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We are told the opposite fairy tale when it comes to the IRS. "They have to go after regular people and small business owners because corporations have too man

We are told the opposite fairy tale when it comes to the IRS. "They have to go after regular people and small business owners because corporations have too many lawyers!"

clucas 4y ago
Interesting, who makes that argument?
- willcipriano 4y ago
  I can find someone making that case with a quick Google: https://www.april15th.com/irs-problems/why-irs-audits-more-small-businesses-than-big-corporations/ https://www.april15th.com/irs-problems/why-irs-audits-more-s... > The IRS brings in more dollars per hour auditing small mom and pop businesses, than they do auditing medium and large companies. > Why is that the case? Because the larger companies keep impeccable records and have tax experts to defend them; Enrolled Agents, CPAs, or tax attorneys that usually know more about the Tax Code than the IRS auditor-employee. I've found it in my conversations with people justifying the recent increases in IRS agents and the new $600 reporting requirement.
  - clucas 4y ago
    Reading that link, it appears they are saying the IRS is concentrates its efforts on small businesses because they have the best chance of recovery. You called it a fairy tale, do you believe that big corporations are actually bigger tax cheats than small businesses, and they're just getting away with it somehow?
    - willcipriano 4y ago
      I do not have any of direct evidence of anything, I'm just a guy with a brain. This is one of many in a long series of "coincidences" that when put together starts to become nonsensical. Look at where we started. Pfizer gets fined more beacuse they are a bigger company and have more surface area, the law is complex and everyone is breaking it all the time so action against them doesn't mean they did anything wrong. In and of itself fine, that may be true. Then those same people will later say, the IRS went after that Mexican restaurant instead of Pfizer beacuse they are so big, and run such a tight ship that it would almost impossible to find any wrong doing. The tax code is very complex, so is drug regulation. Is the idea that Pfizer is hyper competent in tax law but incompetent when it comes to the core business? That doesn't hold water for me.
      - clucas 4y ago
        Maybe you're right, but I think it's more likely that Pfizer, as a business, is more willing to accept risk in the pursuit of its core business aims than in its accounting, and that's all we're seeing. https://slatestarcodex.com/2019/01/14/too-many-people-dare-call-it-conspiracy/ https://slatestarcodex.com/2019/01/14/too-many-people-dare-c...
        s1artibartfast 4y ago
        It could also be that the endeavor of drug discovery and manufacture is inherently more risky than accounting. From the academic sense, it is not a field of mathematical certainty, but one of subjective risk-benefit tradeoffs.
- transcriptase 4y ago
  In Canada it’s a common argument as to why the CRA goes after waitresses for unclaimed tips and similar trivial cases, versus tackling high-net worth and corporate tax evasion/fraud. It comes down to dollars recovered per agent hour as a metric for the government. The average joe can’t afford to tie up the CRA in court for years with high-paid legal teams, which means that their KPI results are negatively correlated with the financial resources of their target. Why spend years potentially recovering millions when you can spend minutes recovering hundreds or thousands with virtually no risk?
fallingknife 4y ago
That's what I'm told, but not by the IRS. It is a fairy tale, though. Small businesses cheat on their taxes in incredibly stupid and simple ways. e.g. running personal expenses through the business is absolutely rampant. I even know a guy who got a tax deduction buying a $60K engagement ring this way. This stuff is extremely easy to catch in an audit, and requires very little resources from the IRS. These business owners will always settle quickly and never fight, because they are guilty as hell and it's easy to prove. At big corps, on the other hand, this type of activity is heavily policed and almost impossible. The idea that large corporations are rampant tax cheats is completely false. The reason that they would never dare is because the IRS has a whistleblower program where you get to keep a percentage of the proceeds, which at a big corp will be multiple millions of dollars. So any intentional tax cheating will be reported and caught immediately by employees who stand to gain more than their salary for their whole career. The worst that a big corp will ever do is dip a toe into the legal gray areas of tax law. And in that case the IRS will be hesitant to go after them because it takes a ton of resources, and they stand a very high chance of losing. Not because the big corp has too many lawyers, but because the opposition has a legit case, unlike the small business owner who bought his engagement ring on the company card. The idea that anyone has too many lawyers for the government to handle is ridiculous anyway. So it makes complete sense for the IRS to target small businesses and regular people and not big corps. But people don't like this because it goes against the "big corp bad, small business good" religious belief.
- antihero 4y ago
  Also offshore accounting.
- mschuster91 4y ago
  > The idea that large corporations are rampant tax cheats is completely false. And yet, large corporations, especially banks, are continuously caught with blatant abuse of the tax code (e.g. the "cum ex" scandal in Germany, where banks outright looted the government) or their customers. The problem is that the fines are way too low. What does a large corporation care about a fine of even a billion dollars? Spread out over the time of the violation, that's petty cash, and as long as the execs don't have to go to jail, D&O insurance will pay any personal punishments.
Kranar 4y ago
When you control for population, high income individuals are more likely to be audited than the middle class: https://www.irs.gov/about-irs/irs-audit-rates-significantly-increase-as-income-rises https://www.irs.gov/about-irs/irs-audit-rates-significantly-... There is no article about it, but the same also holds for businesses. There are just soooo many more small to middle sized businesses compared to large corporations.

