I.R.S. Tax Fraud Cases Plummet After Budget Cuts
nytimes.com
nytimes.com
As far as purposefully starving your own government of all funds and then triggering a collapse of society, it sure seems like we're about to find out.
> The result is huge losses for the government. Business owners don’t pay $125 billion in taxes each year that they owe, according to I.R.S. estimates. That’s enough to fund the Departments of State, Energy and Homeland Security, with the National Aeronautics and Space Administration tossed in for good measure. Unlike wage earners who have their income separately reported to the I.R.S., business owners are often on the honor system.
Tax Evasion is around 40 times the IRS budget and gets worse with lowered enforcement as the cost / benifit heavy favors evasion.
I think the person you're replying to means "violated the tax code in a minor and non-malicious way" whereas you mean "literally did not violate the tax code at all".
That's for a reasonably typical (and by no means aggressive tax positioned) MFJ + 2 kids return.
Considering that anyone who actually looked at the tax packet should have figured out immediately that the only fault was a mistranscription in the code, they must have wasted quite a bit of money to gain back ultimately nothing.
Thankfully I had records and an accountant, but a very stressful situation to find yourself in.
A notice is not an audit. If you're being audited, you'll know. The IRS examiner auditing you will make sure you know who he/she is, and they will be your primary contact with the agency for several months.
I owned a business that was randomly selected for an NRP audit a few years back. Spent 35 grand on CPAs and defense. After 4 months of an "up to the elbow" exam of our books, received this from the IRS:
"After our audit, we are making the following changes to your return:
"
...that was it. Nothing. No changes. Not even embarrassment or "lol just doing my job, them's the breaks kid" attitude. A total goat rodeo, the entire process. Imagine having to justify every cent on the books in OR out -- for a $2MM revenue business -- 3 years after the return was filed. Seriously impossible. Worse, just before the above letter, we were offered a settlement offer from the IRS for $20K -- to make them just go away. We declined.
Spending more, ideally, should also mean spending on simplification. Making it easier for both people and businesses to pay their due, and costlier not to. Reducing the externalities, not increasing them.
There are evil implications should we judge the effectiveness of tax collectors purely on the basis of cost/gain. We don't want a situation where the IRS only ever goes after easy cases. The people who hide the most money have, by definition, the resources to hide it well. If you want the IRS to go after the big fish, they need the budget to do so. We don't want them resorting to drift-net tactics, only scooping up the easy/small fish.
However, you have a good point about going after big fish, because those are the ones where the gov't is losing the most money, most likely. Some drift-net tactics are OK, where you use some random spot-checking to make sure the smaller fry aren't cheating badly and scare the rest of them into being honest, but don't expend a lot of resources on it because you won't get back the money you spend. But yes, I agree, going after the big fish should be the primary strategy, even if it is much more difficult.
I take it you have never lived in a "police state". I have (middle east). Deterrence is how law works in a modern society. We cannot catch everyone and so must rely on a bit of fear. Fear of being caught it why we obey laws with which we disagree. I personally may think the speed limit on a road is ridiculously low. But that limit wasn't created by the police. I obey it because I don't want to pay a fine, not because I live in a police state. In a police state rules don't matter. I'd get the speeding ticket regardless of how fast or slow I was driving.
A real police state is one where the police both enforce and write the rules, where they are no longer under the control of legitimate government. The IRS is nowhere near that. It remains totally subservient to the elected government. Its budget comes from an external source. Allow it to self-fund and that leash is gone.
I think there's also a sense of fairness. I wouldn't like obeying a law if I knew everybody else is ignoring it and getting away with it. I'd be happier following it if I thought everybody else was. You wouldn't want to be the only bottlenose dolphin that didn't back-date your stock options.
You're comparing revenue on a per-producer basis to a much different number. There are support staff, programmers, benefits, buildings, etc. which all must be paid for too.
For what it's worth, this article from 2011 noting a 4:1 ROI. I'm not sure where 1.2 came from, but I was unable to find it after searching.
https://www.cbpp.org/research/federal-tax/irs-funding-cuts-c...
_ The Treasury estimates, for example, that every additional $1 invested in IRS tax enforcement beyond current levels would yield $4 in increased revenue
This metric can be used only as the performance measurement not it's predictor.
https://www.mckinsey.com/industries/public-sector/our-insigh...
Yes, but money laundering probably isn't the type of nefarious activity that the GOP is most interested in accommodating. (With one very high-profile exception.)
So if you're one of those "Joe the Plumber" people who take time out of work to throw teabags at me on my way into the office in the morning: You are the middle class! I'm helping you!"
https://www.theatlantic.com/business/archive/2011/09/what-pe...
