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Comment by wonderwonder | Hacker News Reader

They are creating new techniques to tackle people potentially avoiding paying taxes on crytpo. By and large, this is not going to yield a ton of money as its likely small traders, just trading and hoping to avoid paying on what are likely small to no profits. There are obviously going to be exceptions.

They could instead just open up the Panama papers and target people and companies hiding billions. The issue is that this would then target those with money and power something the IRS appears loath to do. So instead the rich continue to pay a far lower proportion of taxes than they actually owe and the poor and middle class get hammered.

The IRS already openly admits to not auditing the rich as its too complicated and to instead going after the less wealthy.

No wonder the rich get richer...

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Humphreys County, Mississipp is one of the poorest and the most audited county in the US - https://www.marketplace.org/2019/04/15/study-where-irs-audit...

Also ~75% black, but I'm sure that does not factor into the IRS' decisions...

It seems to be mostly targeting the poor, in particular the Earned Income Tax Credit, because Republicans hate it and constantly pressure the IRS to target people who use it.

If this true ? Can politicians target taxpayers based on what perfectly legal activities they do ? For example can Trump ask IRS to target say H1B employees ?

The IRS publicly says that it audits poorer taxpayers at a higher rate because they require less manpower to audit.

https://www.propublica.org/article/irs-sorry-but-its-just-ea...

Sure it's easier, but it seems like the return on investment must be lousy. Is it really easier to audit 1 million people who end up owing an average of $100, or 10 people who end up owing $20 million?

I would bet that it's much easier to predict costs in both time and money for auditing a poorer person than a wealthier one.

Is this the "run the government like a business" I keep hearing so much good stuff about?

You can just as easily file this one under "every organization has finite resources to allocate".

Depends on the fee structure.

If those poor people end up owing $100, but the IRS can slap $500 of wrongful filing fees on them, and then come up with a 15 year payment plan at 30% interest, they get $25k.

Rich people would just pay the fine and move on, or claim bankruptcy and become rich again in a few years.

Can a private (or corporate) entity take the IRS to court?

As a non-American, I always assumed a big reason of why the rich aren't taxed/audited as much was because tying the funds up in infinite legality was cheaper than actually paying taxes.

The IRS cannot charge a 30% interest rate. They charge short term plus 300bps. There's some other fees, but they cap out too.

The difficulty of auditing someone is totally dependent on the complexity of their tax return. If someone just adds up the numbers wrong and pays the wrong amount of tax, how hard is that to catch? Whereas if someone reports thousands of different stock transactions over a five-year period, and those don’t quite add up, that could easily be a more expensive audit than a thousand automated ones.

also more likely to be breaking the law

As long as they're all legitimate audits, that seems like a reasonable way to prioritize work. I too tackle the lower-hanging fruit first when I begin a task. If this is the methodology that generates the most revenue, then it is generating the most potential benefit to those who rely on government services -- largely, those drawing SS/Medicare/Medicaid/SNAP/EITC.

This report is based upon data from during the Obama administration only.

"Audit rates were calculated per 1,000 income tax filings, over the four tax years from 2012 to 2015."

> For example can Trump ask IRS to target say H1B employees ?

I anal but my guess is no, at least not as an order, and at least not in a way that is consistent with our laws.

> In 2013, the United States Internal Revenue Service (IRS) revealed that it had selected political groups applying for tax-exempt status for intensive scrutiny based on their names or political themes. This led to wide condemnation of the agency and triggered several investigations, including a Federal Bureau of Investigation (FBI) criminal probe ordered by United States Attorney General Eric Holder.

https://en.wikipedia.org/wiki/IRS_targeting_controversy

However, sitting senators and representatives can write letters to the IRS or any federal agency and my understanding is the people at the federal agency actually read those letters.

Here's just an example I found on Google search

> Senate Finance Committee Ranking Member Sen. Ron Wyden, D-Ore., and House Ways and Means Ranking Member Rep. Richard Neal, D-Mass., today questioned whether the Trump administration is wrongfully pressuring the IRS to produce 2018 withholding tables that would result in systematic underwithholding of federal taxes from taxpayer earnings. In a letter to Acting IRS Commissioner and Assistant Secretary for Tax Policy David Kautter, Wyden and Neal asked about interactions between Trump officials and the IRS regarding the development of the tables, which are expected to be released in the near future. If an undue amount of taxes are underwithheld by employers now, millions of hardworking Americans will owe taxes next April instead of receiving a tax refund.

https://www.finance.senate.gov/imo/media/doc/010818%20IRS%20...

https://www.finance.senate.gov/ranking-members-news/wyden-ne...

I don't see why not, it appears nobody is held accountable anymore

Not directly, but certain IRS ranking officials have targeted specific groups in the past for both administrations.

However, there is also rampant fraud with the EITC. Similarly with the Child Tax Credit, it is likely because it is refundable, meaning that you receive a check after your taxes are paid rather than a deduction which can only bring your liability down to zero. Also auditing these are fairly trivial and usually only done through the mail so they can send them out en masse based on red flags.

