[HN Gopher] IRS audits poorest families at five times the rate f...
___________________________________________________________________
IRS audits poorest families at five times the rate for everyone
else
Author : heavyset_go
Score : 214 points
Date : 2022-08-11 18:44 UTC (4 hours ago)
(HTM) web link (trac.syr.edu)
(TXT) w3m dump (trac.syr.edu)
| PsySecGroup wrote:
| Curious timing given the expansion of the IRS.
|
| EDIT: why is this getting down voted?
| diputsmonro wrote:
| The expansion to the IRS will directly alleviate the injustice
| implied by the headline. But your headline focused on the
| problem, not the solution which is already underway, so it just
| seems like misinformation and outrage bait.
| PsySecGroup wrote:
| Why do you think adding more agents means they will target
| the poor less?
| inanutshellus wrote:
| If I were wealthy enough to be /actually/ affected by the IRS
| expansion (400k+/yr) it would be a wise investment to spread
| articles like this to make sure The People are as against the
| IRS expansion as possible.
|
| I'm curious what the avg income level of your downvoters is...
| ;-)
| PsySecGroup wrote:
| A 2022 $400K/year threshold hits population A.
|
| With inflation, The 2023 population A is much larger. The
| idea of $400K/year being slated as a "minority of easy-to-
| dismissed wealthy" will be an important frame to keep alive
| as population A keeps growing due to inflation.
| alistairSH wrote:
| $400k is a 98% percentile income in San Francisco metro, DC
| metro, and NYC metro.
|
| Sure, inflation may increase the number of households
| earning $400k, but it's still a tiny minority of the
| population and will be for a long time.
| usaar333 wrote:
| > $400k is a 98% percentile income in San Francisco
| metro, DC metro, and NYC metro.
|
| You care about household income, not individual.
|
| https://dqydj.com/income-by-city/ gives 95th, not 98th in
| SF Metro area for household income. 92nd in Silicon
| valley.
| washbrain wrote:
| Population A is a miniscule fraction of today's earners.
| Even if it doubles 3 times, it will still be a small
| percentage. We have a long, _long_ runway until we need to
| figure out of $400k is too big of a population.
| throwaway5959 wrote:
| I'd happily pay more taxes if I could wake up tomorrow
| making $400k/year in 2023 dollars.
| PsySecGroup wrote:
| If want tommorrow's money to pay today's prices, start
| managing wealth.
|
| You'll end up getting tommorrow's money to paid for
| tommorrow's prices, however. And I'm pretty sure you
| won't like that. You never have, in fact.
| washbrain wrote:
| I make more than $400k, and my tax bill is criminally
| low.
| shkkmo wrote:
| This comment is likely being down voted because it provides
| zero analysis or factual content while appearing to be an
| attempt to stir the partisan pot.
| PsySecGroup wrote:
| Please name a single non-partisan, wholly independent,
| politically agnostic, scientifically distilled objective tax
| that emerged external of any political pressures whatsoever.
| pilgrimfff wrote:
| This just doesn't make sense from a financial standpoint. It
| seems doubtful the money recovered covers the cost of the audits.
| throwaway292939 wrote:
| Perhaps the idea of audits would discourage people from
| committing fraud in the first place.. so it may make sense
| trebbble wrote:
| From the article:
|
| > A large increase in federal income tax audits targeting the
| poorest wage earners allowed the Internal Revenue Service to
| keep overall audit numbers from further declines for Americans
| as a whole during FY 2021.
|
| I'm guessing low-income people are, for a bunch of reasons
| including having simpler finances and ~no ability to hire legal
| counsel or other outside help, _way_ cheaper to audit than
| those with more money are.
|
| This passage suggests they shifted focus there to keep their
| total-audits number from dropping even further. The IRS is
| experiencing a many-years-long deliberately-inflicted severe
| staffing shortage. IOW this was probably done to keep a metric
| someone cared about from dropping without requiring more
| funding, not because it's efficient or just or anything like
| that.
| albatross13 wrote:
| >without requiring more funding
|
| I might be missing something here, but are you disregarding
| the 80bn the IRS just got for another 87,000 auditors? Or are
| we talking funding for something else?
| shkkmo wrote:
| That is funding that has just been allocated, the results
| of that funding obviously won't be seen in data that
| predates that funding..
| albatross13 wrote:
| >article about IRS auditing
|
| >person I'm replying to is talking about funding for
| auditing
|
| >IRS says they're going to hire 87,000 more auditors
|
| Gee I wonder what the results will be.
| trebbble wrote:
| > Gee I wonder what the results will be.
|
| On the FY 2021 audit rate? Little or no effect, I expect.
| albatross13 wrote:
| I'll take that wager- the IRS will audit you back what
| six years if they want to?
|
| The smart money says a government that's 24 trillion in
| debt, beholden to a private central bank that printed 16
| trillion to keep alive a fake economy in the face of a
| flu, will probably up its FY 2021 audit rate.
|
| I'll check back with you in a few years to see how I did
| ;)
| trebbble wrote:
| Since they're already unable to keep up with their
| current workload, and it will take time for them to staff
| up, no, I don't think this will give them enough staff to
| do substantially more auditing of 2021 taxes unless, for
| some reason, they decide to keep neglecting more recent
| years in order to do that. Some? Sure. A lot more, enough
| to make the audit-rate graph in the article look
| noticeably different? Nah, doesn't make sense, _even if_
| their motivations and purposes are what you imply.
|
| So no, that's not what the "smart money" says. If the
| staff increase were 2x what's proposed, sure, maybe. As
| it is I expect them to mostly use those resources to make
| the chart in the article go up for FY 2022 and on, though
| I'll be surprised if they manage to reach 1990s levels of
| audit rates.
|
| I think what's happened here is you got caught either
| misreading or deliberately ignoring parts of my post in
| order to bring up something that's bugging you and you
| wanted an excuse to post about, and instead of going
| "oops, my bad" you're digging in. So now you're trying to
| relate your thing back to 2021 so you can pretend it was
| ever relevant to the discussion. That's not making it
| look any better, incidentally.
| albatross13 wrote:
| I think you are unironically dumb as fuck, my first
| response to you was me asking if I misread something.
|
| Turn off your internet.
| trebbble wrote:
| Pretty sure the whole exchange speaks for itself to
| anyone else reading it, and doesn't convey what you
| hope/believe it does. HAND.
| alphakappa wrote:
| The 87,000 additional auditors is a misleading
| interpretation [1]
|
| Summary: - IRS used to have over 100,000 employees a decade
| back. This number has fallen due to funding cuts etc to
| less than 78,000 today.
|
| - The employees are not just auditors - they are support
| people for tax filing, IT etc.
|
| - There will be further employee attrition over the next
| decade that would need to be backfilled.
|
| - What Congress has given them is funding to cover hiring
| of 87,000 employees over _the next decade_. This will cover
| backfill for employee attrition + new employees that will
| include auditors, enhanced support, IT etc. The total
| growth (again over the next decade) is expected to be
| 20-30,000 with will bring the IRS back to last decade
| levels.
|
| TL;DR: IRS isn't going out and hiring 87,000 new (and in
| some misleading reports, gun toting) agents tomorrow and
| doubling their workforce. Instead, they are bringing their
| employee count (auditors and others) back to last decade
| levels and also replacing departing employees.
|
| 1. https://time.com/6204928/irs-87000-agents-factcheck-
| biden/
| albatross13 wrote:
| > and in some misleading reports, gun toting
|
| Is that why they posted this job description, and then
| deleted it?
|
| https://web.archive.org/web/20220804060409/https://www.jo
| bs....
|
| Good luck in what's to come, friend. I hope you're ready
| :)
| JumpCrisscross wrote:
| > _the 80bn the IRS just got_
|
| It's not got. (It passed the Senate on Sunday and is
| scheduled to be passed by the House tomorrow.)
| albatross13 wrote:
| Acting like this dog shit house, senate, and president
| won't pass this is disingenuous. Your government wants to
| do nothing but take from you, the money is got.
| dheera wrote:
| I mean the reality is they can fine the poor however much they
| want and the poor can't afford lawyers. Fining rich people
| doesn't pay because they'll lawyer up. Reality.
| throwaway292939 wrote:
| I think the reality is they can probably fine up to upper
| middle class..
| marwatk wrote:
| > IRS accomplished over 650 thousand audits last year by
| jacking up its already high reliance on so called
| "correspondence audits" - essentially a letter from the IRS
| asking for documentation on a specific line item on a return.
|
| I can't imagine those are very expensive.
| missedthecue wrote:
| ~19 cents in postage and a few cents more for the envelope
| and letter.
| mrguyorama wrote:
| Is the IRS not postage exempt?
| missedthecue wrote:
| " _USPS bills the IRS monthly via the Intra-governmental
| Payment and Collection (IPAC) system for one-twelfth of
| the yearly postage estimate_ "
|
| https://www.irs.gov/irm/part1/irm_01-022-004
| Invictus0 wrote:
| If the IRS randomly selected returns to examine, I would expect
| the poor to be samples more than everyone else because that is
| the largest category. Likewise if the IRS is sending automated
| letters to anyone that improperly claimed a credit commonly
| claimed by the poor, then I would expect that to
| disproportionately affect the poor. Sending an automated letter
| is hardly comparable to a real audit in any case. Without more
| context I don't think this can be deemed a scandal.