"I'm Robin hood stealing from rich people" doesn't work for the people on the right who are more likely to complain more about the irs in the first place.
Joe the plumber who runs his own plumbing business and doesn't pay taxes is going to get audited as well and he's (rightfully) going to lose despite his position in the middle class.
This isn't "the bourgeois" stealing, it's anyone who deducts significant amounts of money, which is a broader/simpler message everyone can get behind. Every small business/individual contractor has the means to illegitimately write off tens of thousands of dollars.
But I'll add that every small business/contractor has the right to write off a lot of things, or portions of things that they use for business.
What sort of "promoting" of IRS tax audits and fraud cases do you think should be done?
Why are crimes for some people not crimes while crimes for others punished so harshly? How is that not unfair already?
Why? That's exactly what it is.
Meals, travel, vehicles, basically everything a regular person has to spend out of their own income to survive, these people get away with expensing as business expenses.
All I'm saying is that both should be treated equally, which ever option that ends up being.
For the thin margins, imagine a company that makes 2%. But they pay 30% tax. Suddenly they’re at a loss on every sale due to tax. So thry raise price. Except every component in their chain alos does this.
You’d probably also see a lot more vertical integration. No sale, no tax. Whereas separated companies have to pay tax every time thry deal withan outside company.
But the world is not vertically integrated. So this tax plan wouldmforce america to drop best practices and go for extremely inefficient methods.
Your plan for fairness would almost certainly destroy the economy.
The middle ground we have now is personal exemptions and the standard deduction, which gives single individuals $16,000 in Federal tax-free income. Which is fair-ish. Certainly it's more fair now than when only upper-middle class people with mortgages and high property taxes were able to itemize.
There is a reason no country in the world does OP’s proposal, or yours. They would turn things topsy-turvy.
This seems wrong. I would think you would only be able to deduct basics like food and housing, maybe vehicles, with limits. Admittedly, that does get complicated really fast. In fact, as a pastor technically working as a contractor, my dad was able to deduct housing expenses for his whole family. It's not entirely unheard of.
Also, I don't believe getting the government to pay you by deliberately incurring a loss works for business, so I don't see why it would for individuals.
It would indeed be an enormously complicated system. And for what benefit?
(Americans actually have one of the most deduction heavy tax systems in the world btw, including mortgage interest. In Canada we have almost no deductions of expenses from income tax. So our taxes are very simple. Complex taxes favour the rich, and require auditors)
https://en.wikipedia.org/wiki/Business_and_occupation_tax#Ma...
So a federal B&O scheme might work if the rate was low enough. Auditing a business would be massively simplified, no need to carefully check expenses and write-offs to calculate net income. Compliance would be much easier. The question is would gross income taxation create a bigger pie, and would that pie be big enough that a low rate would substantially tax revenues.
https://www.inc.com/manon-defelice/ceo-mom-expense-childcare...
Individuals shouldn't be able to misrepresent personal expenses as business costs, but the amortization of a $500,000 crane also isn't all that similar to needing to eat.
That's actually not true, and is in fact the point of the IRS auditor. Namely, that people are expensing these items as business deductions when they are in fact normal living/lifestyle expenses.
A partner at a law firm can easily get away with expensing 1 of their 2 luxury cars, 50% of their meals, 50% of their travel, their home computers and software, etc. Car companies even make SUVs and Crossovers that are slightly over 6000lbs so they can be deducted as 'working' trucks for white collar workers.
If it wasn't setup as the employer paying for 1/2 of it, do you not think that most workers would want to be paid 7.5% more to pay it?
However, those people are not getting away with expensing them, because the IRS has no statute of limitations on going after these sorts of issues (income tax returns which are fraudulent are not subject to a statute of limitations, which means that the related crimes aren't either). Basically, it's a timing issue of when they get punished for the tax evasion, though at some point the backlog gets big enough that they might have to triage out the smaller cases.
This seems like language specifically crafted to encourage an us vs. them view of taxation. Also, I notice the examples given are upper middle class/lower upper class, and not the top of top that evade the most taxes. Often legally, since there are so many massive tax loopholes that the richest get to legally avoid paying a share in proportion to the government goods and services they consume.
On some level it feels like punishing the poor for trying to emulate the wealthy, and the merely very wealthy (an interesting way of putting it) like lawyers and doctors often fall into the poor when you break it down to those who are truly rich or not.
On some level it feels like punishing the poor for trying to emulate the wealthy,
Let's get things straight: they're being punished for breaking the law, or more specifically, for fraud. The fact that they want to emulate the wealthy is irrelevant.
