An agent spending a day going through the returns of some random person who makes 40-60k to see that their return was off by $30 is an absolute waste of time and resources.
The IRS needs to fry the biggest fish for a change, instead of ignoring them or being too scared to face a well-funded legal team.
One year I got a paper mail from IRS where they said that there were potentially unpaid taxes, but it could be that you haven't filed Schedule D form for RSU. I was very pleased with it - it clearly stated what I didn't do, what I should do (file needed forms), how to contact etc.
I updated everything providing what was needed and sent it, everything was ok.
Comparing to the messy interactions with tax guys that I had long time ago in my former home country (with hints of needs of bribes), when I was leaving it, I'll rather have to deal with IRS any day.
The IRS is about to have the world's largest Kanban board.
And when they do, all you can do is pay whatever amount they decide.
Ask me how I know.
The final 2017 audit rate for earners between $200,000 and $500,000 0.4%, far below the 2.3% for that bracket in 2010, according to IRS data."
https://www.senate.gov/legislative/LIS/roll_call_votes/vote1...
Statement of Purpose: To prevent the use of additional Internal Revenue Service Funds from being used for audits of taxpayers with taxable incomes below $400,000 in order to protect low- and middle-income earning American taxpayers from an onslaught of audits from an army of new Internal Revenue Service auditors funded by an unprecedented, nearly $80.000.000.000, infusion of new funds.
Vote Result: Amendment RejectedMoney is fungible. This was a messaging bill. If they were serious, they'd create an independently-funded agency within the IRS with the sole mandate of going after high earners.
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RE: below [due to timeout]
>The original bill already passed.
factcheck: false. Original bill passed almost 12 hours later on the same day[0] [1]. The (above) amendment was voted on in the early morning, with the unamended increase passing in the afternoon.
factcheck: false. All 100 senators voted on the floor for a full vote on the amendment. None found they had something more important to do that would cause them not to cast a vote.
factcheck: True. Either congress ignored the position, or they followed the privately endorsed position rather than the publicly endorsed one.
[0] https://www.senate.gov/legislative/LIS/roll_call_votes/vote1172/vote_117_2_00325.htm
[1] https://www.senate.gov/legislative/LIS/roll_call_votes/vote1172/vote_117_2_00296.htmNot really? The original bill already passed. The executive has stated its position. Congress has more important things to do.
It sounds like that's the plan:
"It also aims to help close the "tax gap" between taxes owed and those paid, estimated by Treasury at some $600 billion a year, by focusing new audits on the wealthiest Americans."
Hopefully we can avoid electing clowns long enough to see this bear fruit.
You can easily run a program to detect people claiming the same dependents.
... while audits for rich folks required heavy human involvement right from the beginning, so of course the numbers are skewed such that it looks like they are targeting the middle and lower classes, if you treat both types of audit as identical.
These sorts of audits may or may not return any extra revenue.
The highest likelihood of tax fraud are people who commit small fraud that, to them, seem undetectable.
Sure you could go after a low income tax cheat, but you end up just putting them in debt if they don’t actually have the ability to pay you.
This is all about justice vs. profitability.
Should police only pull over people in luxury cars because they're more likely to be able to pay a speeding ticket?
Clear answer IMO. Similarly should the government prioritize more serious offenses over lesser? It's a bigger crime to evade $1,000,000 in taxes than it is to evade a $1,000 tax bill.
so the analogy is flawed, because you a priori assume the higher income people would perpetrate a higher amount of fraud.
> It's a bigger crime to evade $1,000,000 in taxes than it is to evade a $1,000 tax bill.
Yes, but is earning a higher income make you a higher probability of higher fraud? I don't think fraud is distributed like that. In fact, i would argue that the higher income you are, the more likely you are to use professional services for taxes, which means you are less likely to commit fraud!
Is it unfair that police patrol for speeders on the highway more than on bike paths?
yes, if the majority of the people are on bike paths, and they're the majority of all frauds.
Esp. if to drive on the highway, you are often driven by a chauffeur, who are professionals and knows exactly which section of the highway allows you to go fast without breaking the legal limits.
Therefore, patrolling the highways in lieu of bike paths means you will miss all of the small time speeders, and occasionally just catch a big speeder. I would imagine the trade off is not worth the loss in speeding tickets.