| njbooher wrote:
| Incidence of audits per 1000 returns filed by poor people is
| (13.0/2.6)=5x the incidence of audits per 1000 returns filed by
| non-poor people.
| lawrenceyan wrote:
| I had a conversation with someone recently, and I think it makes
| sense to replace the income tax with some kind of proportional
| wealth tax. Especially as human labor becomes increasingly
| deemphasized in comparison to technology/capital.
|
| Calculations should be done to determine the exact number, but
| 2.5% seems like a reasonable starting point.
| graton wrote:
| As the article states the "audits" are for the most part (~85% of
| the time) a letter sent to the person asking them to provide
| documentation for something.
|
| I would think most people think of an audit as having to meet in
| person with an IRS representative going over their taxes.
| jwarden wrote:
| The author of the article asks "Does it make sense from either
| an equity or revenue standpoint to focus IRS's limited
| firepower on the poorest taxpayers among us?" But he has only
| established that the IRS sends more of these letters to the
| (self-reported) poorest taxpayers, and not that they actually
| spend more of their limited firepower on them.
| tpmx wrote:
| raunak wrote:
| I think you have that backwards buddy.
| [deleted]
| mrguyorama wrote:
| Your persecution complex is incredible
| washbrain wrote:
| Wait what? What about defining "correspondence audits" is
| political?
| throwaway5959 wrote:
| For some people, it's easier to ask them what isn't
| political than what is. Once you realize that, their
| constant strife makes a lot more sense.
| washbrain wrote:
| I mean, I'm a Marxist and I think lots of stuff is
| political, but even _I_ can 't figure out what that
| poster was trying to say.
| Buttons840 wrote:
| I had one of these audits last year when my tax guy claimed a
| tuition tax break (graduated this time :) which I had already
| fully utilized during my younger years before dropping out. The
| IRS sent a letter saying "you already claimed this credit" and
| I marked a form indicating I was no longer claiming the credit
| and sent it back. The entire process put my refund on hold, but
| once cleared up I still got a refund.
| jwarden wrote:
| I think this statistic may be misleading. The article states that
| most of these are "correspondence audits", described as
| "essentially a letter from the IRS asking for documentation on a
| specific line item on a return."
|
| The headline statistics gives the impression that the IRS spends
| proportionally more money and effort on auditing poor families.
| But sending out a letter is easy and cheap. I realize now that
| the total number of audits may not be a good proxy for cost and
| effort if not all audits involve an IRS agent coming to your
| house and trying to guess the value of your artwork.
| NovemberWhiskey wrote:
| The reason for this is almost entirely the Earned Income Tax
| Credit.
|
| The IRS estimates 21-26% of all EITC claims are improper. The
| rules are quite complex, which results in more errors and it is
| relatively straightforward for the IRS to detect certain classes
| of mistake or fraud through automation (i.e. to detect if the
| same child was claimed as a dependent by two different people on
| their return).
|
| Congress made the EITC complex. EITC errors/fraud cost the public
| purse $10-20bn a year. Is the IRS just supposed to ignore that?
| SQueeeeeL wrote:
| >Congress made the EITC complex. EITC errors/fraud cost the
| public purse $10-20bn a year. Is the IRS just supposed to
| ignore that?
|
| I love the advanced level of neoliberalism we're seeing now. Oh
| no, poor people aren't committing tax fraud properly, gotta run
| after them. Meanwhile pretty much every US corporation abuses
| tax laws to the absolute limit to serve their shareholders (on
| the order of trillions of dollars of lost revenue), and somehow
| that's "okay" (i.e. the IRS doesn't audit them and the justice
| dept doesn't go after them)
| JumpCrisscross wrote:
| > _the IRS doesn 't audit [U.S. corporations]_
|
| Corporate auditing is down, but with audit rates at 50% for
| $20+ billion in assets and 22% for $5 to 20bn [1], corporate
| America is the most thoroughly tax audited slice of the
| country.
|
| > _the justice dept doesn 't go after them_
|
| Yes, it does [2].
|
| [1] https://www.washingtonpost.com/business/2021/07/14/corpor
| ate...
|
| [2] https://www.justice.gov/tax/tax-division-press-releases
| alexbiet wrote:
| It looks more like a self-created problem. The tax code is
| unnecessarily complex and this creates confusion for most
| citizens, including the IRS itself.
|
| Simplifying the tax code would solve a lot of these headaches
| plus remove the EITC errors/fraud cost of $10bn-20bn a year.
|
| A simple and reasonable one-liner tax code can be something
| like: "all businesses and citizens pay 10% of their monthly
| revenue to fund a small efficient government and social
| institutions (education, health, firefighters, police, etc)."
| jmyeet wrote:
| > Is the IRS just supposed to ignore that?
|
| Yes.
|
| Or, better yet, just give it to everyone and pay for it by:
|
| 1. Eliminating the carried interest tax credit, which has
| somehow survived 15+ years. It is quite literally a giveaway to
| hedge fund managers who get to pay lower taxes on managements
| because reasons. It most recently survived by being removed
| from the Inflation Reduction Act at the behest of Senator
| Kirsten Senema (D-AZ);
|
| 2. Treat any borrowing in the US the same as repatriating
| foreign profits if there are any. Effectively you want to stop
| companies keeping profits offshore (to avoid tax) yet fund US
| operations with debt;
|
| 3. Have inheritance trigger a taxable event. This includes, by
| extension, allowing heirs to inherit stocks and property on a
| stepped up basis for CGT purposes;
|
| 4. Tax stocks on market value every year just like we do with
| property.
|
| Excessive audits of poor people with a deliberately complex
| system is punitive by design. Spending time and effort (and
| money) auditing the taxes of poor people is ridiculous.
|
| Enforcement of a program like the EITC is a cost you do not
| have to pay. It is a waste of resources.
|
| In fact, auditing anyone who makes less than $50,000 a year
| should be illegal. Maybe even $100,000.
| s1artibartfast wrote:
| >In fact, auditing anyone who makes less than $50,000 a year
| should be illegal. Maybe even $100,000.
|
| So everyone files below 100k and everyone is immune to audit.
|
| I might go for that, but I am also receptive to the abolition
| of taxes.
| landemva wrote:
| Abolition of INCOME taxes. Consumption/use taxes locally
| and tariff/import taxes federally seem reasonable today and
| 250 years ago.
|
| Income tax takes my work effort like slavery.
| NovemberWhiskey wrote:
| > _Or, better yet, just give it to everyone and pay for it
| by_
|
| The IRS doesn't author tax policy. Congress is over there
| --->
| cortesoft wrote:
| Sure, but as the article states, the IRS is already
| ignoring entire categories of tax fraud that is illegal
| under the law. This means the clearly have discretion over
| what to pursue. They could choose not to pursue EITC fraud
| at all.
| NovemberWhiskey wrote:
| Would it be rational to audit (say) one additional
| millionaire rather than correcting objectively massive
| fraud/error rates in the EITC? I would say not. Then the
| question remains is what the break-even point is. Neither
| you nor I know the internal numbers here so it's
| impossible to discuss whether the current policy is
| reasonable or not.
| toast0 wrote:
| > 2. Treat any borrowing in the US the same as repatriating
| foreign profits if there are any. Effectively you want to
| stop companies keeping profits offshore (to avoid tax) yet
| fund US operations with debt;
|
| I think you need to update your screed for the Trump era tax
| changes. There's no longer a tax on repatriated earnings
| (they're exempted from corporate income), and the previous
| funds held offshore were taxed as a one-time charge
| (optionally payable over 8 years). There's no longer a US tax
| reason to keep your offshore profits offshore.
|
| > 3. Have inheritance trigger a taxable event. This includes,
| by extension, allowing heirs to inherit stocks and property
| on a stepped up basis for CGT purposes;
|
| Inheritance isn't a taxable event, but death is. The step-up
| in basis corresponds to being subject to the estate tax. When
| the estate tax expired, estates weren't subject to tax, but
| there was no step-up in basis; it was made retroactively
| optional to subject the estate to the estate tax and get a
| step-up in basis. Certainly, the federal estate tax has a
| pretty large deduction, but just because the effective tax
| rate for a lot of estates is zero, doesn't make it not a
| taxable event. Of course, raising the estate tax comes with a
| lot of bad PR about people's family farms and what not; any
| honest attempt to increase estate taxes needs to address
| that, perhaps with an installment plan/lien for illiquid
| property -- if you can pay the taxes on the proverbial family
| farm over 10-30 years or when the property is sold, that
| might be more palletable
|
| > 4. Tax stocks on market value every year just like we do
| with property.
|
| The US government doesn't run a property tax. Maybe you want
| mark to market income taxation on stocks? That's possible,
| but you'd need to make capital losses refundable or at least
| add carry-back, or people who were invested into a crash are
| going to be pretty grumpy. Paying taxes on unrealized gains
| as of Dec 31 in April when the market is in the toliet isn't
| palatable either.