When the IRS is enforcing a corrupt law, it makes people who fear the corrupt law being enforced against them view the IRS as the bad guys. That it is the law only hurts the IRS's position in this. Until the IRS makes the truly wealthy pay their fair share, not their legal share, they will find themselves in a position lacking moral authority.
Put another way, yes those loopholes are legal, but so is reducing the IRS's budget until they aren't able to operate at all.
This isn't the IRS's job. This isn't within their authority. Under these conditions, the IRS can't ever be in a position of moral authority.
Is it possible that you may be blaming the IRS when blame might be better apportioned elsewhere?
You are right, which is part of the reason why there is a non insignificant part of the population that wants to disable the IRS and sees them as a threat.
Same as a police officer who is sent as set of drug laws to enforce that are crafted specifically to target minorities. The only winning move is to not play, and those who don't quit begin to be seen as opponents regardless of how much the individual doesn't like the laws they are enforcing. Regardless of if you think this is a correct or incorrect way to view things, one has to accept that this does happen and it explains why entire communities turn away from the police and engage in self enforcement of their own rules and begin to craft policies such as 'snitches get stitches'.
The IRS is not enforcing a corrupt law, and the story Fox News doesn't want you to know about the IRS' conservative "charity" crackdown is that all of those charities were openly violating tax laws to the private inurement of their executives and challenging the IRS to do something about it, knowing that they had members of the House GOP in their pocket to prevent IRS action.
I wasn't speaking about that case. I was talking about how the tax law is currently written to favor some groups at the expense of other groups. And to be honest, this doesn't even have to be true. Only the appearance of it has to be seen by enough of the population for the reaction I describe to happen. Even if you think the tax law is completely fair, you would have to admit that significant portions of the population are not in agreement, and their views of the IRS will be driven by their views of the tax law.
This leaves that middle ground of people who don't earn traditional wages, but also don't earn enough to employ fancy tax evasion schemes. Instead, they literally break the law and hope to evade justice long enough for it not to matter.
The key lies in the awkward distinction between tax evasion and using the tax system to minimize your tax liability. They look pretty damn similar to most people. But they're different in a very important way to the IRS - evasion is illegal and minimization is not.
And indeed, many of the examples given will likely be settled under audit instead of criminal cases; Wrote off jet skis? Oh, that isn't allowed, but I used them for business meetings, to show clients 1st hand example policies; limited criminal intentionality there.
The only ones who benefit from this state of affairs seem to be people who have no intentions of filing taxes or can afford to hire other people to do it. Meanwhile the average Joe has to deal with hour long wait times, online services that do not work, month long correspondence chains that lead nowhere. Obviously business like Quicken, HR Block, etc make a lot of money off this inefficiency since they can offer a service charge to save you the headache.
It is a shame because in my experience as an accountant some local/state department of revenues are really well run and super convenient.
It is also a shame because a lot of talented people work in the IRS forensics department which in my opinion is one of the coolest jobs out there.
It doesn't, and they know that. A classic tactic is to underfund a thing you don't like, then point to it failing as an excuse for killing it outright.
A feature gets a crippled UI that makes at awkward and hard to use or even discover. Then a few months later the feature is removed because stats are showing it doesn't get used.
I've seen this assertion made online a few times, but have never seen any actual examples. Are there examples that you're aware of at the federal level? Or maybe a couple at the state level? Just curious...
https://www.google.com/search?q=conservatives+starving+gover...
You don't need examples when you can hear it straight out of the horse's mouth:
"I'm not in favor of abolishing the government. I just want to shrink it down to the size where we can drown it in the bathtub." -Grover Norquist, founder and president of conservative anti-tax organization Americans for Tax Reform
The same thing has happened to (other) law enforcement creating downward spirals of trust in high crime areas. The solution in both of those cases is making reforms to restore trustworthiness and successful pursuit of heroic causes to get people to fund them more. Sadly said option is seldom taken.
They've decreased the sampling rate of the measuring instrument, and cut down on the resolution by cutting a necessary input, (operating funds).
So it is a fairly foregone conclusion that a task which is heavily throttled by manpower and outdated infrastructure will lose efficacy, thereby generating lower metrics.
I can see a couple different ways to handle it. Some incredibly controversial.
A) Increase budget until we start seeing the point of diminishing returns getting out of hand.
B) Say screw it, make returns public record, open access to everyone, and either crowd-source or deputize people on a voluntary basis to help sift through the data to root out the worst offenders for further scrutiny by the what few meager resources remain.
