Q- Who hides income from taxes? A- Those with incomes to hide

[Phoebe Loosinhouse]

This seems like a good time to discuss these issues.

Where does the IRS place most of their enforcement might? What income bracket is the most scrutinized and audited? Where do the most penalties and interest charges come from?

[happyslug]

1. Over the last few years it has been people get the Earned Income Credit

When the GOP controlled the Congress, they would try to increase the number of Audits of people who were getting the Earned Income Credit, while cutting back on other audits. The cut back on Audits started with Reagan, when the IRS was told by Reagan to disband its Audit Teams that use to go after large corporations. Ever since Congress has refused to increase funding for IRS Audits (Except in the case of the Earned Income Credit).

One last comment, the biggest finding of the Audits of people applying for the Earned Income Credit was that they should have done so in previous years. This is NOT what the GOP Congress wanted to hear, they wanted to find a huge number of people getting the credit who were NOT entitled to it. In fact they had the IRA send out notices to people, clearly not eligible, to apply for the Earned Income Credit (my Mother received such a notice, she has NOT had a child under 18 since 1982, but she was sent the notice to apply, even through her only income was a pension, which also NOT counted as earned income for purposes of the Credit). Together, these notices to apply, and the increase number of Audits were to lead to reports of excessive number of people NOT eligible getting the Earned Income Credit, but since most people can read AND ALL 1040As and 1040 EZs are redone by the IRS as they are received, very few such ineligible people received the Earned Income Credit.

What is needed is a return to the Audit teams of the 1970s but that requires a return to the rule that 5% of the returns to the IRS are audited by the IRS (It has been under 2 % since Reagan, even with the increased funding for auditing people who applied for the Earned Income Credit). The IRS had a rule in the 1970, for every dollar it spent on auditing it recovered $10. Most of this was when their audited Corporations and other high income people (An IRS agent once told me that many agents would like to see the Income Tax eliminated for people making less then $50,000 for the time to do the IRS Forms, to review them etc cost more then what the Government was getting from people who filed and earned less then $50,000, he said lets go after the people where who has the money to collect, those making more then $50,000 and this was in the 1970s when Median Income was $25,000 NOT the $42,000 it is today).

The GOP will opposed this, for every since the Income Tax was first passed in 1912 (and revamped under Hoover in the early 1930s) it has been a policy of GOP to make sure as many people as possible pay Income Taxes EVEN IF THAT MEANS IT COST THE GOVERNMENT MONEY TO COLLECT THE TAX FROM LOW INCOME PEOPLE. The reason for this is that the GOP fear that if most people no longer pay an Income Tax, they would pressure politicians to increase the Income Tax. AS long as the poor and working class are paying the Income Tax the GOP can use the Income Tax as a propaganda tool to make sure the rates are kept low (And audits are kept to a minimum). I am sorry, I agree with the IRS agent I talked to, I can NOT remember his name, but collecting Income taxes on people earning less then twice median income is NOT worth the effort. Lets adopt a rule that no income from any one earning less then twice the Median Income is taxable for Income tax purposes.