| josephcsible wrote:
| > In fact, auditing anyone who makes less than $50,000 a year
| should be illegal. Maybe even $100,000.
|
| Why would anyone who made under $50,000 or $100,000 ever
| bother to pay one cent of taxes if you did that?
| jmyeet wrote:
| For one, the vast majority of those people are W2
| employees. Their taxes are withheld at source. Let that be
| whatever taxes someone pays.
|
| Take it further: the IRS just gives you a form at the end
| of the year saying your income was $X and your taxes
| withheld were $Y. Sign here to get a refund or pay the
| shortfall (which, if withheld correctly, there should never
| be a shortfall).
|
| That's actually how it works in most developed countries.
|
| As for small businesses (the vast majroity of non-W2
| employees), sure, audit them if they have been running a
| restaurant for years and weirdly have never drawn an
| income.
| NovemberWhiskey wrote:
| > _For one, the vast majority of those people are W2
| employees._
|
| ... how long do you think it would take for everyone of
| those W2 employees to be filing for the Foreign Tax
| Credit every year if it were illegal to audit them?
| LorenPechtel wrote:
| No. The withholding system isn't accurate enough to do
| this and can be gamed anyway. (I'm thinking back probably
| 20 years ago, one of our employees absolutely furious
| with the accountant for messing up their taxes and
| leaving them with a huge bill they couldn't afford.
| Reality: They bought a house, everyone knows your taxes
| go down when you buy a house so they increased their
| exemptions. Oops, the tax effects of buying a house
| weren't anything like what they thought.)
|
| Furthermore, the system doesn't work too well with
| variable incomes (it's based per-check) and should two
| married people both have variable incomes it can't work,
| period. (We are both self-employed--and some years ago I
| threw in the towel on even trying to get it right. I
| simply stay at the safe harbor limit. Come Apr 15 I
| expect to be off by 4-digit amounts, but it could be in
| either direction.)
|
| And your threshold won't catch most cheating. Not drawing
| an income will of course be suspect, but the guy who
| reports $50k but took $30k in cash out of the till over
| the year won't show up on your radar. I actually get a
| 1099 but my wife does not--no computer can know if she's
| reporting accurately. They would have to do a bit to even
| realize she's working (she's past retirement age.)
| Test0129 wrote:
| This is certainly the hottest possible hot take.
|
| > Have inheritance trigger a taxable event. This includes, by
| extension, allowing heirs to inherit stocks and property on a
| stepped up basis for CGT purposes;
|
| This works for billionaires but harms regular people. If you
| applied capital gains tax to grandpa's modest gift to his
| grandchildren the grand children may very well end up with
| nearly nothing. In many states property taxes are reassessed
| upon property transfer in a will, so if your
| grandparents/parents had a really good property tax rate, you
| may end up paying so much tax that you can't afford to keep
| the house.
|
| There are already enough ways to rob the middle class. No
| thank you.
|
| > Tax stocks on market value every year just like we do with
| property.
|
| This isn't done because the universe of ways you can move,
| adjust, hedge, and sell stock is too broad. Again, this
| inadvertently damages the middle class who by-and-large are
| passive investors. I already pay enough tax, thank you.
|
| > Excessive audits of poor people with a deliberately complex
| system is punitive by design. Spending time and effort (and
| money) auditing the taxes of poor people is ridiculous.
|
| If you look at the problem from the perspective of a
| relatively understaffed organization it is far easier to
| automate the common errors less well off people make. Having
| been on the receiving end of this majority of the audits are
| a simple letter saying "you screwed up, you actually owe this
| much" and nothing more. Auditing the ultra-wealthy takes an
| actual dedicated team to do because the ways that these
| people illegally hide money are complex and ever-changing.
| This is why nothing we have done to repatriate USD, or "tax
| the billionaires" has worked since the dawn of the country.
|
| It honestly sounds like your statement here is actually a
| thin veil over just letting anyone making under $N exploit
| the system at (once again) the cost of the middle class.
| Moreover, the title of OP is deliberately inflammatory. The
| audit rate below 100k is extremely low. The delta can be
| explained by the difficulty involved.
|
| > Enforcement of a program like the EITC is a cost you do not
| have to pay. It is a waste of resources.
|
| It is possible to commit extremely complex fraud with the
| EITC. I pay so much tax as a software engineer I'd like to
| see other people get pounded by the IRS too regardless of how
| much more or less than me they make.
|
| > In fact, auditing anyone who makes less than $50,000 a year
| should be illegal. Maybe even $100,000.
|
| lol.
| jmyeet wrote:
| > If you applied capital gains tax to grandpa's modest gift
| to his grandchildren the grand children may very well end
| up with nearly nothing.
|
| That's such a funny remark. First, this implies the tax
| rate is 100%. How else could you end up with nothing? Long
| term capital gains is what? 20%? If the "modest gift" of a
| $1 million house with a cost basis of $300,000 results in
| $140,000 in capital gains taxes, you still have $860,000.
|
| Hell, you can even have the system defer those taxes until
| the sale of the property (eg capped at 10 years) if you're
| worried about undue hardship.
|
| But the house has its cost basis reset to $1 million, which
| in insane. In some places, you even get to inherit the
| ridiculously low property tax rate, which was another
| result of homeowners voting themselves massive tax breaks.
|
| Second, these completely made up emotional anecdotes about
| regular people are so often used to defend practices
| whereby billionaires get to pay nothing. It's an appeal to
| emotion and a complete distraction. I don't know if you're
| just an unwitting victim of this propaganda (which it is)
| or you're one of the many bad faith pundits who use this
| appeal for the real goal: protecting the wealth of rich
| people.
|
| > This isn't done because the universe of ways you can
| move, adjust, hedge, and sell stock is too broad.
|
| It's a remarkably easy problem to solve. Just tax 1-3% of
| the net value of your assets based on their value on
| December 31 of each year.
|
| > It honestly sounds like your statement here is actually a
| thin veil over just letting anyone making under $N exploit
| the system at (once again) the cost of the middle class.
|
| The idea of a middle class here itself is a myth and
| deliberate propaganda by the wealthy to pit the imaginary
| middle class against the imaginary lower class. There are
| only really two classes: those who trade their labor for an
| income and those who own capital. This idea of "defending
| the middle class" is 100% propaganda.
|
| You, as a software engineer, are in the same class as a
| neurosurgeon, a profesional basketball player, a waiter, a
| nurse or a teacher. I hope you realize that someday.
| quickthrowman wrote:
| > It's a remarkably easy problem to solve. Just tax 1-3%
| of the net value of your assets based on their value on
| December 31 of each year.
|
| Easily avoided by liquidating assets on Dec 30 and
| rebuying on Jan 1 (or Jan 30 to avoid wash sale if
| needed)
|
| It would also have a nasty side effect, there would be
| many sellers and few buyers on Dec 30, so the market
| would crash every single year at EoY.
| jmyeet wrote:
| > Easily avoided by liquidating assets on Dec 30 ...
|
| This creates a taxable event. If people want to realize
| gains at a much higher tax rate I'm fine with that.
| LorenPechtel wrote:
| What I would like to see done about this case is the
| person who inherits the house (and I would apply this to
| any asset that either can't be subdivided or will be
| harmed by being subdivided) can choose to get that $1M
| house with a $300k basis and a IRS lien on it for 14%
| (140k tax vs 1M of value) of it's value. The lien is not
| triggered by inheritance or by the sale of a share of the
| property to someone else who also has a share that has
| the same lien. The lien is triggered by any other
| transfer. Should a property become subject to multiple
| such liens only the largest is active, but all apply for
| purposes of who you can sell to without triggering the
| lien.
|
| Fundamentally, this allows passing of property and family
| businesses without inheritance tax, but the IRS collects
| in the end if it ceases to be held within the family.
| (The sales without triggering are about one recipient
| buying out somebody else's share.) This should cover
| basically all cases where the inheritance tax is unfair,
| the threshold for inheritance tax on things not covered
| by this can be lowered.
| landemva wrote:
| > I pay so much tax as a software engineer
|
| Over a decade ago I was complaining to my tax CPA. He
| replied, "No income, no income tax." I quit that week.
| jcranmer wrote:
| > If you applied capital gains tax to grandpa's modest gift
| to his grandchildren the grand children may very well end
| up with nearly nothing.
|
| Quiz time:
|
| Capital gains is 0% for anything less than $40k, 20% for
| anything over than $400k, and 15% for everything in the
| middle. How much do you have to inherit for the total
| effective tax rate to be greater than 95%?
|
| > In many states property taxes are reassessed upon
| property transfer in a will, so if your
| grandparents/parents had a really good property tax rate,
| you may end up paying so much tax that you can't afford to
| keep the house.
|
| In most states, property taxes are reassessed frequently
| (once every low single digit years). The only state where
| property taxes aren't regularly reassessed appears to be
| California. And I'm highly unsympathetic when the argument
| boils down to "we bought this property 50 years ago and we
| couldn't afford taxes on it if it were assessed at market
| value."
| jmyeet wrote:
| I pretty much agree but want to add some clarifications.
|
| > The only state where property taxes aren't regularly
| reassessed appears to be California.