Something has to give, and it is fairly obvious to me at least that the non-institutional taxpayer is getting handed the short-end of the stick.
Plus, it'll give companies a taste of what having their "personal data" all agglomerated in one place in front of God and everyone is like for your piece of mind.
No matter what happens, however, I'm not expecting much political will to actually remedy the problem due to a reticence to bit the hand that feeds that is industry donors.
> Password Rules:
> 1) At least 8 characters long.
> 2) Must contain at least one numeric and one special character (!@#$%&). (and asterisks, which is ruining formatting here)
> 3) At least one uppercase and at least one lowercase letter.
My standard password pattern* has a different special character in it, so now I'm locked out for 24 hours because I can't remember what substitution/alteration I made! It kills me when "password requirements" purportedly for security are more restrictive on one site than the majority of others. I also infer the sites are rarely updated.
*I'm implementing Dashlane at work. To date, having a unique password for every site/service has felt secure.
As long as my google 2fa isn't compromised, I think this is safe.
This. There will be more crime. Or at least, laws will be enforced disproportionately on vulnerable because its the vulnerable who don't have the resources to fight them.
Suppose the number of people cheating on their taxes remains perfectly constant, but that the IRS gets less money to pursue them. Then there will be fewer tax fraud cases, but the exact same amount of tax fraud.
"The roots of IRS go back to the Civil War when President Lincoln and Congress, in 1862, created the position of commissioner of Internal Revenue and enacted an income tax to pay war expenses."
https://www.irs.gov/about-irs/brief-history-of-irs
> You are the middle class! I'm helping you!"
What do you expect someone working for the IRS to say? They are unconstitutionally robbing the middle class blind?
What part of the constitution are they violating?
The original constitution.
Amendments trump the original.
> The Congress, whenever two thirds of both Houses shall deem it necessary, shall propose Amendments to this Constitution, or, on the Application of the Legislatures of two thirds of the several States, shall call a Convention for proposing Amendments, which, in either Case, shall be valid to all Intents and Purposes, as Part of this Constitution, when ratified by the Legislatures of three fourths of the several States, or by Conventions in three fourths thereof, as the one or the other Mode of Ratification may be proposed by the Congress; Provided that no Amendment which may be made prior to the Year One thousand eight hundred and eight shall in any Manner affect the first and fourth Clauses in the Ninth Section of the first Article; and that no State, without its Consent, shall be deprived of its equal Suffrage in the Senate.
EDIT: for those wondering the part that was unconstitutional was that the income tax is not apportioned with respect to representation.
https://en.wikipedia.org/wiki/Sixteenth_Amendment_to_the_Uni...
Though part of me wonders if we would not have a more equitable system by apportioning the federal tax burden out to the states to collect for it. It'd certainly simply the lives for a bunch of Americans.
Under the Articles of Confederation the Federal government was funded (or not funded, as was the case) by the states directly. It's the biggest reason we ended up with a self-funded Federal government under the subsequent Constitution.
So the Sixteenth Amendment isn't "we can collect income tax", it's "we can do whatever we want with collected income tax." Which makes the tax protestors' arguments that the Sixteenth Amendment wasn't actually properly passed utterly hilarious.
So far, the results have been widespread abuse, especially targeting people who don't have the means and clout to fight back using the legal system.
No thank you.
Alternatively, the whatever governing body that currently keeps IRS in a budget could just hand off extra money if IRS is recovering more money than it spends. But based on your logic wouldn't that also give the IRS the incentive to fabricate more tax crimes? If they knew their budget would increase the more they recover?
The corollary to not funding IRS based on how much they can recover would be to systematically reduce the IRS budget each time they recover a sum of money from owed taxes. Only then the IRS are most certainly not incentivized to go after and to recover taxes left unpaid.
That doesn't make sense either.
https://www.npr.org/2017/10/27/560308997/irs-apologizes-for-...
"In October 2015, the Justice Department notified Congress that there would be no charges against the former IRS official Lois Lerner or against anyone else in the IRS. The investigation found no evidence of illegal activity or the partisan targeting of political groups and found that no IRS official attempted to obstruct justice”
They got their budget cut in retaliation for (perceived) partisan targeting by an administration on the same side as the groups they were auditing. That doesn't mean these groups weren't committing fraud, or just that they were committing fraud at a rate out of line with any other randomly selected group, just that the people who control the IRS's funding wanted to send a message to the IRS about how they should behave.
Or maybe the tax cuts made people more honest since their burden got reduced?
Reminds me of the stock market. You can assign whatever causality you like to changing prices.