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It's hard to hide a lot of money. You can dodge taxes fairly completely when you're small (think cash only employment and side gig) and there's not much to tax

It's hard to hide a lot of money. You can dodge taxes fairly completely when you're small (think cash only employment and side gig) and there's not much to tax but they have plenty of incentive to track you down and get your money if you get big and it's hard to hide that much money moving around. Government isn't gonna let that much money slip through its fingers. So the rich report their income, mostly, or at least enough of it to be rich on paper. They just minimize their liability as much as they can.

breakyerself 5y ago
Except people with a lot of money can afford a team of lawyers and accountants to grapple with the IRS. Middle income people can't afford to fight back. The path of least resistance is to ignore the big fish and just catch as many small fish as you can.
- vmception 5y ago
  > Grapple I think this completely mischaracterizes the relationship that wealthy participants have with the IRS. Factor in these two things: 1) The relationship with the IRS for the wealthy is not adversarial like 100% of the interactions with the IRS are with poorer people. Very many interactions with the IRS are pre-emptive as well as collaborative. The poorer experience is completely retroactive enforcement with the tax authority seemingly already having made a conclusion about what you owe at the worst time for you to come up with that money. Very big difference in experiences. 2) Lawyers and accountants know the law better than the IRS. Yes, “fighting back” can be an accurate term, but its more accurate to say “respond” at all. On the wealthier side, it is rare that an interpretation devolves into an adversarial relationship. The IRS is motivated by having a clear lineage of funds and rationale, as opposed to actually optimizing revenues via taxes.
  - aaron-santos 5y ago
    >The relationship with the IRS for the wealthy is not adversarial like 100% of the interactions with the IRS are with poorer people. The working class gets audit mail, while the capitalist class get to talk face to face. It is the privilege of talking it over. If you can take just a moment to view the IRS as a customer support line, the rich get to talk with a real human.
    - vmception 5y ago
      But as I mentioned, its not adversarial to begin with. Most tax compliance - although much more obscure and less used - is telling the IRS in advance how little you will pay. From an 83(b) election on an arbitrarily short vesting schedule you made for yourself for discounted assets, to Advance Pricing Agreements which you pay for, to Private Letter Rulings, to tax-exempt status for your non-profits. It just isn't the same experience with that agency.
      - aaron-santos 5y ago
        I don't think I'm in disagreement, but maybe you can tell me. The popular portrayal that a face to face meeting with the IRS is the worst needs to be debunked. Anyone who thinks a face to face meeting with a TCO needs to keep in mind who is getting face to face examinations and what that implies. It's much more cordial than the adversarial mailers that the prole gets.
        vmception 5y ago
        We're mostly just talking about different things. Yeah audits are not the end of the world, and every transaction that was filed needs to already be rationalized for how it would be explained in an audit. I've been talking about all the interactions one can have with the IRS before taxes are ever filed.
        aaron-santos 5y ago
        Thank you for taking the time to explain that a bit more. Yes we're talking about two different things.
    - NovemberWhiskey 5y ago
      I see where you're coming from; but isn't it more the case that the kind of audit you get depends on the kind of error/fraud you have in your return? My understanding is that the majority of "working class" audits are around tax credits and that the IRS knows to a moral certainty that there's a problem due to internal inconsistencies in the filing itself.
aaron-santos 5y ago
If you haven't read Rettig's letter[1] to Wyden explaining this, you might want to. It would inform you on the complexities that TCOs face when performing different types of audits. Why different types of audits? Tax fraud takes different forms largely based on class. Working class tax fraud is handled by correspondence audits, while capital class tax fraud is handled by face to face examinations. You can imagine the difference in training and cost without me explaining it to you. (Also it's in the letter) This difference in types of audits brings along a difference in cost to the IRS. correspondence TCOs cost less than face to face examiners. Correspondence examiners are GS-5 through GS-8, while face to face examiners are GS-7, 9, and 11. It simply costs more to audit the rich right now. If you want to pay correspondence TCOs the same as face to face TCOs, or believe that high value audits should be conducted by correspondence TCOs that's one thing. But this topic deserves an understanding of the structural challenges that auditing the capitalist class entails. [1] https://www.documentcloud.org/documents/6430680-Document-2019-9-6-Treasury-Letter-to-Wyden-RE.html https://www.documentcloud.org/documents/6430680-Document-201...