|
| Technically, property taxes are reassessed in California
| but because of Prop 13, passed in the 1970s, the increase
| cannot exceed 2% per year. With in inflation in the 70s
| and 80s, this was a massive boon to incumbent homeowners
| _and their descendants_ (since that favorable tax rate
| can be inherited).
|
| California is the poster child for this taxpayer-led cash
| grab but it's not the only one. New York for example has
| a very complicated property tax system with various caps
| that amount to much the same thing but nowhere near as
| extreme.
|
| > ... highly unsympathetic when the argument boils down
| to "we bought this property 50 years ago and we couldn't
| afford taxes on it if it were assessed at market value."
|
| It's actually worse than that. It's _always_ couched in
| terms of kicking seniors out of their life long homes
| because they 're on a fixed income even though the major
| beneficiaries are Disney and extremely wealthy people.
| Worse, property held in LLCs allow you to retain
| favorable tax treatment even when the LLC changes hands.
|
| Disney has to be singled out here because the're still
| paying 1960s taxes on their land in Anaheim.
|
| Back to seniors, it's such a ridiculous argument. For
| one, you can _always_ treat different taxpayers
| differently and, for example, freeze propert taxes for
| seniors until they die. You don 't need to give a massive
| tax benefit to Disney to do that.
|
| Interestingly, a state like Texas handles this way
| better. Property taxes are deferred for seniors until
| they die. They're still accuring property tax debt but it
| doesn't hit their immediate incomes.
|
| This gives people a choice: stay in their family home and
| pay taxes when the houses are inherited or downsize to
| save on taxes.
|
| This has the added benefit of freeing up housing stock.
| selimthegrim wrote:
| > I pay so much tax as a software engineer I'd like to see
| other people get pounded by the IRS
|
| This sounds like a Chuck Tingle commission waiting to
| happen
| junar wrote:
| It's on Congress to fix the EITC, too. There are already
| detailed proposals to reform it [1], but nothing will change
| unless Congress has the will to do it.
|
| [1] https://www.taxpayeradvocate.irs.gov/wp-
| content/uploads/2020...
| Retric wrote:
| The reason is they can "audit" the EITC by sending some letters
| and doing some very simple validation. Auditing millionares is
| much harder to automate.
|
| So even if they spend very little time or money on dealing with
| the EITC they end up doing a lot more audits.
| jeffbee wrote:
| There's a very easy way to make a revenue-neutral
| simplification to tax codes. Every refund, subsidy, credit, or
| whatever is universal without regard to income of the
| recipient. They are all taxable, and the progressive nature of
| the income tax ensures that the people to whom the benefit was
| targeted get the most benefit and the wealthy people who need
| it the least get the least net benefits. This solves a huge
| number of problems: tax code too complex, weird incentives near
| the edges of income phaseouts (i.e. rent subsidy recipients who
| are disincentivized to earn more), gets rid of massive
| bureaucracies dedicated to checking eligibility, etc.
| ransom1538 wrote:
| Exactly. It's easier to catch when things are automated. People
| of lessor means generally have simple tax returns. However,
| good luck catching a rich persons 1031 Exchange or an improper
| 83(b) Election. Those just don't scale.
| speby wrote:
| This does not sound right at all. A lot of "automated" checks
| by the IRS that result in a return being corrected (such as
| more money being owed, for example, because of an automated
| check that found a mistake, such as someone forgetting to
| report 1099 income), the IRS simply sends a letter indicating
| the correction, the reason for it, and any balance due. It's
| not "audit" when they do these automated checks.
| NovemberWhiskey wrote:
| The IRS sends out notices of correction when it knows what
| the answer is (like, you typed this number in wrong from your
| W-2) but most of the EITC problems are apparent problems of
| fact (is this your child? does this child live with you?)
| rather than this kind.
| moomin wrote:
| They ignore much larger sums. The real reason they're targeted
| is that, quite simply, they're unable to fight back. It's the
| equivalent of searching for your keys under the streetlight.
| bryanrasmussen wrote:
| no, the searching for the keys under the streetlight joke is
| funny because you will never find the keys under the
| streetlight no matter how nice it might be to search for them
| with a good light source, whereas you will be able to
| relatively easy find small sums of money and make people it
| from the poor families under discussion here.
| worik wrote:
| > you will never find the keys under the streetlight
|
| That is a strong statement! It is not true, some times that
| is where they are.
|
| Actually if it is the only place you could find them (the
| rest of the street is too dark, you do not have a torch to
| see or fingers to feel....) it is an optimal, albeit
| dismal, strategy
|
| Loving digression.....
| bryanrasmussen wrote:
| evidently you used the phrase without familiarity with
| its origin?
|
| https://en.wikipedia.org/wiki/Streetlight_effect
|
| >A policeman sees a drunk man searching for something
| under a streetlight and asks what the drunk has lost. He
| says he lost his keys and they both look under the
| streetlight together. After a few minutes the policeman
| asks if he is sure he lost them here, and the drunk
| replies, no, and that he lost them in the park. The
| policeman asks why he is searching here, and the drunk
| replies, "this is where the light is".
|
| Hence, the drunk and the policeman are never going to
| find the keys under the streetlamp because they were lost
| in the park.
| NovemberWhiskey wrote:
| No; it's simpler than that. Tax fraud doesn't distribute by
| income; it distributes by nature of income, and the ease with
| which that income is validated.
|
| Some really large proportion of Americans are basically W-2
| filers taking the standard deduction. These Americans have no
| opportunity to evade taxes.
|
| Most income tax fraud probably takes place in the area of
| passthrough businesses and other areas where tax verification
| isn't simply a problem of reconciling what employer A (or
| brokerage B, for dividends and stock sales, or bank C, for
| interest) said they paid to person P with what person P
| reported on their return.
|
| TL;DR - it's hard to execute a fraud when the IRS already has
| the corresponding 1099s on-file for you.
| AnimalMuppet wrote:
| > They ignore much larger sums.
|
| Source? What category of stuff the IRS ignores adds up to
| more than $20 billion?
| ribosometronome wrote:
| https://www.crfb.org/blogs/primer-understanding-tax-gap
|
| The IRS estimates there's a net tax gap of $554 billion in
| 2019. They break it down into 5 categories with values from
| 2011-2013 that all are over 20 billion each: underreported
| income, over/misreported adjustments, underpayment, non-
| filing, and other underreporting. They note that their
| 2011-2013 estimate failed to include underreporting of
| offshore wealth and wealth going through pass through
| entities, which resulted in a tax gap of $33 billion per
| year to the 2011-2013 estimate and 46 billion for 2019.
| wizofaus wrote:
| Given the total collected is over 4 trillion it's not hard
| to imagine other categories worth far more than 20 billion.
| moralestapia wrote:
| Bit of a tangent but, why $20BUSD?
| NovemberWhiskey wrote:
| $20bn is the estimated annual cost of fraudulent or
| otherwise improper Earned Income Tax Credits, which is
| the primary audit scope for low-income tax payers.
| thrdbndndn wrote:
| >EITC errors/fraud cost the public purse $10-20bn a year
| moralestapia wrote:
| Oh that's right, my mind wandered a bit :l
| lostcolony wrote:
| They don't ignore much larger sums; larger sums are much
| harder to automate detection of. So with the limited amount
| of manpower they have, far fewer are identified.
|
| They can send a letter asking for documentation for
| everything the automated system flags. The automated system
| detects "simple" cases at a far higher confidence ratio,
| which tends to be lower income. Once you get upper income,
| with all manner of complicated itemized deductions, the
| confidence of the automated system is much lower, and the
| effort to ask for appropriate documentation, and verify it,
| is much higher, for a much lower expectation of return
| (since, again, low confidence from the system).
| LorenPechtel wrote:
| And the rich guy probably has a CPA filing their taxes.
| It's quite unlikely there will be anything in there that's
| easily detected.
| ghaff wrote:
| Or that is a flat-out mistake. You're right that
| wealthier people probably aren't going to commit obvious
| fraud like "forgetting" a 1099. But, assuming they are
| not deliberately committing fraud, their CPA will
| probably not make any obvious errors either.
| mindslight wrote:
| I wouldn't be so sure about that. I just got a letter
| from the IRS pointing out an error in an amended return
| my CPA had filed, presumably with the help of software.
| They tallied total taxable income to a nonzero amount,
| but then put a zero for the tax due on that amount. I
| missed it on my own review because it was one of many
| returns I had to file.
| ghaff wrote:
| Hence probably. I have no doubt CPAs like every
| professional including developers make mistakes. Although
| I assume they're probably mostly obvious one which can be
| corrected fairly easily. I'm also sure there are
| outliers.
|
| >I missed it on my own review because it was one of many
| returns I had to file.
|
| Honestly, I look through my returns but they're way past
| the point where I could find most errors even though my
| finances aren't especially complex.
| marwatk wrote:
| This is addressed in the article:
|
| > A critical limitation in the IRS's ability to audit
| millionaires is the availability of IRS revenue agents. Only
| this class of auditors, given sufficient training and
| experience, are qualified to examine complex tax returns -
| the types of returns typically filed by high-income
| individuals and large-scale businesses.
