5 ms·

> They also go after poor people more often than rich people by a long shot (percentage wise, not just absolute numbers) because they know poor to middle class

by bko 5y ago

> They also go after poor people more often than rich people by a long shot (percentage wise, not just absolute numbers) because they know poor to middle class people can't afford a lawyer/accountant to fend them off. Adjusted Gross Income, Audit rate 0 8.9% $1- $25,000 0.7% $25,000-$50,000 0.4% $50,000-$75,000 0.4% $75,000-$100,000 0.4% $100,000-$200,000 0.4% $200,000-$500,000 0.6% $500,000-$1,000,000 1.1% 1,000,000-$5,000,000 2.5% $5,000,000-$10,000,000 5.1% over $10,000,000 8.6% Please don't make stuff up https://www.nolo.com/legal-encyclopedia/what-are-the-odds-being-audited.html https://www.nolo.com/legal-encyclopedia/what-are-the-odds-be...

black_puppydog 5y ago
So this describes P(audit | bracket), the probability of me getting audited give what I earn. But those brackets are very different sizes. What I'd find more interesting is "do they focus on minimizing the amount of money stolen from other tax payers?" That would be more like the absolute number of audits in each bracket, divided by the total number of audits. (or audit hours, if you want to go for a "bang for buck" type analysis)
- bko 5y ago
  I don't know their internal incentives, but I would imagine they have an incentive to get as much money as they can, balanced slightly by catching outright fraud. There's a fixed cost to auditing. Auditing people that they believe have small discrepancies in their taxes just isn't worth it. I read there's a secret formula that screens out cases that can be considered for audit and auto-approves the refund. It's secret because if you knew it, you could obviously exploit it. Even the numbers for lower incomes are a little misleading because fraudsters know the probability of audit and know they can exploit the system by using fake identities to file claims for relatively small amounts. Bret Johnson spoke about this in an interview with Lex Fridman [0] and said 3 days a week for 8 months out of the year he was filing a tax return every 6 minutes using fake or stolen identities. Then he spent the rest of the week driving to ATMs around the state to withdraw the returns. Fun fact, a standard briefcase can hold $150,000 in 20s. So obviously the IRS needs to go after absolute fraud as a deterrent as well as the large tax filings where the money is. [0] https://www.youtube.com/watch?v=cC1LFC0KFSw https://www.youtube.com/watch?v=cC1LFC0KFSw
deleted 5y ago
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by bko 5y ago

black_puppydog 5y ago

So this describes P(audit | bracket), the probability of me getting audited give what I earn. But those brackets are very different sizes. What I'd find more interesting is "do they focus on minimizing the amount of money stolen from other tax payers?" That would be more like the absolute number of audits in each bracket, divided by the total number of audits. (or audit hours, if you want to go for a "bang for buck" type analysis)

bko 5y ago
I don't know their internal incentives, but I would imagine they have an incentive to get as much money as they can, balanced slightly by catching outright fraud. There's a fixed cost to auditing. Auditing people that they believe have small discrepancies in their taxes just isn't worth it. I read there's a secret formula that screens out cases that can be considered for audit and auto-approves the refund. It's secret because if you knew it, you could obviously exploit it. Even the numbers for lower incomes are a little misleading because fraudsters know the probability of audit and know they can exploit the system by using fake identities to file claims for relatively small amounts. Bret Johnson spoke about this in an interview with Lex Fridman [0] and said 3 days a week for 8 months out of the year he was filing a tax return every 6 minutes using fake or stolen identities. Then he spent the rest of the week driving to ATMs around the state to withdraw the returns. Fun fact, a standard briefcase can hold $150,000 in 20s. So obviously the IRS needs to go after absolute fraud as a deterrent as well as the large tax filings where the money is. [0] https://www.youtube.com/watch?v=cC1LFC0KFSw https://www.youtube.com/watch?v=cC1LFC0KFSw

deleted 5y ago

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