71–80 of 231 posts
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).
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.
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.
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 th…
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
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.
This is factually incorrect in so many ways. Please vet your sources better.
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…
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.
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…
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. Ev…
This just doesn’t make sense from a financial standpoint. It seems doubtful the money recovered covers the cost of the audits.
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.
Earlier quoted context omitted.
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.
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.
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.
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, wou…
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.
Earlier quoted context omitted.
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.