|
| > With severe budget constraints, IRS has tended to trade off
| the replacement of revenue agents with hiring more tax
| examiners. These certainly are paid less, but they are also
| less knowledgeable. While revenue agents used to outnumber
| tax examiners, this has slowly shifted over time.
| [deleted]
| wongarsu wrote:
| I'd be interesting to see how the ratio of revenue agents
| to tax examiners would shift if the IRS would get a portion
| of discovered tax fraud back into their budget.
| syspec wrote:
| There's no way that's a good idea. See police departments
| + (civil asset forfeiture and small town speed traps)
| TAForObvReasons wrote:
| Looked into this years ago in a semi-related discussion:
| https://news.ycombinator.com/item?id=21874358
|
| https://www.finance.senate.gov/ranking-members-news/irs-
| budg...
|
| > IRS Research Division estimates in the 2003 GAO report,
| however, placed returns for activities such as tax
| enforcement at more than ten - and in some cases more
| than 20 - dollars collected for every dollar spent. Phone
| calls to follow up on tax debts owed were estimated to
| return 13 dollars for every dollar spent. Audits by mail
| returned as much as 11 dollars for every dollar spent.
| Using the overall rate of a four to one return, this
| year's $100 million budget cut translates to a $400
| million loss.
|
| Imagine 20 dollars per dollar spent, that's the type of
| unicorn investment that basically every VC hunts for.
| DavidPeiffer wrote:
| > Imagine 20 dollars per dollar spent, that's the type of
| unicorn investment that basically every VC hunts for.
|
| It's frustrating that _every business person who has ever
| lived_ would absolutely throw money at that formula if it
| was part of their business, but that 's not politically
| popular because the IRS costs money to operate.
|
| Mathemarically it makes sense to go until you hit 1:1. If
| we increased enforcement until, say, 4 dollars collected
| for every 1 spent in each of the major categories, the
| deterrent factor would probably help people be more
| honest in times of dishonesty, naturally helping the
| problem for the following year.
| ghaff wrote:
| >Mathemarically it makes sense to go until you hit 1:1
|
| Maybe mathematically. But realize that the targets of the
| audits are probably bearing at least as much of the cost
| burden of the audit as the IRS whether they did anything
| wrong or not. And you'll almost certainly cost a lot of
| people who made honest mistakes a lot of money.
|
| So, no, it's not at all clear that the IRC should be
| revenue-maximizing.
| RhysU wrote:
| > Mathemarically it makes sense to go until you hit 1:1.
|
| Nah, until we get better returns on other endeavors for
| the same dollar.
| powerhour wrote:
| If they become more efficient because they get a larger
| budget, that would very publicly contradict a lot of
| campaign messaging.
| gist wrote:
| > The real reason they're targeted is that, quite simply,
| they're unable to fight back.
|
| I think there is a misunderstanding of what an 'audit' means.
| It can be as simple as a letter from the IRS (after their
| analysis alerts them) asking that certain documents be
| provided to support a deduction or otherwise. The IRS is not
| conducting large scale audits on people with low incomes it
| would not be feasible there is not enough to even dig into.
|
| What the government (in this particular case for the EITC)
| should be easy for the taxpayer to reply with info needed to
| dispute the claim.
| biomcgary wrote:
| I got a tax bill for more than a hundred thousand dollars
| when I sold my primary residence a few years ago. No taxes
| were actually owed due to the primary residence carve out
| for capital gains. The sale had been reported to the IRS by
| a couple different entities (realtor and title company,
| IIRC) with a few dollar discrepancy, so the transaction was
| not merged, even though they for the same address (and
| single family home). I wrote the IRS a nice letter and they
| eventually replied that they were closing the case.
| Sometimes "unpaid" taxes are due to limitations of the IRS,
| which has historically had very legacy software (not sure
| if that has been fixed recently).
| JumpCrisscross wrote:
| > _they ignore much larger sums_
|
| Not really [1]. When you make more than $500k, your audit
| rate doubles from the national average of 0.25%. It doubles
| again at $1mm and more than doubles once more at $5mm.
|
| EITC-only returns are audited around the frequency (0.77%) of
| someone making $500k to $1mm. I'm not sure why $1 to 25k is
| audited at the same frequency as $500k to $1mm. But given
| "from fiscal years 2010 to 2021, the majority of the
| additional taxes IRS recommended from audits came from
| taxpayers with incomes below $200,000" and that "EITC audits
| are primarily pre-refund audits and are conducted through
| correspondence," it seems--very roughly--closer to the
| optimum than the headline suggests.
|
| [1] https://www.gao.gov/products/gao-22-104960
| koheripbal wrote:
| It's important to remember that an "EITC correction" !=
| "audit", despite the parent assuming all audits are equal.
|
| Correcting a simple error might never even involve a human
| IRS auditor. It's as simple as an automated letter going
| out and instructing someone to correct an obvious mistake
| (this happened to me).
|
| Never spoke to anyone - just submitted the correction.
| There should be no limit to audits that are nearly-
| automated, regardless of whom they target.
|
| Audits that require an investigator are far more effort and
| those investigative resources need to be proportioned by
| the expected return on investment. ...and while that will
| likely tend more frequently to the rich, it shouldn't
| necessarily be so.
| NovemberWhiskey wrote:
| https://www.taxaudit.com/irs-letters/irs-letter-
| cp75a-sample...
|
| This is what a typical audit of EITC looks like. It is
| literally "send us some forms and some proof like a birth
| certificate showing you're the parent of the child you're
| claiming".
| jabbany wrote:
| If it's that complicated and they are doing audits anyways,
| can't they just automatically apply EITC without relying on
| people to figure out this stuff and how to claim it?
| Retric wrote:
| It is automated just after the fact. It's very easy to
| validate if 1 dependent is claimed by 2 people and then send
| an automated letter.
| kube-system wrote:
| No because tax prep companies have lobbied our legislators to
| make that illegal
|
| (and many would politically be against the data collection
| that would be logically necessary to determine many of the
| common credits/deductions)
| LorenPechtel wrote:
| They already have the data to auto-prepare most tax
| returns. That would be very bad news for the tax prep
| companies, though.
|
| There also is the problem that if they auto-prepare returns
| they're telling the taxpayer exactly what they know and
| thus how the taxpayer can cheat with a low probability of
| detection.
|
| I don't think that's an adequate reason against automating
| it, though. What I would like to see is say March 1 they
| mail out pre-filled tax forms, except every line has an
| extra box on it that's empty. If you think it's right you
| simply sign and return it with payment if needed. If you
| have minor disagreements with it (for example, it's
| unlikely they'll know everything for schedule A) you can
| fill in the extra boxes with the correct values. You may
| then either propagate those numbers through and pay the
| adjusted amount, or you can ignore this part, they update
| the return with your new numbers and send you a bill.
| Lastly you can bin it and do it yourself from scratch.
| kube-system wrote:
| Yes, that's a very reasonable proposal that I would
| personally be in favor of.
|
| Although, the consequences of the "default" values are
| something that both sides of the aisle are almost certain
| to take issue with. The left will likely not be happy
| that the default values result in "overcharging" those
| due social credits, and the right will not be happy that
| the default values make it easy to get away with failing
| to report income that isn't 1099/W2. This would likely
| result in arguments over how to solve that problem ...
| this is the data collection issue I'm referring to.
| jabbany wrote:
| The second thing could be easy to deal with though, just
| make data sharing be a consent based process.
|
| You can opt in to auto-filing by allowing data sharing with
| the IRS. People who appreciate the convenience can opt in
| and those who don't can just not (instead manually
| providing the requisite documents/proofs/numbers just like
| today).
| kube-system wrote:
| Not infrequently, the data involves third party
| cooperation, so it's not really that simple.
| NovemberWhiskey wrote:
| No, because a question like "which of these non-cohabiting
| parents is factually speaking the one that's actually raising
| the child" is not something you can automatically discover.
|
| The EITC is actually a social welfare measure masquerading as
| a tax policy, and subject to all the problems that implies.
| cma wrote:
| We should have an electronic filing system: if someone else
| filed claiming a dependent the next person to try to gets an
| error message and can resolve it amicably instead of hiring
| manual auditors to deal with an error/crime that shouldn't even
| be able to exist.
| kube-system wrote:
| We do have an electronic filing system, and it does throw
| errors for some filing issues.
|
| The US has >0 people who do not use computers, though, so a
| manual intervention process is necessary.
| JumpCrisscross wrote:
| > _reason for this is almost entirely the Earned Income Tax
| Credit_
|
| "As a lower bound, about half of the spike [in operational
| audit selection rate on the lower end of the income spectrum
| apparent in 2014] is explained by EITC-eligibility-related
| projects" [1].
|
| [1] https://dl.acm.org/doi/fullHtml/10.1145/3531146.3533204
| nazgulnarsil wrote:
| The bottom 50% of income tax payer result in 3% of irs receipts.
| This is theater.
| selimthegrim wrote:
| I was making a few thousand a year chopping firewood and selling
| it to restaurants with my dad and the IRS audited me at 17. I'm
| pretty sure it was because I had donated to the Holy Land
| Foundation but come on.
