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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

#171

Post by pessimizer »

jeffbee wrote: post #140
OrvalWintermute wrote: post #125

Earlier 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…

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".

Grover Norquist is dead and was not a Republican politician, but an professional antitax lobbyist.

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

#172

Post by RhysU »

DavidPeiffer wrote: post #159
TAForObvReasons wrote: post #89

Earlier 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.

Nah, until we get better returns on other endeavors for the same dollar.

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

#173

Post by speby »

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…

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.

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

#174

Post by LorenPechtel »

jmyeet wrote: post #166
Test0129 wrote: post #114

Earlier quoted context omitted.

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 hav…

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.

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

#175

Post by pessimizer »

xhkkffbf wrote: post #22

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.

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.)

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

#176

Post by jeffwask »

rrrrrrrrrrrryan wrote: post #160
washbrain wrote: post #66

Earlier quoted context omitted.

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 equitabl…

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.

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.

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

#177

Post by LorenPechtel »

llbeansandrice wrote: post #134
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.

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 gover…

This. A large percentage of "audits" of the middle class and below are oopses, not cheating.

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

#178

Post by NovemberWhiskey »

speby wrote: post #173
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…

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.

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.

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

#179

Post by LorenPechtel »

sokoloff wrote: post #148
enterthematrix wrote: post #52

Earlier quoted context omitted.

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.

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 expa…

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.

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

#180

Post by trebbble »

albatross13 wrote: post #155
trebbble wrote: post #143

Earlier quoted context omitted.

> Gee I wonder what the results will be. On the FY 2021 audit rate? Little or no effect, I expect.

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 ;)

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.

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