> "The IRS estimates that 22 to 26 percent of EITC payments were issued improperly in Fiscal Year 2013. The dollar value of these improper payments was estimated to be between $13.3 billion and $15.6 billion."

https://www.washingtonexaminer.com/report-massive-fraud-stil...

https://www.eitc.irs.gov/tax-preparer-toolkit/frequently-ask...

> Republicans hate it

It was created under the Nixon administration. The biggest expansion came under Reagan and he called the EITC the “the best anti-poverty bill, the best pro-family measure, and the best job-creation program ever to come out of the Congress.” George W. Bush administration also increased the benefits.

I don't think anyone would be that far out of order arguing that the Republican party of today and its principals are very different than those of a decade ago. Your mileage may vary on a case by case basis.

The EPA was also created under Nixon, good luck arguing that today's republicans don't hate it

https://www.businessinsider.com/how-trump-administration-has...

How does changing the purview of the EPA say they "hate" it? Seems like few argue that it has no utility, and many of the complaints are legitimate, particularly complaints about ludicrous misapplication of WOTUS to small agricultural ditches and artificial pools.

https://www.washingtonexaminer.com/trump-says-hed-eliminate-...

I might have somewhat agreed with your assessment 10 years ago, but now?

I'd say that the EPA is doing roughly the right things right now, and they've been doing some groundbreaking stuff lately in collaboration with NASA. It's not like they've been shut down. The CAFE regulation schedules are being reviewed, might be a good opportunity for somebody to improve the model for them to benefit good actors in the broad public and in industry, while it's up for grabs; even if in the short run the targets are less aggressive.

Obviously the President has said some broad, sweeping things about the EPA, but in practice has not done anything near what he said he was interested in. I think at one point he literally said he'd abolish the whole agency, but that was before he'd been nominated, and obviously no such attempt has been made. At the end of the day, if it doesn't get in the way of the populist policies, it seems like the President and his administration are not interested in gutting the EPA; but if you push the EPA into the line of fire, sure, they'll take some hits.

> “Since the 1990s, Republicans in Congress have put a lot of pressure on IRS to prevent payments going to people who didn’t deserve the credit or who didn’t qualify for the credit,” Kiel said

It's part of the war on "Welfare Queens".

It would be easier to condemn this crusade if the examples of actual welfare queens weren't so infuriating. It is a phenomenon dripping with palpable entitlement, at a scale that most people are familiar with.

The myth of the "welfare queen" is an ugly racial stereotype based on a single person, and bears very little relationship to the reality on the ground.

https://newrepublic.com/article/154404/myth-welfare-queen

It's not a myth, it's just that the extreme cases people are thinking of are relatively few and far between.

I'm not making any case for it being somehow common, just that when people see the genuine article, which obviously exists, it's pretty repulsive. It's not that they're all getting rich or even middle class, and you can't really get rich off this stuff, it's that they get off on getting something for nothing. "The Queen" is not the only welfare queen because New Republic wrote a story about one lady.

There are also far less repulsive, but very disappointing misuses of public welfare systems. I know a lady in my city who receives a housing benefit which could buy her a rental unit here, but she spends it on hard drugs instead. You can follow the money from these programs from the public coffers to the wallets of illicit drug dealers and traffickers. An argument could be made that paying more attention to how that benefit is paid out, would give some people a better chance of seeking treatment rather than buying more drugs.

And no, it's not based on "a single person"; it takes a profound kind of class ignorance to say something that ridiculous.

What do you mean war? Are you suggesting that the IRS should target people who "don't deserve or qualify for the credit"?

Maybe just let people claim it who shouldn't be getting it?

"Audit rates were calculated per 1,000 income tax filings, over the four tax years from 2012 to 2015."

You realize that this entire dataset is from the Obama administration, right?

"Audit rates were calculated per 1,000 income tax filings, over the four tax years from 2012 to 2015."

I mean isn't it possible that it is very poor due to rampant corruption?

> this is not going to yield a ton of money as its likely small traders

Thanks to said tax evaders keeping a public record of their evasion (and for those who used tumblers, money laundering), the investigative costs are also lower. (We also have no evidence that these are small fry.)

> they could instead just open up the Panama papers and target people and companies hiding billions

One, the IRS doesn't control the release of the Panama papers. That's the ICIJ, the consortium that collected and vetted the papers.

Two, Americans have been charged [2]. These investigations are expensive and resource-consuming. Simply having an entity in Panama doesn't mean someone is evading American taxes.

[2] https://www.icij.org/investigations/panama-papers/first-amer...

> Simply having an entity in Panama doesn't mean someone is evading American taxes.

