IRS audits poorest families at five times the rate for everyone else • Hacker News Board

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

#211

Post by patrick451 » Fri, Aug 12, 2022, 12:13 AM UTC

wongarsu wrote: post #69

marwatk wrote: post #51

Earlier quoted context omitted.

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…

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.

We can go a step further and let the individual auditors get a commission too. Revenue will sky rocket and surely this will attract the best, brightest and most ethical. Conflicts of interest be damned.

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

#212

Post by jmyeet » Fri, Aug 12, 2022, 12:19 AM UTC

toast0 wrote: post #190

jmyeet wrote: post #75

Earlier 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…

> 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…

> There's no longer a tax on repatriated earnings (they're exempted from corporate income)

Yes and no. What you're saying is partially correct. For pre-TCJA deferred foreign income there was tax holiday (ie a one-time low rate), just as there was in 2004. This tax could be paid over 8 years as well (eg Apple is doing this).

For future income, repatriation is technically exempted from income but there is a minimum tax on income in tax havens that probably incentivizes companies in future to shift profits overseas. The more money you do this with the lower the effective tax rate you pay, as I understand it.

So, you will still have an incentive against repatriation because it reduces the effectiveness of your overall profit shifting.

So borrowing in the US to avoid repatriation is still relevant but less so thanks to both the lower corporate tax rate of 21%, the tax-hoiday rate still being higher than the cost of borrowing and repatriation still increasing overall tax rate. This is less relevant currently with higher interest rates, of course.

> ... 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

I'm all for carving out palatable exceptions such as deferring tax liabiilities for seniors, not hitting heirs with an immediate tax bill and effectively amortizing tax liabilities over many years in the case of farms. Fine.

What I am against is giving massive tax breaks to the likes of Disney and truly wealthy California landholders because of seniors or family farms. You can separate these issues.

> ... capital losses refundable or at least add carry-back

Capital losses (both long and short term) can already be carried forward. What you're suggesting by a carry-back I assume means to apply a loss against a paper profit in a previous year. Fine with me.

> ... people who were invested into a crash are going to be pretty grumpy

We've already had this kind of problem with the AMT. I honestly don't know the current state of the AMT but in previous years (eg during the dot-com bust) we had paper who through exercising options and paying a lot of tax because of AMT then having no way to resolve that when the stock crashed. I'm fine with making sure this doesn't happen either.

> Paying taxes on unrealized gains as of Dec 31 in April when the market is in the toliet isn't palatable either.

I get this. We have numerous examples of deferring tax liabilities (eg until death, due to hardship) so this seems like an eminently solvable problem.

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

#213

Post by pseudalopex » Fri, Aug 12, 2022, 12:27 AM UTC

pessimizer wrote: post #171

jeffbee wrote: post #140

Earlier quoted context omitted.

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.

Grover Norquist is alive. Many Republican politicians adopted his tax pledge.

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

#214

Post by Kye » Fri, Aug 12, 2022, 12:52 AM UTC

NovemberWhiskey wrote: post #149

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.

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 verificat…

This will probably change with the 1099k requirement dropping to $600 nationwide. Or it'll further overwhelm the IRS.

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

#215

Post by prepend » Fri, Aug 12, 2022, 1:36 AM UTC

The purpose of the IRS is not to maximize revenue but to enforce the rules and laws of taxes.

They don’t audit people based on how much they will recover, they audit based on errors and patterns in returns.

Sadly, poor people have many errors and there’s a lot of mistakes and fraud with the earned income tax credit that is very valuable, especially for low income people.

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

#216

Post by prepend » Fri, Aug 12, 2022, 1:41 AM UTC

NovemberWhiskey wrote: post #149

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.

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 verificat…

> These Americans have no opportunity to evade taxes.

I think there’s a lot of opportunity related to kids. Deductions and credits vary and can be mistakenly or willfully claimed.

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

#217

Post by int_19h » Fri, Aug 12, 2022, 2:10 AM UTC

koheripbal wrote: post #181

JumpCrisscross wrote: post #123

Earlier quoted context omitted.

> 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…

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-au…

If it's so automated, why require people to submit tax returns at all? Just calculate everything and send them the breakdown along with the check.

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

#218

Post by sokoloff » Fri, Aug 12, 2022, 2:24 AM UTC

LorenPechtel wrote: post #147

kube-system wrote: post #40

Earlier 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…

See https://www.irs.gov/individuals/get-transcript to get the IRS to show you what they have on your account.

We do this every year to double check that we haven’t missed anything. It’s usually incomplete on April 15, but tends to be pretty complete by mid-summer (and 4868 gives you an automatic extension of time to file [but not to pay])

There’s no secrecy need at play here.

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

#219

Post by drewbug01 » Fri, Aug 12, 2022, 2:49 AM UTC

int_19h wrote: post #217

koheripbal wrote: post #181

Earlier quoted context omitted.

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-au…

If it's so automated, why require people to submit tax returns at all? Just calculate everything and send them the breakdown along with the check.

Lobbying. https://www.propublica.org/article/filing-taxes-could-be-fre...

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

#220

Post by stjohnswarts » Fri, Aug 12, 2022, 3:07 AM UTC

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…

Probably because they don't have the accountants to cover up and cook the books like the 1%, I don't think it's because of "criminal tendencies" of that income bracket like some would claim.