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Letter from Eric Arnow                                Arnow Letter Index

Eric Arnow link page

Eric Arnow has his own web site now. For years I've been putting his letters from Asia here. From now on they'll go on his site, the Bumble Buddhist which also now has all the previous ones from cuke and photos more. - dc

An IRS Audit as Spiritual Practice


I had just cancelled my contract with Shelley and Jan, who had been handling my affairs in America. Shelley's assistant, Jan, would check my mail box, deposit checks from my business, deal with a few bills now and then, and let me know of any important items like license renewals, insurance premiums due, that sort of stuff. Not much really.

I am living a Thoreau like existence here in Asia. Having worked in the insurance business for 18 years after I left my Zen monkhood behind to learn how to deal with the "real world", I longed to get out of the rat race.

So I sold my house, and taking the lead of the big corporations, downsized myself—my expenses that is, cutting them by about 80%. But Shelley had just raised her rates, and getting charged $200 one month on my $800 a month income was not sustainable. So in mid September, I let her know I was on my way to China to visit my new Chinese friends and their monk/teacher, whom I planned to help with some translation work and to just enjoy our Zen discussions, and that I would not be using her services any more

And I am thinking, "So here I am in China again—wow what a life—what a blast, spending my time as I please, no financial stress, no job stress, and out of the Armed Madhouse, the title of journalist Greg Palast’s book, and his nickname for my country the USA."

I thought I’d never hear from Shelley and Jan, but what to my surprise when I got to China, I went to an internet café to check my emails, and saw an email from Jan.

"Notice of IRS Audit". Gulp.

I opened the email and saw an attached letter, dated September 19th. "You must respond to this notice within 10 days". That meant the deadline would be September 29th, only Jan had been on vacation and hadn’t checked my mail, so I got the notice after she sent me the email on October 2nd. Not a great way to start an intimate relationship with your IRS auditor.

"Xiaojunjie (my Chinese friend), I gotta problem. The government is after me. They think I must pay them more taxes!!" What had I done to deserve this, other than being utterly disgusted with a daily diet of stolen elections, wars based on lies, etc. etc? Sure, I’d written a few letters to the editors, and had a couple of articles put on the net that were critical of the Bush administration, but little ol’ me?

"I gotta call the government man right away. Please help."

I had a mobile phone for use in China, but it didn’t reach the US. Xiaojunjie and his wife are two smart people. In this communist country, Xiaojunjie makes his living as a stock trader, and his wife Cao ze dung has a management position with the Bank of China, in Shanghai. Fortunately, she was home for a visit, and she managed to reconfigure her mobile phone so I could call the USA and reach the agent. Since there is a 15 hour time difference, I had to call him at 11PM, in order to reach him at 8 AM California time.

"Hello, can I speak with Abe Michael (not his real name), please.

"This is he. "

"Hi, my name is Eric Arnow , and I must apologize, for not getting in touch with you sooner. You see, I am in China right now, and I just got your letter via email. By the way, how should I address you? You can call me Eric. "

"You can call me Mr. Michaels, or Abe."

"Fine, you can address me as Eric and I will address you as Abe."

" So when are you coming back for the audit?"

"Well, I am here in China helping this monk I met. I plan to stay for a month. And then I am going on a meditation retreat for two or three months, and then I plan to go back to China to study Chinese."

"Well that is all very interesting, but how are you going to get me the information we have requested?"

What was in question was my self employment health insurance deductions, my Legal and Professional fees—that is my tax prep fees and the fees I had paid Shelley, as well as my Capital gains and losses. I had hired H&R Block to do my taxes in 2005, the year in question, but they also wanted my tax returns for 2004 and 2006.

"Abe, I have promised the monk that I would help him this month, and afterwards, I will get back to Chiang Mai Thailand where I live and get all the info together and send it to you. Would that be OK?"

"All right, call me when you get back to Thailand or wherever it is you are staying"

I replied, "Thanks so much Abe. I REALLY appreciate your giving me some time to take care of this."

Whew!! I was off the hook for a month anyway. The next day, I spent at my friend Yeshufa’s internet café, composing a letter to Abe, and copying and printing off the emails showing that I had indeed gotten notice three days after the deadline to respond.

Then Yong Hui took me on his motorcycle to the China Telecom office, where we faxed all the stuff. A one month reprieve.

OK I admit. I am paranoid. The CIA and Bush are personally out to get me, I thought.

Given the stories floating around of no fly lists, people getting tasered, just for asking politicians pointed questions and so on, why shouldn’t I be?