We are told the opposite fairy tale when it comes to the IRS. "They have to go after regular people and small business owners because corporations have too many lawyers!"

clucas 4y ago

Interesting, who makes that argument?

willcipriano 4y ago
I can find someone making that case with a quick Google: https://www.april15th.com/irs-problems/why-irs-audits-more-small-businesses-than-big-corporations/ https://www.april15th.com/irs-problems/why-irs-audits-more-s... > The IRS brings in more dollars per hour auditing small mom and pop businesses, than they do auditing medium and large companies. > Why is that the case? Because the larger companies keep impeccable records and have tax experts to defend them; Enrolled Agents, CPAs, or tax attorneys that usually know more about the Tax Code than the IRS auditor-employee. I've found it in my conversations with people justifying the recent increases in IRS agents and the new $600 reporting requirement.
- clucas 4y ago
  Reading that link, it appears they are saying the IRS is concentrates its efforts on small businesses because they have the best chance of recovery. You called it a fairy tale, do you believe that big corporations are actually bigger tax cheats than small businesses, and they're just getting away with it somehow?
  - willcipriano 4y ago
    I do not have any of direct evidence of anything, I'm just a guy with a brain. This is one of many in a long series of "coincidences" that when put together starts to become nonsensical. Look at where we started. Pfizer gets fined more beacuse they are a bigger company and have more surface area, the law is complex and everyone is breaking it all the time so action against them doesn't mean they did anything wrong. In and of itself fine, that may be true. Then those same people will later say, the IRS went after that Mexican restaurant instead of Pfizer beacuse they are so big, and run such a tight ship that it would almost impossible to find any wrong doing. The tax code is very complex, so is drug regulation. Is the idea that Pfizer is hyper competent in tax law but incompetent when it comes to the core business? That doesn't hold water for me.
    - clucas 4y ago
      Maybe you're right, but I think it's more likely that Pfizer, as a business, is more willing to accept risk in the pursuit of its core business aims than in its accounting, and that's all we're seeing. https://slatestarcodex.com/2019/01/14/too-many-people-dare-call-it-conspiracy/ https://slatestarcodex.com/2019/01/14/too-many-people-dare-c...
      - s1artibartfast 4y ago
        It could also be that the endeavor of drug discovery and manufacture is inherently more risky than accounting. From the academic sense, it is not a field of mathematical certainty, but one of subjective risk-benefit tradeoffs.
transcriptase 4y ago
In Canada it’s a common argument as to why the CRA goes after waitresses for unclaimed tips and similar trivial cases, versus tackling high-net worth and corporate tax evasion/fraud. It comes down to dollars recovered per agent hour as a metric for the government. The average joe can’t afford to tie up the CRA in court for years with high-paid legal teams, which means that their KPI results are negatively correlated with the financial resources of their target. Why spend years potentially recovering millions when you can spend minutes recovering hundreds or thousands with virtually no risk?

fallingknife 4y ago

That's what I'm told, but not by the IRS. It is a fairy tale, though. Small businesses cheat on their taxes in incredibly stupid and simple ways. e.g. running personal expenses through the business is absolutely rampant. I even know a guy who got a tax deduction buying a $60K engagement ring this way. This stuff is extremely easy to catch in an audit, and requires very little resources from the IRS. These business owners will always settle quickly and never fight, because they are guilty as hell and it's easy to prove. At big corps, on the other hand, this type of activity is heavily policed and almost impossible. The idea that large corporations are rampant tax cheats is completely false. The reason that they would never dare is because the IRS has a whistleblower program where you get to keep a percentage of the proceeds, which at a big corp will be multiple millions of dollars. So any intentional tax cheating will be reported and caught immediately by employees who stand to gain more than their salary for their whole career. The worst that a big corp will ever do is dip a toe into the legal gray areas of tax law. And in that case the IRS will be hesitant to go after them because it takes a ton of resources, and they stand a very high chance of losing. Not because the big corp has too many lawyers, but because the opposition has a legit case, unlike the small business owner who bought his engagement ring on the company card. The idea that anyone has too many lawyers for the government to handle is ridiculous anyway. So it makes complete sense for the IRS to target small businesses and regular people and not big corps. But people don't like this because it goes against the "big corp bad, small business good" religious belief.

antihero 4y ago
Also offshore accounting.
mschuster91 4y ago
> The idea that large corporations are rampant tax cheats is completely false. And yet, large corporations, especially banks, are continuously caught with blatant abuse of the tax code (e.g. the "cum ex" scandal in Germany, where banks outright looted the government) or their customers. The problem is that the fines are way too low. What does a large corporation care about a fine of even a billion dollars? Spread out over the time of the violation, that's petty cash, and as long as the execs don't have to go to jail, D&O insurance will pay any personal punishments.

Kranar 4y ago

When you control for population, high income individuals are more likely to be audited than the middle class: https://www.irs.gov/about-irs/irs-audit-rates-significantly-increase-as-income-rises https://www.irs.gov/about-irs/irs-audit-rates-significantly-... There is no article about it, but the same also holds for businesses. There are just soooo many more small to middle sized businesses compared to large corporations.