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IRS audits poorest families at five times the rate for everyone else

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Re: IRS audits poorest families at five times the rate for everyone else

#41

Post by JumpCrisscross »

josephcsible wrote: post #2

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.

> 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

Re: IRS audits poorest families at five times the rate for everyone else

#42

Post by AnimalMuppet »

moomin wrote: post #23
NovemberWhiskey wrote: post #11

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…

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.

> They ignore much larger sums.

Source? What category of stuff the IRS ignores adds up to more than $20 billion?

Re: IRS audits poorest families at five times the rate for everyone else

#43

Post by Buttons840 »

graton wrote: post #6

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.

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.

Re: IRS audits poorest families at five times the rate for everyone else

#44

Post by tomohawk »

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.

Re: IRS audits poorest families at five times the rate for everyone else

#45

Post by cosmiccatnap »

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.

Re: IRS audits poorest families at five times the rate for everyone else

#46

Post by throwaway5959 »

PsySecGroup wrote: post #26
inanutshellus wrote: post #17

Earlier quoted context omitted.

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... ;-)

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.

I’d happily pay more taxes if I could wake up tomorrow making $400k/year in 2023 dollars.

Re: IRS audits poorest families at five times the rate for everyone else

#47

Post by lostcolony »

moomin wrote: post #23
NovemberWhiskey wrote: post #11

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…

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.

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).

Re: IRS audits poorest families at five times the rate for everyone else

#48

Post by enterthematrix »

mannykannot wrote: post #14

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.

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.

Re: IRS audits poorest families at five times the rate for everyone else

#49

Post by NovemberWhiskey »

jabbany wrote: post #30
NovemberWhiskey wrote: post #11

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…

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?

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.

Re: IRS audits poorest families at five times the rate for everyone else

#50

Post by moralestapia »

AnimalMuppet wrote: post #42
moomin wrote: post #23

Earlier quoted context omitted.

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.

> They ignore much larger sums. Source? What category of stuff the IRS ignores adds up to more than $20 billion?

Bit of a tangent but, why $20BUSD?
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