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>”they can get to audit people with money and skip the rest of the riff raff.” The IRS has no qualms with auditing people of average wealth. Each year they inv

>”they can get to audit people with money and skip the rest of the riff raff.” The IRS has no qualms with auditing people of average wealth. Each year they invest a substantial amount of time and effort going after waiters and other staff that work for tips. The rich usually have the money to defend themselves rigorously, whereas middle class folks tend to end up just paying the fines and the amount the IRS claims they actually owe.

masklinn 4y ago
That’s very much because the IRS doesn’t have the funds for complex legal action.
- mike_d 4y ago
  IRS collection agents already have the power to seize assets without a court. Letting them rack up legal bills too wouldn't generate a positive ROI.
pavlov 4y ago
Are you suggesting they should completely give up auditing middle-income taxpayers? That feels like demanding the police should stop all road traffic monitoring because it targets regular people who are just trying to get somewhere by car. If the law isn’t enforced for a particular group, it doesn’t exist for them. But completely even and fair enforcement is an ideal that’s usually impossible to reach — the traffic cops only catch a small minority of speeders and drunk drivers.
- cultureswitch 4y ago
  The analogy doesn't really work though. Deliberately investing less IRS money into checking low capital individuals doesn't actually cause damage if it means there's more high net accounts being investigated. There's tax waste in the system no matter what you do. The question is where it is preferable for this waste to occur. It is vastly preferable for the whole economy that the people who are most likely to get away with fraud are also the ones with the lowest net wealth.
- Jochim 4y ago
  If you see a car-jacking and a car with one of it's lights out you don't leave the first one to go after the second.
midoridensha 4y ago
Sounds like a good reason to eliminate tipping.
Amezarak 4y ago
Poor and middle class people probably really do cheat on their taxes a lot more. I used to wait tables. Not reporting most of your cash tips was absolutely standard - you reported the minimum amount necessary to equal minimum wage, so your employer wasn't required to make up the $7.25-$2.15 difference, and both of you had to pay less taxes. Some bigger companies, in collaboration with the IRS, started instituting "tip compliance" schemes, which do really suck in that they assessed your tip income to be a % of sales, regardless of reality. Additionally, tons of middle and lower class people use not tax software, but local "accountants" of varying quality. In the US, anyone can do your taxes for you. The selling point of these accountants is that they're going to get you back more than anyone else. Well, most people have fairly simple taxes, unless they own a business. There's not much they can do besides the standard deduction and child tax credits. So these accountants claim all sorts of deductions for which their client is not actually eligible. Sometimes they are "smart" and choose ones that are relatively hard to audit (e.g., mileage), sometimes they choose ones that are easy to audit (EITC). A lot of people get away with these for years or sometimes, seemingly ever. I have a close friend who did this type of thing for 10 years before finally getting caught. A wealthy person is paying a real accountant who is going to do things by-the-book. They're also more able to structure their wealth to reduce taxable income. Probably the most common fraud you see with wealthier people is small business owners claiming business expenses that aren't. Once you get into the ultra-wealthy, there's all kinds of entirely aboveboard games they can play.

masklinn 4y ago

That’s very much because the IRS doesn’t have the funds for complex legal action.

mike_d 4y ago
IRS collection agents already have the power to seize assets without a court. Letting them rack up legal bills too wouldn't generate a positive ROI.

pavlov 4y ago

Are you suggesting they should completely give up auditing middle-income taxpayers? That feels like demanding the police should stop all road traffic monitoring because it targets regular people who are just trying to get somewhere by car. If the law isn’t enforced for a particular group, it doesn’t exist for them. But completely even and fair enforcement is an ideal that’s usually impossible to reach — the traffic cops only catch a small minority of speeders and drunk drivers.

cultureswitch 4y ago
The analogy doesn't really work though. Deliberately investing less IRS money into checking low capital individuals doesn't actually cause damage if it means there's more high net accounts being investigated. There's tax waste in the system no matter what you do. The question is where it is preferable for this waste to occur. It is vastly preferable for the whole economy that the people who are most likely to get away with fraud are also the ones with the lowest net wealth.
Jochim 4y ago
If you see a car-jacking and a car with one of it's lights out you don't leave the first one to go after the second.

midoridensha 4y ago

Sounds like a good reason to eliminate tipping.

Amezarak 4y ago

Poor and middle class people probably really do cheat on their taxes a lot more. I used to wait tables. Not reporting most of your cash tips was absolutely standard - you reported the minimum amount necessary to equal minimum wage, so your employer wasn't required to make up the $7.25-$2.15 difference, and both of you had to pay less taxes. Some bigger companies, in collaboration with the IRS, started instituting "tip compliance" schemes, which do really suck in that they assessed your tip income to be a % of sales, regardless of reality. Additionally, tons of middle and lower class people use not tax software, but local "accountants" of varying quality. In the US, anyone can do your taxes for you. The selling point of these accountants is that they're going to get you back more than anyone else. Well, most people have fairly simple taxes, unless they own a business. There's not much they can do besides the standard deduction and child tax credits. So these accountants claim all sorts of deductions for which their client is not actually eligible. Sometimes they are "smart" and choose ones that are relatively hard to audit (e.g., mileage), sometimes they choose ones that are easy to audit (EITC). A lot of people get away with these for years or sometimes, seemingly ever. I have a close friend who did this type of thing for 10 years before finally getting caught. A wealthy person is paying a real accountant who is going to do things by-the-book. They're also more able to structure their wealth to reduce taxable income. Probably the most common fraud you see with wealthier people is small business owners claiming business expenses that aren't. Once you get into the ultra-wealthy, there's all kinds of entirely aboveboard games they can play.