| mannykannot wrote:
| This may explain why (it is from the National Taxpayer Advocate
| Erin M. Collins' annual report to congress):
|
| _The IRS correspondence audit process is structured to expend
| the least amount of resources to conduct the largest number of
| examinations - resulting in the lowest level of customer service
| to taxpayers having the greatest need for assistance._
| alex_young wrote:
| Isn't that kind of the wrong way to structure resources? I
| could see making a case for either random auditing or for
| focusing on the largest possible sources of financial error,
| which surely would trend towards higher income level
| households.
| mannykannot wrote:
| I suspect it is a rational way for IRS staff to respond to a
| simplistic and apparently harmful performance mandate.
| s1artibartfast wrote:
| Not if you can automate detection for simple errors that are
| largely made by the poor
| enterthematrix wrote:
| The thing is that's not designed to get the most amount of
| dollars - which is pretty moronic. This is just measuring the
| wrong thing. We should do the least work to get the most
| dollars.
| shemnon42 wrote:
| Is this really a fallout that the poorest families are more than
| five times more likely to do their own taxes instead of hiring a
| tax professional? Most audits are to account for sloppy
| bookkeeping or not attaching the correct documentation, not
| uncovering tax fraud schemes. (but many good tax fraud schemes
| look like bad bookkeeping, to be fair).
| washbrain wrote:
| Another way it's extremely expensive to be poor.
| NovemberWhiskey wrote:
| I couldn't find a more recent statistic; but lower incomes
| families are actually not much less likely to use a tax
| preparer than higher income families:
|
| https://www.taxpolicycenter.org/briefing-book/why-do-low-inc...
| washbrain wrote:
| This seems to have a statistical backing to me:
|
| I'd assume lower income folks take less time to audit than
| wealthy folks. I'd also assume there are more low income than
| high income people. My final assumption is that the IRS will
| start a new audit when they complete one, rather than just wait.
|
| Imagine then two auditors, both selecting random tax returns. One
| pulls a wealthy return, the other pulls a low income return.
|
| The person auditing the wealthy return spends two months working
| on theirs. The low income return is audited in a week. The
| auditor then pulls a second return, also low income. This one
| takes a week, so they pull another, also low income.
|
| You can see the pattern here - it's not malicious (though it may
| be a systemic injustice), it's an outcome of statistics playing
| out in unintended ways.
| alistairSH wrote:
| _You can see the pattern here - it 's not malicious (though it
| may be a systemic injustice), it's an outcome of statistics
| playing out in unintended ways._
|
| Probably true.
|
| But purely from a revenue perspective, I wonder if larger
| emphasis on the rich would pay better dividends? Over half the
| audits are for returns with incomes less than $25,000. Even if
| there's a problem, the amount of recoverable money is really
| low. Even though most of those are "correspondence audits"
| (done via letter instead of face-to-face) somebody still hast
| to review any new documentation.
| washbrain wrote:
| Oh, I totally agree with you. Random sampling is the wrong
| approach. There should be weighted random sampling by income.
| xhkkffbf wrote:
| Inflation hits the poorest the most. And this new explosion in
| IRS attention is going to hit them too. I'm not sure why people
| think this is targeting the rich.
| pessimizer wrote:
| Inflation is hitting the employed poorest the least, because
| they've had a recent pay raise. It's hitting the unemployed and
| the dependent hard, and hitting severely overborrowing and
| overextended middle-class people hard (and if their house
| prices go down again, they're in real trouble.)
| jimbob45 wrote:
| There was talk during the Trump administration of bringing the
| tax code in line such that it could "fit on a large postcard" or
| something like that. That went out the window for the final bill.
| I have to imagine that tax simplification would provide as much
| benefit to revenue as boosting audit counts.
|
| I'm told in European countries that y'all have your taxes pre-
| calculated and sent to your homes? I'm flabbergasted that we
| don't do the same.
| ghaff wrote:
| It probably should be for simpler taxes. Although if all you
| have is a W-2 and a standard deduction (and maybe a 1099), your
| taxes are pretty straightforward to file.
|
| But things get complicated in a hurry in the US. My taxes
| aren't unreasonably complicated with only maybe a couple things
| that aren't pretty routine. And I still end up with a 1" thick
| sheaf of paper between federal and state taxes from my
| accountant.
| junar wrote:
| What actually happened is that Form 1040 got sliced into
| multiple pages.
|
| Going from 2017 to 2018, the 1040 went from 79 lines [1] to 23
| lines [2]. The remaining 50 or so lines? Moved to Schedules 1,
| 2, 3, 4, 5, and 6. So if your return had any amount of
| complexity, you probably needed more pages that year.
|
| Today's Form 1040 [3] is somewhere in the middle. The form
| itself has 38 lines, and the numbered schedules have been
| consolidated from 6 to 3.
|
| [1] https://www.irs.gov/pub/irs-prior/f1040--2017.pdf
|
| [2] https://www.irs.gov/pub/irs-prior/f1040--2018.pdf
|
| [3] https://www.irs.gov/pub/irs-prior/f1040--2021.pdf
| shkkmo wrote:
| > I'm flabbergasted that we don't do the same.
|
| It is because Intuit and other large tax preparers have lobbied
| heavily against anything that makes taxes easier to file.
| missedthecue wrote:
| How are you sure it's because of that?
| mrguyorama wrote:
| Yes. Another important note however is there are several
| politicians in a strange alliance that sees any
| simplification of a tax filing process as being bad because
| they are of the "all taxation is theft" and "I want to
| drown the government in the bathtub" mindset and making
| people hate taxes by making the process miserable is their
| favorite way to keep people angry at the government.
| washbrain wrote:
| It's widely reported and widely understood that lobbying
| has specifically killed bills that have been introduced to
| simplify tax prep.
| shkkmo wrote:
| From Intuit's own files:
|
| > Internal presentations lay out company tactics for
| fighting "encroachment," Intuit's catchall term for any
| government initiative to make filing taxes easier -- such
| as creating a free government filing system or pre-filling
| people's returns with payroll or other data the IRS already
| has. "For a decade proposals have sought to create IRS tax
| software or a ReturnFree Tax System; All were stopped,"
| reads a confidential 2007 PowerPoint presentation from an
| Intuit board of directors meeting.
|
| https://www.propublica.org/article/inside-
| turbotax-20-year-f...
| ohiovr wrote:
| Free tax preparation services are vastly inferior to a personal
| service. I got audited because I did some stock market gambling
| and my return only showed the loss and gain for everything and
| not for every stock traded. So the IRS sent me a letter that my
| income was in the tens of thousands of dollars because every
| instrument sold was assumed to be of no cost to acquire making it
| 100% capital gains. When TD ameritrade reported my trades they
| did not report the cost basis to them. So I got a letter saying I
| owed thousands in taxes with no indication in there that I should
| see a tax prep to clear it up and submit a correction.
|
| Lessons learned:
|
| 1. Don't gamble or invest in stocks. 2. Always use a professional
| to do your taxes.
|
| I was also informed never to sign a letter to agree. Fortunately
| I never did that.
| mercy_dude wrote:
| Yeah and in the name of "inflation reduction" act, we have now
| decided to double the number of agents and make IRS the most
| bureaucratic heavy federal agency. Not to say they are heavily
| weaponized by one known party over their opposition, and when
| caught in the act nothing happened to thee agents.
|
| These federal agencies and their overreach go way beyond their
| scope. It is time to abolish these agencies.
| singlow wrote:
| Wealthier people are much more likely to use a professional tax
| consultant or are better at knowing how to file. Audits are
| usually triggered by mistakes. Say the IRS gets a 1099 form that
| wasn't included in the return, which triggers an investigation. A
| wealthier person is much more likely to have filed the 1099
| because they are more educated and/or can afford a tax
| professional. A poorer person is much more likely to just ignore
| the 1099 or not even know that it needs to be filed.
| kazinator wrote:
| > _Does it make sense from either an equity or revenue standpoint
| to focus IRS's limited firepower on the poorest taxpayers among
| us - those with incomes so low they have filed returns claiming
| an anti-poverty earned income tax credit?_
|
| Yes, in a sense it does. If you are auditing in order to catch
| under-reported income, it does make sense to look at lower income
| returns.
|
| If someone who made $500,000 reported $20,000, their return would
| be found among those from the honest poor taxpayers, not among
| those from the rich.
|
| Moreover, someone doing something that egregious is probably dumb
| enough to be easily busted by the audit processing, and the yield
| would be high.
|
| Higher earners will have tax returns which are professionally
| prepared, and complex. Auditing them is going to be a more time
| consuming process requiring more expertise, and have a low
| probability of yielding anything.
| jeffwask wrote:
| The budget for the IRS has been continually slashed since Reagan
| despite all research on the subject showing increasing funding to
| the IRS funding increased revenue well beyond it's cost.
|
| The IRS has publicly stated on a number of occasions they do not
| go after the wealthy because they do not have the resources to
| win in the ensuing legal battles.
|
| This leaves the poor and middle class as the only groups they can
| target.
| JumpCrisscross wrote:
| > _budget for the IRS has been continually slashed since
| Reagan_
|
| Congress is working on boosting it [1].
