White House Boosts IRS Enforcement Funds in Budget

[Rose Siding]

WASHINGTON (Reuters) - The White House on Monday proposed a 7.8 percent boost in the Internal Revenue Service's funds for tax enforcement in its fiscal 2006 budget.

"The increase will provide additional resources to examine more tax returns, collect past due taxes and investigate cases of tax evasion," the Treasury Department said in a statement.

http://www.reuters.com/newsArticle.jhtml?type=politicsNews&storyID=7557483&src=rss/ElectionCoverage

[fryguy]

1. will they be targeting the wealthy and corporations which avoid $millions

or the poor and middle class who fail to itemize their travel and entertainment exemptions?

[Disfronted]

2. not sure what you mean

I am not familiar with "travel and entertainment exemptions" that relate to poor and middle class taxpayers. What is that?

Regardless, the IRS, if it focuses on the less wealthy, will stick with the Earned Income Tax Credit. Besides that, it generally goes after wealthier taxpayers because that is where the money is.

[w4rma]

6. Those tax laws apply mostly to small businesses owned by mostly middle

class folks.

[Disfronted]

8. Keeping records is part of running a small business. nt

[w4rma]

10. I see that you support going after small buisnesses on their taxes rather

than big buisnesses which have, recently, been paying *less* in taxes than the average person through loopholes and various kickbacks.

Correct?

[Disfronted]

14. That's not what I said

http://www.msnbc.msn.com/id/6532305/

But individuals aren’t the only targets. On the corporate side, the IRS is shifting its watchful eye from small businesses, which Alexander calls a hotbed of tax avoidance, to large corporations.

More than 4,400 companies with assets of at least $250,000 were audited in 2004. That's up 32.5 percent from last year. Put another way, the audit rate in 2004 was 40 percent, up from 30 percent in 2003. The audit rate for small businesses — or companies with assets less than $10 million — dropped 46 percent during the same period.

[w4rma]

19. It's what you seemed to imply with your focus on small buisnesses.

Also note this paragraph:
“It's hard to be any fewer audits of high income or low income taxpayers than the audits that they've had or not have over the past few years,” said Former IRS Commissioner Donald Alexander. “The IRS has been a toothless tiger and people know that.”

[Disfronted]

23. That is why I support this - it allows more audits of wealthy taxpayers

n/t

[w4rma]

26. I support this too, but I'm not convinced that's how it will be used.

Republicans tend to be lax on law enforcement against the wealthy.

[Disfronted]

28. So if the budget had cut the IRS you would have supported it? n/t

[MadHound]

3. Why the poor and middle class of course!

After all, they wouldn't dare touch the Chimp's base of "haves and have mores". Besides, it simply costs to much to take on the rich, they have money for lawyers and accountants and such. The poor and middle class now, well that's just like shooting fish in a barrel. With no money for legal or accounting help, these folks just roll over and pay whatever the IRS wants them to pay, if just to avoid mounting penalties.

What's so funny is that numberous studies have been done, and apparently no two people can get the same answer when presented with the tax information of a family of four. Gee, I guess that means that the IRS can pretty much hit anybody they want, since most likely the IRS won't have the same figure as the taxpayer. What a great racket.

[Disfronted]

5. I disagree

After all, they wouldn't dare touch the Chimp's base of "haves and have mores". Besides, it simply costs to much to take on the rich, they have money for lawyers and accountants and such. The poor and middle class now, well that's just like shooting fish in a barrel. With no money for legal or accounting help, these folks just roll over and pay whatever the IRS wants them to pay, if just to avoid mounting penalties.

You miss the idea of IRS audits. The IRS audits to get money. If Joe Blow has an AGI of $40,000, there is not a lot of money to be gained by auditing him. When auditing the poor and middle class, there are generally three causes:

1) The taxpayer errs in claiming the EITC
2) Something on the taxpayers return does not match what was reported to the IRS
3) The return is way out of whack (such as $40,000 in mortgage interest and only $50,000 income)

Note that 1 and 2 are pretty much automatic for the IRS to catch. The "audit" involves sending out a letter explaining the error and either billing the taxpayer or reducing the refund (with the appropiate steps outlined to challenge). So if your W-2 includes wages of $54,768, and you report $45,768, you will get audited and your return will be adjusted, likely with nothing more than a letter.

Most complex IRS audits are still of wealthier individuals and corporation, small business and other fiduciary or partnership arrangements.

