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.
Interesting, source on the amendment? Was there a poison pill in it?
IRS audits poorest families at five times the rate for everyone else
161–170 of 231 posts
Re: IRS audits poorest families at five times the rate for everyone else
#162Earlier quoted context omitted.
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)
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…
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.
Re: IRS audits poorest families at five times the rate for everyone else
#163The 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.
> 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.
Re: IRS audits poorest families at five times the rate for everyone else
#164Earlier quoted context omitted.
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…
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 i…
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
Re: IRS audits poorest families at five times the rate for everyone else
#165I 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.
Re: IRS audits poorest families at five times the rate for everyone else
#166Earlier quoted context omitted.
> 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 Se…
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 pro…
> 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.
Re: IRS audits poorest families at five times the rate for everyone else
#167The 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…
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)."
Re: IRS audits poorest families at five times the rate for everyone else
#168Earlier quoted context omitted.
> 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?
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 de…
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.)
Re: IRS audits poorest families at five times the rate for everyone else
#169Earlier quoted context omitted.
> 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 Se…
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 pro…
> 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."
Re: IRS audits poorest families at five times the rate for everyone else
#170Earlier quoted context omitted.
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…
> 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, s…
>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.