What should be concerning is the new reporting requirements on virtually any $600 transaction combined with 30k more IRS staff.
Look at what's come out from Trump's historical tax returns -- literally tens (if not hundreds?) of millions of dollars in tax fraud that was just never prosecuted. Had the authorities looked before the statute of limitations had elapsed, there would have likely been criminal charges.
https://www.nytimes.com/interactive/2018/10/02/us/politics/d...
https://www.propublica.org/article/trump-inc-podcast-never-b...
This isn't "some people say" territory - it's just blatant fraud that went unprosecuted and it happens all the time.
Once you get out of simple W2 and 1099 income things get real complicated real fast. So complicated the IRS can get it wrong themselves. The more complicated the return, the more subjective they become. When the rules are so complex or the terms so vague that things can be left up to interpretation or they do not capture all edge cases it becomes very easy to end up in a scenario where you have to prove intent to commit fraud if you really want to prosecute.
There is no doubt that the IRS leaves plenty of money on the table by not pursuing more high earners, but who wants to do the hard work when the easy work is just to compare reported W2 and 1099 income statements with returns?
If we wanted to get serious about going after high earners we would simplify the tax code. We'd get rid of certain carry overs all together. At some point we may even tax revenue instead of profits. That might sound wildly "anti-capitalist" but it's the only way to eliminate the ambiguity. We could create different incentives that reverse the burden.
I can think of a funny example I saw the other day where some dope was telling people they can deduct their dog as a business expense if they work from home because the dog is a "guard dog". The thing is you actually can do this. If you do this with any old dog it obviously would not hold up… but where is the line? How much training does a dog need to be considered a guard dog? How many hours a day is the dog actually guarding? You going to interview the dog? What if the dog dies or runs away? The IRS is not going to scrutinize every dog. There are a ridiculous amount of things just like this that people write off as expenses. If you want to successfully prosecute you've got to really make the case that it was intentional—like that there was no dog at all. Otherwise it's just difficult, and there's so much lower hanging fruit. You want to go back and forth over a dog with or just go after this person who failed to report a PayPal transaction? The latter is so much easier. Guaranteed win.
which would be easy, as an animal ought to have been registered and thus have a registration from which an easy check should've been possible.
If the tax code deems that expenses such as a guard dog is something that can be deducted, then why is the nuance relevant at all? It's a dog, and it does guarding duties during business hours. Whether it performed the guarding duties well or not is also irrelevant - the expense of a dog would be the same whether they do guarding well, or sloppily.
So the only opportunity for such fraud is if the dog didn't exist, and thus you're not really paying the expenses associated with said dog. I fail to see why having a dog and being able to expense it from your income is such a big deal.
Edit: in fact, i personally would like to see the tax code simplified, so that each human can claim _all_ expenses for living, from their income, and only ever get taxed on profits (which is money they did not consume).
Oh really?
"Credit Suisse, the collapsed Swiss bank taken over by UBS Group in a hastily arranged bailout earlier this month, may bring with it a fresh set of regulatory and legal problems for its new owner.
For years, the bank has provided a safe haven for wealthy American clients to hide assets from the IRS — even after it was caught and prosecuted for doing the same thing more than a decade ago"
Many will take whatever opportunity they can get. Whether its complex offshore structures or moving it to banks that will greet you with a wink and a nod. As long as it doesn't go to the IRS.
I'm not saying all wealthy individuals do this, or even most. But the amount of money that is intentionally hidden from the IRS is incredibly substantial. They have done the studies.
The best practices for tax planning deliberately go into the gray area, because there is money to be made in the expected case. Even if you are audited and found breaking the law, the consequences are rarely that severe. But the same reasons that make going into the gray zone profitable in tax planning also make it profitable to audit people who practice tax planning.
Just because they have receipts of their expensed 'business' dinners and 'client' trips to Disney World doesn't mean they're not fraudulent
Warren Buffet pays a smaller % of his income in tax than he secretary does, and he's said that himself. You know how that's possible? Because Buffet and people like him bought off the government ages ago and, collectively, said to the IRS "we're going to tell you what we are going to pay, and you're going to deal with it, OK?", and continually lobby congress and say that whatever minuscule amount they actually do pay is WAY too high and needs to be cut, and cut again.
You say that like it should be shocking, but I don't see why that would be the expectation.