But then I thought. "Look, Eric. Calm down. What have you actually done wrong? Who is this guy, Abe, probably just some guy trying to do his job. Don’t take it personally. Remember, your practice of unconditional loving kindness?"

I reflected on another chance meeting I had had with an IRS guy on an airplane flight.

I was on my way to Hawaii for a meditation retreat, when I saw this portly fellow sitting next to me with a handout titled, :"IRS money laundering guide"

So I said to him, "say, you wouldn’t happen to be with the IRS would you, I see you have that handout."

"Yes", he said sheepishly.

"So what do you do?"

"I go to CPA’s Lawyers, Check cashing places and so on to inform them of these illegal practices and their responsibility to notify us."

"So give me an example".

"Suppose you are a check cashing company, and a kid comes into your shop with $1000 cash. What would you think?

"I guess, let’s see, he is a paper boy and he has saved up his money and he is going to buy a new super bicycle"

"No, he is splitting $10,000 that a drug dealer has made into small amounts and is laundering it"

So I said, " Gee that’s interesting. Do you know about the fact that the Department of Defense cannot account for $2.3 trillion? Robert Lieberman, the Deputy Inspector General for the Pentagon gave a report to Congress on it."

The IRS guy was taken aback. "Nooooo, nooooo. That’s not true"

"Well, I have seen the report myself, and it is on the Congressional record, I don’t think the guy is committing perjury, do you?"

"Noooo, noooo, it can’t be."

It was time for me to get off the plane. " I wish you well in your career. Bye bye".

So here I am with my poverty level income being audited for possible tax violations.

And here was someone in IRS management who is obviously totally CLUELESS about the astronomical amounts of money being stolen from us taxpayers, training people to chase down paperboys. Pathetic, just Pathetic.

OK, calm down , calm down. He is he is just trying to do his job as he has been trained—or perhaps a better term, indoctrinated to do. We must show compassion for these folks. Think of it from their standpoint. They are constantly trained to be suspicious, and probably under various types of pressure that then gets passed on down to the people like me, who are obviously intimidated by one of the most powerful agencies in the world.

A close business associate of mine had told me that he had hired a CPA for his insurance agency (that I had quit the year before). Both his and the parent company’s investigation cleared the guy, but it turns out he had a criminal history.

So one day, the IRS stormed into my friend’s office, took away all his files and computers, and he was fired from his position with the company. A year later, after a thorough investigation, the IRS gave him back his stuff. "You are in the clear. Sorry for the inconvenience".

Reflecting on this, I recalled the three Characteristics of Existence, as taught in Buddhism here in Thailand. First, is Suffering. If you are alive, sooner or later shit happens. Second, impermanence, whether you want some condition to last or not, everything changes. Third, not self. The world is essentially out of control, nothing exists in and of itself outside of numerous vastly complex conditions.

The point being: Relax.

I had done my taxes the best I could, and if the IRS decided to take my money, whatever.

One time, the Zen monk Ryokan went for a walk, and when he came back to his mountain hut, thieves had taken everything he had. Sitting at night, he thought, "Oh if only I could give them this beautiful full moon."

That is freedom.

From the Diamond Sutra:

Subhuti, [one of the Buddha's monks] thousands of lifetimes ago when my body was cut into pieces by King Kalinga, I was not caught in the idea of a self, a person, a living being, or a life span. If, at that time, I had been caught up in any of those ideas, I would have felt anger and ill-will against the king.

"I also remember in ancient times, for 500 lifetimes, I practiced transcendent endurance by not being caught up in the idea of a self, a person, a living being, or a life span. So, Subhuti, when a bodhisattva[a person aspiring to Enlightenment for all beings] gives rise to the unequalled mind of awakening, he has to give up all ideas. He cannot not rely on forms when he gives rise to that mind, nor on sounds, smells, tastes, tactile objects, or objects of mind. He can only give rise to that mind that is not caught up in anything.

A woman in Afghanistan was serving breakfast to her family, when an American bomb fell through the roof , killing her husband and children, she somehow survived.

One time, Suzuki Roshi my first Zen teacher and founder of the San Francisco Zen Center said, you people are so lucky, you shouldn’t complain so much all the time. You know sometimes people get their heads cut off. I didn’t understand at the time, but in light of what we hear nowadays, I do now.

Considering these real life and apocryphal stories, I had to put things in perspective.

Show compassion for the IRS guy, he is only fulfilling his function in the vast expanse of the Universe.