What's so funny is that numberous studies have been done, and apparently no two people can get the same answer when presented with the tax information of a family of four. Gee, I guess that means that the IRS can pretty much hit anybody they want, since most likely the IRS won't have the same figure as the taxpayer. What a great racket.

This shows an ignorance of how IRS audits are done. The IRS (in the vast majority of cases) doesn't compute your tax from scratch and send you a bill for the difference; they simply take your calculations and challenge specific items, such as, "you left off a W-2", "that interest is not deductible" or "provide backup for medical deductions". Since the audits are focused on one or two items, it is fairly easy for a taxpayer to at least understand what is being challenged and provide the appropiate documentation or response. Keep in mind, also, most poor and middle class taxpayers do not have very complicated returns.

I'm surprised by the responses in this thread. I thought people would be peeved if funds for IRS enforcement were cut, since that would let more wealthier taxpayers off the hook.

[Bridget Burke]

9. Somehow, we doubt the "more wealthier" taxpayers will be targeted.

We've known Bushie & his pals a bit too long for that, I'm afraid.

[Disfronted]

12. Facts say otherwise

But the IRS has been increasing it's audits of higher income taxpayers. That is a fact.

I thought is a "reality-based" community?

http://www.msnbc.msn.com/id/6532305/

"

The Internal Revenue Service is gearing up for tax season. And while it may be a kinder, gentler IRS these days, the agency is still coming after you — especially if you make a lot of money. Audits overall are up 19 percent, but for the wealthier they’re a lot more frequent.

advertisement
That's the result of a new study by the IRS, which defines ""high income"" as over $100,000 a year. That target includes some relatively modest, two-income white-collar types.

The IRS checked their math 40 percent more this year than last year, bringing the total number of audits to 195,200 individuals. That's a 74 percent increase over 2002 but actually well below the last peak period in 1996 when 210,000 individuals were audited.

“It's hard to be any fewer audits of high income or low income taxpayers than the audits that they've had or not have over the past few years,” said Former IRS Commissioner Donald Alexander. “The IRS has been a toothless tiger and people know that.”

But individuals aren’t the only targets. On the corporate side, the IRS is shifting its watchful eye from small businesses, which Alexander calls a hotbed of tax avoidance, to large corporations.

More than 4,400 companies with assets of at least $250,000 were audited in 2004. That's up 32.5 percent from last year. Put another way, the audit rate in 2004 was 40 percent, up from 30 percent in 2003. The audit rate for small businesses — or companies with assets less than $10 million — dropped 46 percent during the same period.

"

[Occulus]

33. ok, I understand what you're saying, and I don't really disagree, but

what needs to be understood here is that prior actions of this administration are no longer any indication of future actions, if indeed they ever were in the first place.

We can't trust Bush* to not go after the smaller guy, given the chance. It's what he's always been about.

[MadHound]

16. Sorry friend, but some much more knowlegable people on this issue

Disagree with you. You can check here<http://www.independent.org/newsroom/article.asp?id=92>
<http://www.govexec.com/dailyfed/0402/041802cdam2.htm>
<http://www.magislaw.com/articles/07011020028Morvillo.pdf#search='irs%20audits%20the%20poor%20disproportionately'>
<http://www.minutemanmedia.org/LANCELOT%20120804.htm>
<http://www.house.gov/apps/list/speech/ny15_rangel/eitcltr043003.html>

And on and on the list goes, each showing that yes indeed, the poor and middle income are geniunely subjected to more audits, both in number and proportion, than the wealthy and businesses. While there have been some modest efforts made to correct this situation, it is still clear that the burden of audits falls on the lower classes, and for much the same reasons as I mentioned above.

[Disfronted]

22. Is the IRS supposed to ignore obvious errors?

In every link you posted, the reason for the higher audit rates is the EITC. The reason the EITC is audited so often is it is easily messed up, easily checked and easily corrected by the IRS.

I am confused. Are you saying the IRS should ignore mistakes and fraud in people claiming the EITC, when checking such returns is simple, cost effective and ensures the law is administered as it was meant to be? To me, that is like saying that the IRS should not check the math on returns, since that might ensnare more low income filers who prepare returns by hand.

[MadHound]

24. Yet you are ignoring what else these articles are saying

That the IRS IS ignoring mistakes, fudges and outright lies committed by the wealthy and well connected, instead, focusing on the easiest targets, the poor and middle class. Go reread these articles friend, you missed a few things.