Just like using a tumbler doesn’t mean the crime of money laundering is occurring, as that crime requires an illicit origin not the mere act of obfuscation

> using a tumbler doesn’t mean the crime of money laundering is occurring, as that crime requires an illicit origin not the mere act of obfuscation

Correct. But if someone (a) didn't pay taxes on cryptocurrency proceeds they (b) didn't declare after (c) using a tumbler, that's as pre-packaged a case as one gets.

Using bitcoin to purchase goods and services would be a taxable event, but is there really a clear case that using a tumbler is a taxable event? On what grounds?

I think their arguments is you went say eth->btc and then through a tumbler, they would be able to charge you for tax avoidance on the eth->btc (assuming you didn't declare this and pay the tax) and then money laundering on the tumbler because it was meant to obfuscate that.

There are legitimate reasons for wanting privacy/anonymity. Not everyone who uses a tumbler does so to evade taxes or launder money.

I think it would be better for plausible deniability to just use a coin that has default privacy built-in. That way no one can point to the fact that person went out of their way and spent money (transaction fees) to attempt a measure of privacy.

Read a couple of tax court rulings, IRS embarrasses itself all the time on overzealous stretches.

With non-reporting the IRS doesn't know how a taxpayer is categorizing a transaction. They wouldn't know if a transfer was a payment for a good/service with a capital gain or less required, or if a transfer was collateralizing debt to a third party that manages their collateral however they want which would not be a tax event, for example.

>The issue is that this would then target those with money and power something the IRS appears loath to do.

Ability to fight back makes one a less desirable target. We need to equalize access to courts so that wealth is not a factor.

The government shouldn't be picking who to prosecute based on ease of conviction. Wealthy criminals are just as guilty as poor ones.

Well it seems in the US that just being poor is a crime

If you could catch 10 child abusers or 1 child abuser within the next 2 months with your given resources, which would you choose?

We need to make it so that catching any of the 11 takes equal amounts of work, so when they pick the 10 of 11 to go after they rank it by severity of crime or other more reasonable factors than the criminal's wealth.

A better analogy would be: would you rather catch 10 thieves who stole $10 or one theif who stole $1,000,000?

If the metric employees (police, prosecutors, etc.) are judged by is how many criminals are caught, does the answer change?

For those employees maybe

Though I agree with your sentiment my understanding is that the Panama Papers had very little for the IRS to work with because the law firm in question, who were not interested in fighting the US government, actively avoided having US citizens as clients.

ahem, its resources...a billionaire can afford a team of highly skilled trial lawyers whereas gov orgs tend to have trouble with this...the main reason why Trump did not testify in the special prosecutor probe was that the gov team did not have an adequate amount of experienced trial lawyers on staff to take it to the Supreme court.

That is not the only example... financial crisis of 2008 and why no bank execs did time...same reason DOJ lacking exp trial lawyers on staff

Your argument appears to be that lighter tax evasion shouldn't be prosecuted as long as there are heavy tax evaders that haven't been prosecuted. There are no doubt people right now plotting highly technical 15-person bank vault heists, but I absolutely expect the police to investigate a B&E of my house.

In my experience the police don't investigate B&E's into people's homes that often or with any vigor.

That has not been my experience.

That probably depends a lot on whose house and where it is.

Twice for me. Both in lower rent apartment row houses in college in different locations. Tons of electronics stolen and I had the S/N for 80% of them and one firearm, cops didn't seem to care. On one instance I gave them the likely culprit. Which was someone I had known from the neighborhood that I saw looking in windows when I drove left the afternoon I got robbed, didn't think too much of it at the time; just thought he was trying hang out with friend and was trying to see if they were home.

My argument is that the rich have been evading paying taxes for decades and the IRS acknowledges this. They also acknowledge that they actively target the poor due to auditing the rich being difficult. I am sure politics and lobbying adds to that difficulty.

The current system is geared towards keeping the rich and poor where they are. I find it interesting that the IRS devotes resources towards targeting a new wealth source available to the poor while not dedicating those same resources towards auditing the wealthy. (I am in no way a crypto evangelist). One could argue that they are going after low hanging fruit, and I would not disagree but I would also argue that they are actively choosing to not target the rich with their limited resources.

I think you analogy is flawed, I would instead compare this case to the police hanging out in poor neighborhoods targeting house parties vs doing the same in rich neighborhoods as they may need to go the extra step of getting a gate code to the rich neighborhoods.

Especially since the IRS has come out and said they go after minor tax evasion more since going after the bigger fish requires more money and resources. The IRS also has it’s budget decrease year after year.

It’s not like going after the bigger evaders would yield bigger fines and maybe lead to bigger budgets.

>Your argument appears to be that lighter tax evasion shouldn't be prosecuted as long as there are heavy tax evaders that haven't been prosecuted.

I think the argument is more along the lines of: "Something is wrong if the police spend zero or minimal effort investigating major burglaries (when they have the resources to do so, as evidenced by their investigations into lesser burglaries). This lack of investigation incentivizes major burglaries by those who have the means to do."

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