|
| [1] https://crsreports.congress.gov/product/pdf/IN/IN11977
| washbrain wrote:
| This is 100% the story. The IRS can help make sure everyone is
| playing fair if we sufficiently fund them. And they can stop
| policing all the little issues and go after the big ones if we
| sufficiently fund them. AND sufficiently funding them is
| expected to _increase tax revenue above the cost of funding
| them_.
|
| It's the most obvious and should be the most bipartisan
| approach. It's introducing no new taxes, it's equitable, it
| improves revenue (which could allow you hypothetically cut
| taxes.) It drives me up the wall that this isn't just a fast,
| handshake and proceed bit of legislation.
| axus wrote:
| If dodging/bungling taxes were a Civil matter instead of a
| Criminal matter, it might be easier to get support for better
| enforcement.
| [deleted]
| SirSourdough wrote:
| It effectively introduces new taxes for the powerful people
| currently getting away with dodging them, which should be a
| pretty clear indication of why we aren't seeing stronger
| support.
| JumpCrisscross wrote:
| > _should be the most bipartisan approach_
|
| Lol [1][2][3].
|
| [1] https://www.washingtonpost.com/business/2021/07/07/irs-
| taxes...
|
| [2] https://www.reuters.com/world/us/us-infrastructure-deal-
| teet...
|
| [3] https://www.foxbusiness.com/politics/middle-class-
| americans-...
| washbrain wrote:
| I'm aware, I'm pointing out the hypocrisy in these specific
| cases.
| rrrrrrrrrrrryan wrote:
| For every $1 of additional funding, the IRS brings in $3.
| They're the only federal government entity for which this is
| true. Increasing their finding should be an absolute no-
| brainer, but many powerful people have a vested interest in
| keeping the IRS weak and small and underfunded, so that's
| what we've got.
| jeffwask wrote:
| The Panama papers should be all the proof we need.
|
| The Panama papers had enough data to chase tax cheats for
| decades.
|
| The Panama paper resulted in zero.
| jeffbee wrote:
| "Defund the Police" but for rich republicans.
| OrvalWintermute wrote:
| In recent years after Reagan, both the Executive branch and
| Legislative branch have been dominated by the same party, at
| various times
|
| Congress | House | Senate | Presidency | Status
|
| 101st (1989-1991) Democrats Democrats Republican (G.H.W.
| Bush) Divided
|
| 102nd (1991-1993) Democrats Democrats Republican (G.H.W.
| Bush) Divided
|
| 103rd (1993-1995) Democrats Democrats Democrat (Clinton)
| Unified
|
| 104th (1995-1997) Republicans Republicans Democrat (Clinton)
| Divided
|
| 105th (1997-1999) Republicans Republicans Democrat (Clinton)
| Divided
|
| 106th (1999-2001) Republicans Republicans Democrat (Clinton)
| Divided
|
| 107th (2001-2003) Republicans Republicans / Democrats
| Republican (G.W. Bush) Unified / Divided
|
| 108th (2003-2005) Republicans Republicans Republican (G.W.
| Bush) Unified
|
| 109th (2005-2007) Republicans Republicans Republican (G.W.
| Bush) Unified
|
| 110th (2007-2009) Democrats Democrats Republican (G.W. Bush)
| Divided
|
| 111th (2009-2011) Democrats Democrats Democrat (Obama)
| Unified
|
| 112th (2011-2013) Republicans Democrats Democrat (Obama)
| Divided
|
| 113th (2013-2015) Republicans Democrats Democrat (Obama)
| Divided
|
| 114th (2015-2017) Republicans Republicans Democrat (Obama)
| Divided
|
| 115th (2017-2019) Republicans Republicans Republican (Trump)
| Unified
|
| 116th (2019-2021) Democrats Republicans Republican (Trump)
| Divided
|
| 117th (2021-2023) Democrats Democrats Democrat (Biden)
| Unified
|
| Please, lay off the partisanship.
| jeffbee wrote:
| And yet, oddly, only one party has the platform of
| "drowning the government in a bathtub" which, if you think
| about it, is isomorphic with "defund the police".
| pessimizer wrote:
| Grover Norquist is dead and was not a Republican
| politician, but an professional antitax lobbyist.
| jeffwask wrote:
| Correct neither party cares about the will of the people
| both parties are beholden to the rich and corporations.
|
| https://www.cambridge.org/core/journals/perspectives-on-
| poli...
|
| Multivariate analysis indicates that economic elites and
| organized groups representing business interests have
| substantial independent impacts on U.S. government policy,
| while average citizens and mass-based interest groups have
| little or no independent influence.
| jeffwask wrote:
| At the same time, we do have to acknowledge that "Cutting
| the IRS or Eliminating the IRS" has consistently been a
| platform agenda item for Republican candidates for office
| both because it supports their agenda and because it is
| wildly popular with their base who think it means less
| taxes.
|
| At the same time, when the democrats have held power they
| have typically not made efforts to fund the IRS because
| it conflicts with their agenda and because it is wildly
| unpopular with their base who think it means more taxes.
|
| So while the results are the same with both parties, one
| party specifically uses the elimination of the IRS as a
| campaign rallying cry.
|
| It's been kind of a game like abortion rights were until
| it was no longer a game. The both use it to raise
| campaign donations then do fuck all about it.
|
| and please don't make me pull out all the Ted Cruz tweets
| charlieyu1 wrote:
| I have no idea why the poor are advocating tax rises when they
| are clear on the losing side
| Silverback_VII wrote:
| It would not be a very smart move to go after your own
| supporters... I think politicians know this simple rule of
| power. they need the money and the connections of affluent ppl.
| exabrial wrote:
| Bullies don't mess with people that can defend themselves.
| kyleblarson wrote:
| And the bill that just passed adds 87000 new IRS agents.
| Additionally every single democrat voted against an amendment
| that would have prevented new agents from auditing individuals
| and small businesses with less than $400,000 of taxable income.
| pgodzin wrote:
| Why would anyone want to pass a law saying that anyone below a
| certain income threshold can cheat on their taxes and it's
| illegal for anyone to look into?
| camel_Snake wrote:
| This article about Janet Yellen instructing IRS not to use any
| additional funding to audit individuals or businesses making
| less than 400k contradicts you. [0]
|
| > The bill itself says the new funding is not "intended to
| increase taxes on any taxpayer or small business with a taxable
| income below $400,000."
|
| [0] https://www.cnn.com/2022/08/10/politics/yellen-new-irs-
| fundi...
| toast0 wrote:
| > Additionally every single democrat voted against an amendment
| that would have prevented new agents from auditing individuals
| and small businesses with less than $400,000 of taxable income.
|
| How do you know how much taxable income someone has if you're
| unwilling to audit them?
| washbrain wrote:
| Interesting, source on the amendment? Was there a poison pill
| in it?
| kyleblarson wrote:
| https://twitter.com/MikeCrapo/status/1556177703098884103
| tomohawk wrote:
| And we're now going to get 87,000 more auditors. This is the
| largest increase in the federal police force (they are all armed)
| ever.
|
| The politicos are already dancing around this saying how "middle
| class" people will not have an increased chance of audit.
| shkkmo wrote:
| > And we're now going to get 87,000 more auditors. This is the
| largest increase in the federal police force (they are all
| armed) ever.
|
| This is factually incorrect in so many ways. Please vet your
| sources better.
| tomohawk wrote:
| Articles are all over the place. It's not like its a state
| secret.
|
| https://www.forbes.com/sites/robertwood/2022/08/11/irs-to-
| ad...
| washbrain wrote:
| Whew boy, no. Revenue Agents and Revenue Officers do not carry
| firearms. Revenue Agents perform audits and are not police.
|
| Take the tin foil hat off and quit spreading this FUD.
| tomohawk wrote:
| No tin in my hat.
|
| https://news.yahoo.com/irs-requires-special-agents-
| carry-130...
| washbrain wrote:
| There exist armed officers in the IRS. They are called
| "special agents" in the "criminal investigation division".
| They are federal law enforcement, like the FBI, who seize
| assets in criminal tax fraud cases.
|
| They are not the majority of hires, and they are not the
| ones doing audits, and I'm guessing they will be a tiny,
| _tiny_ fraction of any IRS expansion.
|
| My office building when I worked for Boeing had an armed
| security guard, that does not mean that if Boeing expands
| by 10k jobs that suddenly there will be 10k more guns in
| the factory.
|
| So yes, your original post is clearly out of phase with
| reality.
| enterthematrix wrote:
| Fundamentally if you just pay your taxes, you shouldn't be
| audited (ideally.) That being said... an increase in auditors
| is net good because then the IRS can actually audit some of the
| massive number of tax crimes that occur. This is good.
| oaththrowaway wrote:
| Less good for your pets
| sokoloff wrote:
| I was the unfortunate subject of a TCMP/NRP audit. Even with
| no tax issues identified in the audit, this took over $2K in
| my representation costs, ran over a year in calendar time,
| and seemed to exhibit no concern for the wastefulness on
| either party's time and money. This was a fairly simple W-2,
| 1099-B, 401(k) couple of regular workers with a couple kids
| return.