[Disfronted]

27. I agree with the rest of the articles

The IRS is already auditing the EITC pretty effectively, but a lack of funds keep it from going after wealthier taxpayers as much as it needs to. Now the IRS is getting a badly needed increase in funds, and people are criticising the action. I don't understand it.

All those articles basically seem to say:

1) The IRS audits the EITC too much (I disagree)
2) The IRS lacks the funds to audit the wealthy effectively (I agree)

The IRS still focuses the majority of non-EITC audits on the wealthier taxpayers, and more funds will allow it be more effective.

[Massachusetts]

35. We've been Tied to The Whipping Post for a long time

"I'm surprised by the responses in this thread. I thought people would be peeved if funds for IRS enforcement were cut, since that would let more wealthier taxpayers off the hook".
:hi:

[maxrandb]

34. Of Course Not! Don't You Remember * himself said

"the wealthy find a way not to pay their taxes anyway, so why should we even bother taxing them", or words to that effect.

However with guns the mantra is always "let's enforce the laws we have on the books".

Anyone posted this over at "FeebleRepublic"? I'd love to get there take on their "messiah" added more money to IRS enforcement. I imagine most of them would spin their brains like a Wareing Blender trying to explain how wonderful this is.

God I hate these fucking people.

[satya]

4. Bumping up the budget to harass political dissenters?

Heard something on AAR about this the other day--people who had been targeted for audits for no apparent reason, but who happened to be vocal opponents of the * regime...

[Emboldened Chimp]

7. Of the following, who do YOU think the IRS will target?

A. Ken Lay

B. Bernie Ebbers

C. John Q. Public

D. None of the above

[Lorien]

11. There was a report last year

about the IRS targeting those who made under $120,000. Audits for that group (most of us) have skyrocketed, while audits of the wealthy (those making $450,000 a year or more) have remain unchanged.

[Emboldened Chimp]

13. Not surprising in the least

The government no longer works for the people, but against them.

[Disfronted]

15. Do you have a link? n/t

[Mel]

18. for one thing

if you've been paying any attention to the debate that's gone on in the Senate you would know that the Republican side of the isle hates the EITC and wants to audit the people that file using EITC more.

Also, read
http://www.bainvestor.com/Perfectly-Legal-Review.html
Perfectly Legal: The Covert Campaign To Rig Our Tax System To Benefit The Super Rich—And Cheat Everybody Else

By David Cay Johnson

In his new book, Perfectly Legal: The Covert Campaign To Rig Our Tax System To Benefit The Super Rich—And Cheat Everybody Else, Pulitzer Prize-Winning Reporter David Cay Johnson argues that the American tax system has been corrupted to benefit the super rich.


<snip>According to Johnson, over time, the IRS has been remade so that it seldom punishes the super rich who fail to pay their taxes. In some cases, it actually allows them to commit obvious tax fraud. Rather, Johnson tells us that the IRS has a political mandate to pursue more audits against the working poor and the middle class.


Johnson tells us the working poor who claim the earned income tax credit are audited at the rate of one in every 47 filers as of 2000. Johnson says the working poor are more heavily audited than businesses with assets between $1 million and $5 million dollars.


Further, while audits of the working poor have increased, Johnson writes: "The IRS also cut back sharply on audits of the types of business entities favored by the rich. One is the subchapter S corporation, which is favored by many doctors, lawyers, and other professionals because it does not pay taxes directly, but instead passes tax liabilities to their owners. Their audit rates fell to one in 233. Sole proprietorships, businesses that file a schedule C on an individual tax return saw their audit odds plummet to one in 83 if they had $100,000 or more of revenue, but those with revenue of less than $25,000 had a much greater chance of being audited, one in 37."</snip>

[Disfronted]

21. The EITC distorts audit stats

You miss the point about the audits of the EITC. The reason it is so often audited is that honest mistakes and outright fraud are both rampany and obvious. To be fair, there are also many mistakers made by eligible people not claiming the EITC as well, which the IRS will actually try to spot and correct for the taxpayer.

But the IRS simply cannot ignore an obvious error in claiming the EITC. If, for example, a taxpayer claims the EITC when the filing status is "married filing separately", the mistake is so obvious the IRS would be negligent in not "auditing" and correcting the return.

