They are collected in 45 states and more than 10,000 local jurisdictions. 
Only a few states, however, currently charge sales taxes on a wide array of services.
But as states have struggled to balance their budgets in recent years, many have begun exploring the collection of sales taxes on services. It is seen by many lawmakers as the easiest way to shore up their treasuries as the service-based economy continues to grow.
Carbon and cola taxes, too: Washington State also is asking its citizens to OK a carbon tax. If passed, the Evergreen State would become the first state to impose such a pollution tax.
Across the country, both sides of the climate change battle are closely watching to see if the Washington ballot initiative will herald national efforts implement higher taxes on fossil fuels.
And just down the Pacific Coast, San Francisco is trying again to get its residents to institute tax on a sugar-sweetened beverages tax. The city’s 2014 ballot effort failed.
This time, supporters of San Francisco’s Prop V have tried to make the drink tax more palatable proposing the 1 cent per ounce tax be collected from distributors, not consumers at the retail level.
Ballots issues across the U.S.: Do you have some ballot matters to decide tomorrow? If you’re not sure, the interactive map below, created by Graphiq using Ballotpedia data, offers guidance.

Regardless of how you vote on the initiatives in your area or the candidates at local, state and national levels, vote!
It’s the only way to get (maybe) what you want.
You also might find these items of interest:

The good side of taxes
This is why I hate ballot referenda
What government services would you give up for a lower tax bill?

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Nov. 8 is a big day for tax-related ballot measures

‘Trusted’ taxpayers to get more ID theft protection

Taxpayers will be “trusted customers” when they file their tax returns next year.
That’s how the Internal Revenue Service and its state tax and private sector Security Summit partners are approaching the 2017 filing season. The group, which discussed upcoming security measures at a press conference Nov. 3, says the filing process next year will focus on and expanded features that will help ensure the authenticity of the taxpayer and the tax return.

Paris officials last summer removed the love locks from Pont des Arts for safety reasons, but the IRS and its Security Summit partners are adding heavy duty cyber locks to the 2017 tax filing process. (Photo by Megan Easley via Facebook)

Added filing security features: As with 2016, the IRS says taxpayers will not even be aware of many of the new features. However, the upgraded security process will help Security Summit members identify and stop fraudulent identity theft returns.
The new or expanded features for 2017 that the IRS says will protect taxpayers and the tax system include:

New data elements (37 new next year) will be transmitted by the tax industry with every tax return, providing additional information to strengthen the authentication that the 1040 is being filed by the real taxpayer.
The tax industry will go beyond individual taxpayer protections, extending more data share items (32 in all) with the IRS and states to enhance identity theft protections to business filers.
More than 20 states are working with the financial services industry to create their own version of a program that allows the industry to flag suspicious refunds before they are deposited into taxpayer accounts.
Private sector partners are enhancing efforts to identify the “ultimate bank account” to ensure that the refunds go into the true taxpayers’ financial accounts instead of into those opened by tax refund criminals.
The IRS’ Form W-2 Verification Code initiative that debuted in connection with 2 million forms last year will expand to 50 million in 2017. This process requires the entering of a 16-digit verification code when prompted by tax software, used by both individuals and tax professionals, to validate the information on the W-2. The IRS plans to eventually expand the verification code requirement to all W-2 forms.
The software industry will continue to enhance software password requirements for individuals and tax professional users. So have those driver’s licenses and prior tax forms handy!

The IRS and its Security Summit partners are confident that that these “trusted customer” features, taken together, will help federal and state tax collectors do an even better job of detecting fraudulent returns and protecting taxpayers.
Based on 2016 tax fraud success: The upcoming filing season enhancements to fight tax identity theft are built, says the IRS, on the agency’s 2016 accomplishments.
Security Summit initiatives put in place in 2016 had a dramatic impact on the collective ability to identify and stop fraudulent returns. IRS data show decreases, several dramatic, in identity theft attempts because of the group’s efforts, including:

Identity theft affidavits fell sharply. The number of people who filed affidavits with the IRS saying they were victims of identity theft was cut almost in half during the first nine months of this year compared to 2015. The number of new affidavits filed through September 2016 was 237,750 compared to 512,278 for that same time period in 2015.
More fraudulent returns stopped before processing. IRS statistics show a notable drop in the number of fraudulent returns that made it into the IRS tax processing systems, a sign that Summit efforts are working up front in the tax process. Through September of this year, the IRS stopped 787,000 confirmed identity theft returns, totaling more than $4 billion. For the same nine-month period in 2015, the IRS stopped 1.2 million confirmed identity theft returns, totaling about $7.2 billion.
Fraudulent refunds fell. The number of bank partners grew to 620 institutions from 514 institutions in 2015, enabling internal processes to continue improving. As those participants increased, the number of suspect refunds stopped by banks and returned to the IRS dropped to 108,539 in 2016 compared to 243,361 in 2015. Again, this demonstrates the Summit’s improved ability to stop fraudulent returns before refunds are paid. The dollar amount of suspect refunds dropped to $239 million from $829 million in 2015.
Shared information stopped more bad returns. Industry and state partners provided information that helped improve IRS fraud filters and stop additional bad tax returns, including 57,000 that would have bypassed IRS processing filters without Summit assistance.
Shared data elements helped identify new areas. Several new data elements shared on tax returns from Summit partners helped the IRS stop over 74,000 suspicious returns, representing over $372 million in refunds that were prevented from being paid.

That’s a lot of numbers, both in amounts of stopped tax ID theft and associated refund fraud dollars.
Fewer filers hassling with stolen IDs: But the data point that caught my eye was the fewer number of real, legitimate taxpayers who so far this year have had to cope with the tax implications of identity theft.
Only 237,750 people had to file Form 14039, Identity Theft Affidavit, to alert the IRS of questionable activity in their tax account.
I am so sorry for those 237,750 people who had to go through the hassle of proving they are the legit taxpayers due the refund money from their accounts. But their smaller number is good progress and earns this week’s By the Numbers honors.
Here’s hoping that one day the number will be 0.
You also might find these items of interest:

4 tax cyber security tips from IRS, NY tax officials
IRS stopped $1.1 billion in fraudulent refunds this year
2-step authentication system on the way for access to more IRS online services

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‘Trusted’ taxpayers to get more ID theft protection

Holiday time means seasonal work, special tax issues

Finally the weekend! It’s what, as the song says, we’ve been working for.
Some folks, however, are spending today looking for a job.

Job fairs are good places to get, if not a job, at least an idea of what’s available in the marketplace. (Photo courtesy iLearn Schools Job Fair 2016/NJASCS.org)

Good jobs report: On Friday, Nov. 4, the Bureau of Labor Statistics released its last jobs report before the presidential election. It showed 161,000 jobs were added in October, as well as a hike of 10 cents in the hourly pay rate.
The number of jobs was less that economists had expected (they were predicting 175,000). However, the average pay of $25.92 an hour is the strongest annual growth in wages since the 2008 recession.
The bottom line is that the national unemployment rate dipped to 4.9 percent. That means a tighter job market, but there’s a brighter employment light in seasonal jobs.
Seasonal job prospects: Lots of folks look for seasonal work this time of year, either to help cover their daily expenses or to pocket some extra holiday cash.
The human resources and payroll company ADP reports that businesses added 147,000 jobs last month. That number should be picking up about now.
As the holidays near, outplacement firm Challenger, Gray & Christmas’ latest survey indicates that U.S. retailers expect to hire nearly 740,000 seasonal workers this year.
Seasonal job tax issues: If you snag one of these positions, congrats! But – and this is the week’s belated tax tip (sorry, as my “finally the weekend” comment earlier indicates, it was crazy Monday through Friday!) – make sure you understand the employment arrangement.
If you’re hired as a contractor instead of as an employee, you’ll have more tax responsibilities, primarily paying estimated income and self-employment taxes.
Also keep track of your job search expenses. Those could be tax deductible if you itemize.
Wanna be a T-man? One place that’s hiring, at least in my neck of the woods, is the Internal Revenue Service.
The postcard pictured below was in my snail mail box last week.  

The IRS is looking for temporary help in Austin and possibly your area, too. You can check out openings at IRS.usajobs.gov.

And no, it wasn’t directed just to me. It was addressed to Austin “Resident,” although that’s a map of Missouri underneath the text. Kudos to the IRS (for real, no sarcasm) for using the materials on hand instead of spending to make geographically specific mailers.
It’s not the first time Uncle Sam’s tax collector has been looking for Austin area seasonal workers. They also come calling mailing in the spring in advance of the annual filing season work crunch.  And I’m sure these solicitations have been delivered to other parts of the country.
These are short-term jobs, not permanent positions that the IRS found money to fill back in May.
But if you’re looking for some short-term income, there are worse places to work than the IRS. Really.
And wherever you’re looking for work, I hope you find just what you want for as long as you want.
You also might find these items of interest: 

4 tax tips for independent contractors
Unemployed? You still could face tax issues
Tax help finding new work, or what to do differently from Jimmy McGill if you don’t like your job

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Holiday time means seasonal work, special tax issues