|
| Based on my experience, I'm not in favor of this expansion.
| LorenPechtel wrote:
| The TCMP audits are not about finding money--by that
| standard they are incredibly wasteful. Rather, they are
| about investigating how honest people are being and in what
| ways they are being dishonest.
|
| I believe the answer to TCMP audits is to have the IRS pay
| you an appreciable amount if no substantial issues come to
| light as they are an unreasonable burden to those who get
| selected.
| tomohawk wrote:
| The tax code is incredibly complex, which means unless your
| tax filing is trivial, you likely have misfiled.
|
| The Secretary of the Treasury (not current one) was found to
| have misfiled his return. When asked, all he could say was he
| put the numbers into Turbo Tax, and this is what it spit out.
|
| I have a family member who gets audited by the IRS every
| year. They've never found anything, but the harrassment
| continues year after year.
|
| Once the IRS has these additional people, they will have to
| use them, and they will have to justify them.
| cosmiccatnap wrote:
| Capital is a cascading problem of inequality.
|
| If you have money you can pay to keep it by having someone well
| versed in the tax laws to find a loophole. If you have a lot of
| capital you can even then use that money to essentially buy a new
| loophole in the tax law.
|
| Sad...but not surprising. Money buys everything in this age even
| laws and the people that govern them.
| washbrain wrote:
| Surprising to see this downvoted. The OP is saying, "the
| wealthy have more resources to protect their wealth from
| audits." Which, like, is objectively true?
|
| And if you think money can't buy political goodwill these days,
| I'm not sure what to tell you...
| LorenPechtel wrote:
| I really wish they would quit calling the simple these-numbers-
| don't-match correspondence things "audits". It gives a very
| different picture to what's happening.
|
| Yeah, if you're poor you're a lot more likely to be doing your
| taxes by hand and thus you have much more room to make a copied-
| the-number-wrong mistake. Hence a high rate of "audits" in lower
| incomes. There's also more room to misunderstand something and
| enter wrong numbers.
|
| Separate them out based on whether it's just a letter kicked out
| by the computer and the taxpayer easily remedies whatever the
| computer was complaining about vs cases where the IRS is actually
| hunting for wrongdoing (say, unreported income from a cash-heavy
| small business.)
|
| I do agree, however, they need to target those with more. It's a
| lot harder so they tend not to and that has become much more
| severe because the Republicans have been deliberately starving
| them, they don't have the resources to do much of any actual
| auditing, it's almost all just these-numbers-don't-agree letters
| from the computer.
| serf wrote:
| >Yeah, if you're poor you're a lot more likely to be doing your
| taxes by hand
|
| that hasn't been my experience.
|
| friends and family at poverty levels of income routinely buy
| TurboTax garbage or go to H&R Block or equivalents every year.
|
| These options, while wasteful, are attractive to them because
| they're low-effort and they generally offer pay-with-refund
| financing options.
| kyleee wrote:
| yes the "audit" word is a bit too formal and has very
| bad/strong connotations related to a full tax audit, i propose
| "reconciliation"
| josephcsible wrote:
| There's one statistic that I didn't see but I'm now really
| curious about: what percentage of audits discover irregularities,
| per income level? If lower-income people are more likely than
| average to cheat on their taxes, then it makes sense to audit
| them more, but if they don't, then this is indeed totally unfair.
| kevinventullo wrote:
| Also, the whole point is that they may in fact not be as low
| income as they claim!
| Scoundreller wrote:
| Would make more sense if they looked at IRS audit rates by
| zip code.
| SubiculumCode wrote:
| I'd guess that audits of the poor finds *less* but can be
| completed swiftly; if there is any quotas requiring X
| audits/month of IRS accountants, are you going to choose the
| 1040EZ or the tax filing with 50+ pages of mumbojumbo?
| oneplane wrote:
| If we were to try to assess fairness, wouldn't it make sense to
| also take effects and side-effects into account? Say a
| disproportionate amount of poor families cheat, but also end up
| on the street after an audit, either not able to pay any
| outstanding taxes, or having paid them and no longer being able
| to afford a roof over their head. At the same time, while
| breaking the law should be the same for everyone else, wouldn't
| it also be more fair for small time violators to be treated
| less harsh, for example not having paid 100 dollars in tax vs.
| not having paid 1M.
|
| At the end of the day, the enforcement is there for one reason:
| to make sure everyone pays for the shared facilities of
| society. If you catch someone who was supposed to pay 250.000
| or catch 1000 someones who all had 100 outstanding tax,
| wouldn't it make more sense to focus on the big fish first?
| rglover wrote:
| > wouldn't it make more sense to focus on the big fish first?
|
| Of course, but the reason they don't is that the tax system
| is a psychological control mechanism disguised as "doing
| good" (I make that assertion by looking at the utter amount
| of careless, unaccountable waste in government despite the
| endless gaslighting about "muh roads").
|
| Why? Because if you can keep the majority in the
| psychological bracket of being the property of their
| government (purely via suggestion), you guarantee some
| percentage of cash flows. The "big fish" are smart and
| financed well-enough to circumvent (legally, in many cases)
| the system, while the little fish are ripe for catch and
| require far less worms/fishing poles to track down.
|
| This is why a flat tax rate with a floor is necessary. If you
| don't make above a certain amount per year (e.g., at or just
| above the poverty line), you don't pay any taxes. Everyone
| above that pays 10%. The government, as they should, adjusts
| their budget accordingly instead of treating citizens like an
| ATM. What the money gets spent on is transparent, itemized,
| and readily available for you, me, and everyone else. This
| would solve all of the unnecessary red tape and procedure,
| fearmongering, etc. And that's precisely why it will never
| happen.
| josephcsible wrote:
| > Everyone above that pays 10%.
|
| I hope you mean 10% of the amount of the part of their
| income that's above the line, and not 10% of their total
| income. Otherwise, this would cause a horrible welfare
| cliff.
| rglover wrote:
| You wouldn't need welfare in this scenario and that's the
| point. Let people keep all or the majority of their money
| (thus enabling more potential for prosperity if the
| individual is responsible).
|
| If the point of tax dollars is to fund some form of
| socialism (e.g., for the disabled or others who can't
| care for themselves), then allocate the majority of tax
| revenue to that and strip down the federal government to
| bare essentials (as it should be). Also offer tax credits
| to people who offer amounts above 10% for allocation to
| such costs.
|
| There's plenty of ways to take care of others without
| letting it burn up in the hands of the unproductive class
| (edit: meaning the government, not people who can't care
| for themselves).
| kyleee wrote:
| yes, basically flat tax of say 10% on everything above a
| reasonable cutoff, say 100k and then maybe states can get
| a similar 5%. a beautiful dream
| josephcsible wrote:
| There's a big difference between acknowledging that you owe
| taxes but not paying them, and lying that you don't owe taxes
| when you really do. I can only sympathize with people who do
| the former, and these audits are all about catching the
| latter.
| singlow wrote:
| The audits also catch a lot of cases where people don't
| know how to file anything beyond their basic employer
| withholdings. If a poorer, less educated person gets a 1099
| for a side job or does an early withdrawal from their IRA,
| they are likely to fail to report it properly, or pay the
| required taxes. This is not usually intentional, they just
| don't know better. Even if they know they have to pay taxes
| on the money, they don't realize that the IRS didn't
| already take their cut just like they do from a paycheck.
| googlryas wrote:
| True, and the IRS is fairly reasonable about
| understanding when something is intentional or
| unintentional when levying fines and setting out payment
| plans.
| llbeansandrice wrote:
| They're not cheating. It's because the EITC is complex so it's
| easy to make mistakes. Also because the IRS doesn't have the
| proper staffing to actually go after people that are richer and
| file yet more complex tax returns.
|
| "Cheating" is a very loaded word to use here.
|
| Increasing funding so the IRS can hire the proper staff to
| enforce tax-law across the board is the solution and it results
| in net revenue for the government. But the GOP consistently
| opposes these measures and is intent on hamstringing the IRS in
| its ability to audit higher-income households and businesses.
| LorenPechtel wrote:
| This. A large percentage of "audits" of the middle class and
| below are oopses, not cheating.
| nonameiguess wrote:
| Not sure that really follows. Is the goal of the audit to
| punish the maximum number of people or recover the maximum
| amount of money? If the latter, then it doesn't make much sense
| to spend most of your effort assessing $400 penalties.
| s1artibartfast wrote:
| That depends on the ROI. If it costs a fraction of a penny to
| write a code that catches hundreds of thousands of $400
| errors, the ROI is pretty good
| offsign_p wrote:
| Exactly. Study makes a huge assumption that low _earned_ income
| means the recipient is poor. Investment only income isn 't
| "earned" income, unreported income isn't _earned_ income --
| both are probably good targets audits.
| [deleted]
| JumpCrisscross wrote:
| > _what percentage of audits discover irregularities, per
| income level?_
|
| "The rate at which taxpayers understate their tax liability
| increases monotonically with income and average adjustments are
| highest in the highest income decile" [1].
|
| [1] https://dl.acm.org/doi/fullHtml/10.1145/3531146.3533204
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