The reason the audit rate is so high for the EITC is because the error rate is high as well. This is not the taxpayers fault, as the credit is confusing and difficult to understand, and aimed at those who often have the least expertise at tax matters. But the IRS has the responsiblity to make sure all those who are eligible for the credit receive it, and those who are not do not.

[Bridget Burke]

29. So the EITC is the main target? Remember "Lucky Duckies"?

The EITC is an important theater of operations in the war on the working poor, because if you're going to start taking money away from poor people, it's prudent to start merely by giving them less.

The Bush administration increased eligibility in 2001, but in the last two years it has done nothing to expand the EITC while becoming steadily more interested in policing fraudulent claims. Nobody likes tax fraud, of course, but EITC fraud causes the Bushies much greater offense than any other kind. EITC claims are twice as likely to get audited as other individual tax returns, even though in dollar terms EITC cheating accounts for a mere 3 percent of all IRS cheating.

The IRS is also starting to impose elaborate procedural changes that will require recipients to submit documents and even affidavits before they can collect any cash.

http://slate.msn.com/id/2083932/

So, the IRS will be putting most of their effort into ensuring the EITC is minimized--although it accounts for such a small percentage of cheating.

[Disfronted]

30. The IRS puts relatively little effort into catching EITC cheaters

I agree the documentation procedure is nonsense, and a waste of money. I am 100% against that.

But, yes, the EITC accounts for 3% of fraud, but it is usually so obvious that is likelier to get audited.

Here is an analogy - arithmetic errors only account for a tiny fraction of all errors, but they have a 99% chance of causing an audit. Do you understand why? It's not because the IRS is targetting the socio-economic group where arthetic errors are made.

[Mel]

31. you missed my point

let me be more specific the debate on the Senate floor for increasing the funding for more IRS audits 'specifically' was for auditing EITC filers. I heard it with my own ears! The Republican Senators talking about this where rather obvious in their contempt for the poor/low income getting this tax credit and yes they do see it as welfare.


BTW I've filed using EITC and it just isn't that hard sure the poor don't have accountants like the more well off that's true but it still doesn't mean they should be audited more than the well off.
What I think, that the more well off aren't getting audited as much is 'on purpose' let's face it in America the more well off can buy access to be heard that's the bottom line. Thing is the top 2% are heard the most and reaping the benefits off of our backs.

According to the numbers One in every 47 for the EITC filers, revenue of less than $25,000 had a much greater chance of being audited One in 37, compare that to One in every 83 or One in every 233 for the more well off I think that backs up my point.

People are going to cheat at all levels of income so answer me this why aren't they audited at near or close to about the same rate? I think it's because it's a hell of a lot easier to go after lower wage earners because they don't have the cash to fight back like upper income people do.
The poor have always been an easy target to take advantage of just take a look at all the other schemes used on the working poor in this country. Why should this be any different?

<snip>According to Johnson, over time, the IRS has been remade so that it seldom punishes the super rich who fail to pay their taxes. In some cases, it actually allows them to commit obvious tax fraud. Rather, Johnson tells us that the IRS has a political mandate to pursue more audits against the working poor and the middle class.


Johnson tells us the working poor who claim the earned income tax credit are audited at the rate of one in every 47 filers as of 2000. Johnson says the working poor are more heavily audited than businesses with assets between $1 million and $5 million dollars.


Further, while audits of the working poor have increased, Johnson writes: "The IRS also cut back sharply on audits of the types of business entities favored by the rich. One is the subchapter S corporation, which is favored by many doctors, lawyers, and other professionals because it does not pay taxes directly, but instead passes tax liabilities to their owners. Their audit rates fell to one in 233. Sole proprietorships, businesses that file a schedule C on an individual tax return saw their audit odds plummet to one in 83 if they had $100,000 or more of revenue, but those with revenue of less than $25,000 had a much greater chance of being audited, one in 37."</snip>

[Lorien]

25. I wish I did

It was posted here in earlier last year. I asked my tax accountant about it, and she said that they had seen an increase in audits for their less well heeled clients over the past three years.

[truebrit71]

20. C.

Without a doubt.

[NYC Liberal]

17. Why bother? I mean, the rich get around the tax laws anyway...

Or so sayeth Herr Boosh.

[Triana]

32. And just WHOM will they be targeting?

The Poor, middle class, small business, and 'liberal' organizations such as Working Assets or the ACLU. Are they going to audit IBM, GE, or Time-Warner?

I DOUBT IT!

A**holes.