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IRS: Sorry, but It’s Just Easier and Cheaper to Audit the Poor

57 points by SQL2219 7y ago

kgermino 7y ago
I hate this article. It’s an important issue - the IRS not having the resources to review complex tax returns - but it’s hard to read past the authors efforts to build outrage around unfairness and actually understand it. He claims throughout the article that the IRS focuses disproportionately on poor families over the wealthy, but the first f$&@ing sentence says that the IRS audits the working poor at the same rate as the wealthy. You can argue that that’s not good policy, but it’s literally the definition of proportionate. The sub-head and the first sentence literally say opposite things. I’m so frustrated with the article because I feel like the focus on “disproportionate enforcement” (which the article itself says isn’t happening) distracts from the very real and outrageous problem. Sorry for the rant
- jjeaff 7y ago
  If the purpose of audits are to recover tax revenues, then auditing the poor at the same rate as the wealthy is very disproportionate. If the purpose of audits is merely to find and punish tax cheats, then auditing everyone at the same rate makes sense I suppose. Though I suspect certain higher income levels are more prone to cheating.
  - notacoward 7y ago
    If the purpose of audits is to find and punish cheating, then auditing in proportion to number of exemptions/deductions would make the most sense. Sure, audit people claiming EITC more, but also audit people claiming lots of exemptions for money transferred to/from trusts or Caymans corporations, deductions for depreciation and business expenses, and every other special provision in the bookshelf-long tax code. Sure, a lot of these provisions have legitimate reasons for existing and are genuinely necessary for some people (like EITC), but each one also has some potential for abuse and when the tax code has thousands of them it becomes like a recipe book for those looking to evade.
- timwis 7y ago
  That's not quite right. Click the link in the first sentence you're referring to for context: > Americans who receive the earned income tax credit, one of the country’s largest anti-poverty programs, are audited at a higher rate than all but the richest taxpayers. The new data shows that the trend has only grown stronger.
  - papreclip 7y ago
    You're both right. The EITC only requires you to have earned $1 in income. When he quotes the statistic about the "working poor", they are probably counting people who work full time EITC often results in the individual paying negative taxes. I know this was the case for me one year that I mostly spent unemployed. It's not the craziest thing in the world to pay extra attention when you're handing out checks, if for no other reason than to keep the program honest and protect its existence
chimi 7y ago
> For now, the IRS says, while it agrees auditing more wealthy taxpayers would be a good idea, without adequate funding there’s nothing it can do. Why not pay out a portion of the tax recovered from audits as a bonus. The IRS auditor gets 1-10% of the tax they recover for the people of the USA. It'd work like the commissions the big accounting firms receive of the amount of tax they save for their clients. I bet there'd be a benefit in retaining those really smart auditors who could pass all the tests as well. I can't help but imagine some of those auditors leave the IRS and go straight to those aforementioned accounting firms. Farm team style like the Senators and Representatives do to lobbyists.
- mimikatz 7y ago
  Incentives matter and that is a really dangerous incentive.
  - chimi 7y ago
    The perverse incentive is rewarding an organization for enabling the defrauding of the American people. My bonus scheme will only balance that.
    - sokoloff 7y ago
      I literally had to read your comment twice, because you're creating an incentive for the agents of the IRS to strongarm the public because it directly lines their pocket. You're also creating an incentive to bribe IRS agents, because why take 1-10% if a fraudulent taxpayer would readily offer you at least twice that amount... The reason I had to read it twice is I thought you were suggesting the "organization" in question was the IRS itself.
  - pintxo 7y ago
    Why is that? I am with you, that incentives need to be very carefully crafted to prevent negative side effects. But what could the negativ effect be here?
    - 7y ago
RhysU 7y ago
Simplifying the tax code would allow more audits for a fixed amount of IRS funding.
- deleted 7y ago
  [deleted]
smkellat 7y ago
The Improper Payments Act report shows just under $19 billion was lost in improper EITC payments in FY2018. NASA’s FY2018 budget was $20.7 billion just to compare the scale of the loss. Every little bit of fraud, waste, and abuse does add up to something quite large in the aggregate. ProPublica is asking the wrong questions. They should be asking what we should do with refundable tax credit programs that have such high error rates in payments. What we’re doing currently isn’t working best.
Grindersa 7y ago
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57 points by SQL2219 7y ago