breakyerself 5y ago

Except people with a lot of money can afford a team of lawyers and accountants to grapple with the IRS. Middle income people can't afford to fight back. The path of least resistance is to ignore the big fish and just catch as many small fish as you can.

vmception 5y ago
> Grapple I think this completely mischaracterizes the relationship that wealthy participants have with the IRS. Factor in these two things: 1) The relationship with the IRS for the wealthy is not adversarial like 100% of the interactions with the IRS are with poorer people. Very many interactions with the IRS are pre-emptive as well as collaborative. The poorer experience is completely retroactive enforcement with the tax authority seemingly already having made a conclusion about what you owe at the worst time for you to come up with that money. Very big difference in experiences. 2) Lawyers and accountants know the law better than the IRS. Yes, “fighting back” can be an accurate term, but its more accurate to say “respond” at all. On the wealthier side, it is rare that an interpretation devolves into an adversarial relationship. The IRS is motivated by having a clear lineage of funds and rationale, as opposed to actually optimizing revenues via taxes.
- aaron-santos 5y ago
  >The relationship with the IRS for the wealthy is not adversarial like 100% of the interactions with the IRS are with poorer people. The working class gets audit mail, while the capitalist class get to talk face to face. It is the privilege of talking it over. If you can take just a moment to view the IRS as a customer support line, the rich get to talk with a real human.
  - vmception 5y ago
    But as I mentioned, its not adversarial to begin with. Most tax compliance - although much more obscure and less used - is telling the IRS in advance how little you will pay. From an 83(b) election on an arbitrarily short vesting schedule you made for yourself for discounted assets, to Advance Pricing Agreements which you pay for, to Private Letter Rulings, to tax-exempt status for your non-profits. It just isn't the same experience with that agency.
    - aaron-santos 5y ago
      I don't think I'm in disagreement, but maybe you can tell me. The popular portrayal that a face to face meeting with the IRS is the worst needs to be debunked. Anyone who thinks a face to face meeting with a TCO needs to keep in mind who is getting face to face examinations and what that implies. It's much more cordial than the adversarial mailers that the prole gets.
      - vmception 5y ago
        We're mostly just talking about different things. Yeah audits are not the end of the world, and every transaction that was filed needs to already be rationalized for how it would be explained in an audit. I've been talking about all the interactions one can have with the IRS before taxes are ever filed.
        aaron-santos 5y ago
        Thank you for taking the time to explain that a bit more. Yes we're talking about two different things.
  - NovemberWhiskey 5y ago
    I see where you're coming from; but isn't it more the case that the kind of audit you get depends on the kind of error/fraud you have in your return? My understanding is that the majority of "working class" audits are around tax credits and that the IRS knows to a moral certainty that there's a problem due to internal inconsistencies in the filing itself.

aaron-santos 5y ago

If you haven't read Rettig's letter[1] to Wyden explaining this, you might want to. It would inform you on the complexities that TCOs face when performing different types of audits. Why different types of audits? Tax fraud takes different forms largely based on class. Working class tax fraud is handled by correspondence audits, while capital class tax fraud is handled by face to face examinations. You can imagine the difference in training and cost without me explaining it to you. (Also it's in the letter) This difference in types of audits brings along a difference in cost to the IRS. correspondence TCOs cost less than face to face examiners. Correspondence examiners are GS-5 through GS-8, while face to face examiners are GS-7, 9, and 11. It simply costs more to audit the rich right now. If you want to pay correspondence TCOs the same as face to face TCOs, or believe that high value audits should be conducted by correspondence TCOs that's one thing. But this topic deserves an understanding of the structural challenges that auditing the capitalist class entails. [1] https://www.documentcloud.org/documents/6430680-Document-2019-9-6-Treasury-Letter-to-Wyden-RE.html https://www.documentcloud.org/documents/6430680-Document-201...