Cutting Through The Hype Surrounding Sequestration

 

While the Chicken Little’s of various Federal agencies, the media, and pundits have screamed about the disastrous effects of Sequestration, I believe their public face is quite different from what is going on behind the scenes.  Here is one example of how a Federal agency is approaching the budget cuts internally:

  

  • Continue to look for opportunities to reduce expenses at all levels;
  • Institute a hiring freeze;
  • Reduce funding of grants;
  • Cut costs in areas such as travel, training, facilities and supplies;
  • Review contract spending to ensure that only the most critical and mandatory requirements are fully funded;
  • A number of furlough (unpaid) days will be necessary since our greatest expense is employee pay.  We expect that every one of us will take no more than one furlough (unpaid) day per pay period beginning in the summer equaling 5 -7 furlough days through December.

This doesn’t sound so draconian.  It sounds like something that should have been done long ago.  We certainly have been through this process of self analysis with our business and many of our business clients.  I am sure that the workers do not like unpaid days.  Nor do business owners like the notion of laying off workers or suffering loss of income.  However, if the money is not there, it just is not there.

And what agency is this?  The IRS.

The sky is not going to fall.  And while the IRS and other agencies will likely have a different public spin, the reality is that, like many businesses, many Federal agencies spend more on payroll, and will make their savings come from other areas to minimize the effect on their take home pay.  This could be good or bad depending upon leadership.  If Sequestration does have disastrous effects, then quite possibly those in a position of authority have not made the right choices.

Will Sequestration affect the processing of tax returns and refunds?  Not based upon the furlough schedule.  If refunds are slower this tax season, it will not be because of Sequestration, but because of the Tax Act passed on January 1, which put the IRS behind from the beginning of tax season.

Maybe most government agencies should do as many of our clients:  analyze the business using a diagnostic, like the Holden Moss business diagnostic, aimed at increasing profitability.

And unlike Chicken Little, we should not believe everything we hear.  Have courage.

Source:  Memorandum to All IRS Employees from Steven T. Miller, Acting Commissioner of the IRS.

 

Written by

Steve Moss, CPA is a partner at Holden Moss CPAs and loves helping businesses and their owners grow to be the very best they can be. Our other offices include Raleigh, Oxford and Warrenton.

We are a little different at Holden Moss CPAs. While we still provide traditional tax and accounting services, years ago we realized many clients wanted help in running their businesses and were hungry for ideas, solutions, strategy, and execution. In response, we expanded our skill set and joined Ran One, a global network of business consulting firms. Our membership with Ran One gives us access to proprietary resources and analytical software to help our clients grow, become more profitable and valuable, and have the lifestyle they desire.

Now, blended into the fabric of our normal tax and accounting needs, we are focused on our clients’ businesses in a very different way. While our approach is not right for everyone, for those whom it is, incredible results may be obtained. Whether you have a new, or established, business, or for those in transition of selling or retiring, or for those who simply need to develop an exit strategy or succession plan, our unique approach to client service may be the edge you need.

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