I hate this article. It’s an important issue - the IRS not having the resources to review complex tax returns - but it’s hard to read past the authors efforts to build outrage around unfairness and actually understand it. He claims throughout the article that the IRS focuses disproportionately on poor families over the wealthy, but the first f$&@ing sentence says that the IRS audits the working poor at the same rate as the wealthy. You can argue that that’s not good policy, but it’s literally the definition of proportionate. The sub-head and the first sentence literally say opposite things. I’m so frustrated with the article because I feel like the focus on “disproportionate enforcement” (which the article itself says isn’t happening) distracts from the very real and outrageous problem. Sorry for the rant

jjeaff 7y ago
If the purpose of audits are to recover tax revenues, then auditing the poor at the same rate as the wealthy is very disproportionate. If the purpose of audits is merely to find and punish tax cheats, then auditing everyone at the same rate makes sense I suppose. Though I suspect certain higher income levels are more prone to cheating.
- notacoward 7y ago
  If the purpose of audits is to find and punish cheating, then auditing in proportion to number of exemptions/deductions would make the most sense. Sure, audit people claiming EITC more, but also audit people claiming lots of exemptions for money transferred to/from trusts or Caymans corporations, deductions for depreciation and business expenses, and every other special provision in the bookshelf-long tax code. Sure, a lot of these provisions have legitimate reasons for existing and are genuinely necessary for some people (like EITC), but each one also has some potential for abuse and when the tax code has thousands of them it becomes like a recipe book for those looking to evade.
timwis 7y ago
That's not quite right. Click the link in the first sentence you're referring to for context: > Americans who receive the earned income tax credit, one of the country’s largest anti-poverty programs, are audited at a higher rate than all but the richest taxpayers. The new data shows that the trend has only grown stronger.
- papreclip 7y ago
  You're both right. The EITC only requires you to have earned $1 in income. When he quotes the statistic about the "working poor", they are probably counting people who work full time EITC often results in the individual paying negative taxes. I know this was the case for me one year that I mostly spent unemployed. It's not the craziest thing in the world to pay extra attention when you're handing out checks, if for no other reason than to keep the program honest and protect its existence

chimi 7y ago

> For now, the IRS says, while it agrees auditing more wealthy taxpayers would be a good idea, without adequate funding there’s nothing it can do. Why not pay out a portion of the tax recovered from audits as a bonus. The IRS auditor gets 1-10% of the tax they recover for the people of the USA. It'd work like the commissions the big accounting firms receive of the amount of tax they save for their clients. I bet there'd be a benefit in retaining those really smart auditors who could pass all the tests as well. I can't help but imagine some of those auditors leave the IRS and go straight to those aforementioned accounting firms. Farm team style like the Senators and Representatives do to lobbyists.

mimikatz 7y ago
Incentives matter and that is a really dangerous incentive.
- chimi 7y ago
  The perverse incentive is rewarding an organization for enabling the defrauding of the American people. My bonus scheme will only balance that.
  - sokoloff 7y ago
    I literally had to read your comment twice, because you're creating an incentive for the agents of the IRS to strongarm the public because it directly lines their pocket. You're also creating an incentive to bribe IRS agents, because why take 1-10% if a fraudulent taxpayer would readily offer you at least twice that amount... The reason I had to read it twice is I thought you were suggesting the "organization" in question was the IRS itself.
- pintxo 7y ago
  Why is that? I am with you, that incentives need to be very carefully crafted to prevent negative side effects. But what could the negativ effect be here?
  - 7y ago

RhysU 7y ago

Simplifying the tax code would allow more audits for a fixed amount of IRS funding.

deleted 7y ago
[deleted]

smkellat 7y ago

The Improper Payments Act report shows just under $19 billion was lost in improper EITC payments in FY2018. NASA’s FY2018 budget was $20.7 billion just to compare the scale of the loss. Every little bit of fraud, waste, and abuse does add up to something quite large in the aggregate. ProPublica is asking the wrong questions. They should be asking what we should do with refundable tax credit programs that have such high error rates in payments. What we’re doing currently isn’t working best.

Grindersa 7y ago

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