When I got back to Chiang Mai, I had my work cut out for me. I had to go through 6 years of stock trades, and three years of health insurance premium payments, and get invoices for all this stuff. What a headache!! It took over 6 weeks to call all the various brokers, vendors, and so on to get original receipts. Plus, I called H&R Block to find out how they calculated the "Schedule D gains and losses".

"Hi Eddie, this is Eric Arnow, you did my taxes in 2005. And now I am being audited by the IRS. Can you please provide me with your calculations, since they didn’t appear on my actual tax return?"

"I gave you everything already", he replied.

"Then please let me talk with your supervisor", I said.

"Dave, I am being audited by the IRS after you guys did my taxes. What gives?"

Dave sputtered, "it’s a fishing expedition".

Well that may well be the case but that didn’t help me with the audit. So I said, "I really need to have the Schedule D calculations".

Dave said he didn’t have them. So I asked for Eddie again.

"Eddie, I don’t see the calculations, how did you arrive at the number on my tax return. Did you even DO the calculations???"

Eddie hesitated and then said, "No".

Isn’t that just great. I specifically asked them to do my return since the Schedule D is the hardest part of the return, and now I find I paid them and they didn’t even do it.

So I demanded to speak with the office manager. "Eddie didn’t do the calculations, I need to get my money back." I demanded and got her name and address, and faxed my demand for a refund. Shortly afterwards, a check without comment from H&R Block arrived in the mail for a full refund.

As an aside, I recently got a call from a woman with H&R Block. "Hi I am with H&R Block, do you need help with your taxes this year?" I told her the whole story, including the fact that in my demand letter for a refund, said that Eddie should be disciplined for gross errors and omissions. "So what happened to Eddie?" I asked. "Oh he got a promotion to management."

See what I mean? Out Of Control



But now I had to tell Abe, that the calculations on my return were made up, basically , and that I would do them myself.

In doing the calculations, I saw that, although I had significant losses that year, they were not as bad as I thought, owing to one pretty large gain. I had bought Allied Capital’s stock in 1999 and with reinvested dividends it had tripled in value by 2005. Why the heck did I sell that stock? Well, I had had to because the brokerage firm I was using had done some extremely bad work, violating trading rules that put me at severe risk, so I had to sell everything and close the account.

But seeing how I had actually sold several stocks out of impatience that later doubled or tripled was a big lesson for me. And on further checking, I learned that the big gain for that year on Allied Capital was not a fluke. The company paid a 10% dividend and has had an annual return of 17% over 40 years!!!

This audit was becoming a great teaching tool for me, forcing me to look at my own investing psychology. I really owe Abe a debt of gratitude!

So I finally, with many phone calls and repeated requests for documents from my bank, from Shelley and several other sources of info, got everything into the mail.

I also, to show Abe that I really did do the translation work with the monk, sent a photo and an ink drawing he did with my translation and comments.

The photo was that of "the House of the Ancients" at a monastery we had visited, a memorial to two great Chinese scholars 500 years ago. My caption for the photo was,

"Open your own treasure house and use those treasures".

I called Abe in mid December, having mailed all the documents. "Hi Abe, how are you? I have sent all the documents, so when should I hear from you?"

"I am going away for three weeks and won’t be back until January 7th. But I still have to review them, so don’t call me until January17th."

"Gee, Abe that is great, because as you recall, I have been planning to go on my meditation retreat. So this works well. I want to say that I really appreciate your giving me the extra time and I hope you have a good holiday!"

I called him back on January 17th, at 11PM. "Hi Abe! How are you?"

"I’m OK, I haven’t had a chance to go through your stuff yet."

"I see, well I just want to let you know that I put this all together and that I am acting in good faith with you."

"Yes Eric, I know that because you could have waited to call me after you came back from China but you called right away."

"Abe, I would like to say that I don’t think I made any mistakes but I am certainly glad to work through everything with you. I don’t really think there is much there for you. After all, my rent here in Chiang Mai is $60 a month. So should I call you back in a week?"

"No that’s OK, I have a lot on my plate, since I came back, with other cases. Save your pennies on phone calls, I will send a letter out by February 1st".

""OK and thanks again for your patience in letting me stay in China and doing my retreat. Bye for now."

I don’t really know how this will all turn out. I haven’t heard back from Abe. He is really a nice guy, I wish I could take him to lunch. After all, I learned an important lesson in investing from him, albeit indirectly.

Making friends with people that you wouldn’t normal think of as a friend can be a truly mind altering experience. Now if I could just have a little chat with George and Dick and Condi.

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