You could easily come at it from the opposite direction and wonder why Buffet pays so much more than his secretary in dollar terms, yet they get the same police, roads, schools, and public services.
Buffett pays less in %, because he is not earning wage labour. That's not tax fraud, nor is it illegal.
Buffett specifically believes that this is bad and his taxes should be higher.
Most people know where their checkbooks are but aren't using them. What they really mean is either 1) I wan't someone else to pay taxes for X, or 2) Im willing to pay more taxes, but only if everyone else does it too.
Thats not to say either of those positions are necessarily bad, just that people aren't very honest about expressing them, or possibly with themselves.
Why is proportional comparison relevant?
https://www.sba.gov/partners/contracting-officials/contract-...
Note that pretty much everything the Biden administration has done amounts to soaking the middle class. $600 reporting threshold, anyone?
The only real “change” was that now Venmo/Cash App will be required to, too— and even that got delayed.
https://www.wolterskluwer.com/en/expert-insights/irs-delays-...
So it applies to digital payment methods like Paypal, to payment networks like Western Union, but also to any credit card transaction over $600?
edit: I think I was thinking of the payments in the wrong direction. The 1099-K applies primarily to the receiving party?
The number one priority of the IRS I should be recovering funds, not ideological Warfare.
Recovering funds should not be political, and to make it so is a race to the bottom. Once you start targeting specific groups, you normalize all kinds of bad behavior.
That would mean that lower-income people would be investigated much more frequently than a multi-billionaire. Which is currently the case - harassing a lower-income family over a $500 or $1k difference is an open-and-shut case, the lowest of the lowest hanging fruit. Going after a billionaire is much harder, more time consuming, and definitely costly, even if the potential payout is orders of magnitude higher.
If the IRS can catch 100 X $1K errors in an hour, they should do this instead of spending 100 hours to catch a 10k error.
That is to say, the top priority should be getting the most money back for the tax payer, and Not fighting a culture war that assumes poor = good person and rich = bad person.
If people work hard and make alot of money you want them targeted? Wow! If only I could waste billions of our taxes without accountability.
Those ultra rich hire people, and have lot's of write off's and know the system. Tax code is difficult on purpose.
There is a history of IRS targeting certain groups, while ignoring the others. If you think they wont target people that are helpless and can't fight you've got to wake up.
Not too long ago: "Internal Revenue Service says it gave extra scrutiny to organizations with the names "Tea Party" or "Patriot" seeking tax-exempt status.
No criminal charges were ever filed against IRS officials.
Targeting some dopes creating a 501 as a “Tea Party” group is called targeting the low hanging fruit. So is aggressively enforcement of credits for non-custodial parents, etc.
Meanwhile, those hard working ultra-rich real estate developers committing various frauds with self-dealing, fake appraisals, etc walk away with millions of dollars and pay little or nothing.
When they investigated, "progressive" and "occupy" (as in Occupy Wall Street) were also on the scrutiny list. They were (correctly) looking for political orgs masquerading as "social welfare" orgs to avoid disclosing donors.
(Also on the list of terms: "open source software", "medical marijuana", etc.)
https://web.archive.org/web/20131207123209/https://www.bloom...
No, just the "make a lot of money" part. How hard they worked doesn't matter.
Uh, yes, that's the whole point. If you win at capitalism, you have to pay the cost to keep the whole thing going.
>Those ultra rich hire people, and have lot's of write off's and know the system. Tax code is difficult on purpose.
They also hire people to hide money for them. See: the Swiss banking system, Cayman Islands LLC structure, etc...
>If you think they wont target people that are helpless and can't fight you've got to wake up
That's what they DO do. They go after the low-hanging fruit significantly more because the poor person knows they'll get fucked if they don't do what the IRS says. The rich person will hire lawyers.
>Not too long ago: "Internal Revenue Service says it gave extra scrutiny to organizations with the names "Tea Party" or "Patriot" seeking tax-exempt status.
The Tea Party was founded by a bunch of billionaires that didn't want to pay any taxes at all. Seeing them form an organization to "donate" money to (with the express intent on using said money to "lobby" the government to reduce taxes even further) and ask for it to be tax-exempt is the peak example of everything that is wrong with unchecked capitalism.
No shit the IRS looked at them a bit closer.