Friday, March 21, 2014

Guerilla class warfare: IRS audits fewer rich, more poor people

Channeling the spirit of my man David Cay Johnston, I'm gonna tell you why this mundane story matters.

See, Republicans in Congress cynically under-fund the IRS year in, year out. So an undermanned, undertrained IRS makes do and does what comes easier, relatively -- auditing people with lower incomes. Because higher-income filers have lawyers and complicated returns and it requires more manpower to check them.  

What this works out to, in reality, is a calculated game of probability by rich filers: if you're wealthy, and you're lawyered up, chances are you'll come away unaudited; and even if you are audited, you'll come away unscathed.  

And so wealth inequality is a double-whammy for the poor and working class: earning so much less, they are still more likely to be audited. 

BECAUSE THAT'S THE WAY THE GOP WANTS IT.  Don't be naive and believe otherwise.

Finally, do I really have to explain how this makes no business sense?  As every auditor knows, you focus your attention on the weakest control points with the highest potential for losses. The potential for losses among poor filers is minimal, almost nil.  

All the Tea Partyers who are serious about fiscal health should cheer on  the IRS, because every dollar spent on the IRS  brings in $255 to the U.S. Treasury. Just by enforcing existing tax laws passed by Congress, nothing more. No other government agency can boast of such efficiency!  And so it's time for the TPs to put up or shut up about the IRS, the only government agency that reduces the federal deficit.

By  Patrick Temple-West
March 21, 2014 | Reuters

The U.S. Internal Revenue Service said on Friday that it audited fewer high-income Americans in 2013 than it did in 2012 or 2011, while it conducted more audits of people with no income.

Total audits fell by 5 percent from 2012 to reach the lowest level since 2008 as the IRS said it coped with budget cuts.

For the fiscal year that ended September 30, 2013, the IRS said it audited 24.2 percent of individual tax returns with adjusted gross income of $10 million or more. That was down from 27 percent in 2012 and 30 percent in 2011.

There were also fewer individual tax returns audited in the $5 million to $10 million gross income band, the IRS said.

In total, the IRS audited about 1.4 million individual returns. IRS Commissioner John Koskinen said in a statement that budget cuts at the agency have "presented challenges."

Wealthy Americans historically are the likeliest to be audited. The IRS a few years ago started a "Global High Wealth Industry Group" to audit high-wealth individuals more efficiently.

But Congress in January cut the IRS's fiscal 2014 budget by about 4 percent to $11.3 billion.

The funding cuts have forced the IRS to cut the number of customer service representatives it employs during tax season, Colleen Kelley, president of the National Treasury Employees Union said in a statement. "Both taxpayers and employees are frustrated."

Last year, audits were done on 6 percent of individual tax returns reporting no gross income, up from 2.7 percent in 2012 and 3.4 percent in 2011.

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