Posted on 11/28/2021 6:03:22 AM PST by Kaslin
The Biden administration is scrambling to come up with ways to pay for its trillions of dollars of social program proposals. One such way they’ve proposed to do this is to give the Internal Revenue Service (IRS) more funding to go after potential tax cheats. Proponents say more money for the IRS will pay for itself by allowing the agency to go after millionaires and billionaires who are underpaying on their federal tax returns. However, if the IRS’s past track record is any indication, it will not be the rich and powerful that come under their microscope.
Before ProPublica resorted to publishing illegally leaked tax information on private citizens, they compiled troves of data on where the IRS conducts audits and which United States counties are targeted most frequently. This deep dive revealed that the most audited county in the United States is not one near financial meccas like New York, Los Angeles, or Chicago. No, rather, the most IRS audits per capita are directed at Humphreys County, Mississippi, a rural county near the delta, know for catfish farming.
Humphreys is not some bastion of secret wealth hidden in the Deep South. According to the U.S. Census Bureau, well over one-third of Humphreys’ residents live below the poverty line. The average income of this humble county is roughly $18,000 per year. The economic issues in Humphreys County are fueling a dramatic decline in population over the last decade. There is hardly enough money to go around in counties like this, yet the IRS seems to believe there is too much and these poor catfish farmers are secretly hoarding wealth.
Also of note, over 75 percent of Humphreys County residents are African-American. This makes Humphreys one of 151 counties in America where African-Americans, Hispanics, or Native Americans/Alaska Natives comprise the demographic majority. This is where the trends in the IRS data take an even darker turn. Of these 151 counties – spread out from Miami-Dade County in Florida to Nome Census Area in northwest Alaska – 144 of them are targeted for audits at rates well higher than the national average. This is not a coincidence.
The IRS is not even particularly shy about leaning into this trend. When questioned by lawmakers on Capitol Hill in late 2019, IRS Commissioner Charles Rettig described audits of poor Americans as “the most efficient use of available IRS examination resources.” Rettig’s justification for this answer is perhaps worse. Simply put, auditing poorer Americans from disadvantaged communities is easier. It requires less staff time because they don’t have the adequate resources to fight back.
It’s easy to see how this cycle continues and will become worse over time if not addressed. The IRS targets those who are disadvantaged because they don’t have the will or the ability to fight back. This makes sure they’re not making any more money. These communities then remain economically disadvantaged because they have become outsized targets for the power of the federal government. They then remain targets because they are economically disadvantaged and can’t fight back when the time comes. On and on it goes – and has gone.
Sinisterly, the roots of this trend are seen dating all the way back to the slave trade era. For example, the counties in Alabama where there are majority Black populations, form a sort of stripe across the middle of the state. This is due to the fertile soil in these areas. That meant it was prime real estate for aggressive farming, spurred on by slave labor. This led to outsized slave populations, which leads to the prevalence of Black communities in these areas today. The IRS looks at the crippling effect slavery had on these communities and sees not injustice, but opportunities for cost-effective audits, ensuring these communities do not succeed economically beyond what the IRS believes is permissible.
Now, members of Congress and of the administration are calling for stepped up IRS enforcement to generate more revenue to fund projects included in the Build Back Better Act. They claim that this will enable the agency to go after wealthy Americans who are taking advantage of the tax code. We need only look at how the IRS has used the funding already at its disposal to see that this will not be the case. We need only take the head of that agency at face value when he says it is more efficient to go after poor Americans.
Members of Congress like Reps. Alexandria Ocasio-Cortez (D-NY) and Ilhan Omar (D-MN) have touted the social justice benefits of the Build Back Better Act – likely with the best intentions. However, empowering the IRS to continue to hold down disadvantaged communities – and target them for harassment when they do attain success – will have the opposite of the intended effect. Striving for economic justice ought to begin with reining in the abuses of the IRS, not enabling it any further.
Many black men and women work off the books by choice. Demolition and salvage for men, and hair or nails for women, to avoid taxes. I had a 46 year old man apply with us who worked for his uncle, hard labor, 26 years for cash. I couldn’t hire him. Mistake to work like that, now the IRS (service?) will have the manpower to get him.
These are the same people who democrats say can’t figure out how to get a Voter ID. Expecting them to comply with IRS regs for claiming refundable credits seems racist, or at least supremacist.
Will likely have a negative impact on owner operated trucks thereby fueling the consolidation of over the road trucking in a few large companies.
The premise is wrong. The IRS will not target minorities, the targeted group will be the minority minority.
The minority minority are successful people with black skin who have deserted the racist “Black Community” and are real Americns
For my entire working career everyone I knew got paychecks, paid into the tax structure and paid taxes on everything they bought. After getting into the low-end rental market as a landlord, I finally got fully emersed into the other side of America. This side doesn’t work for companies, or, if they do, they supplement their income in some way that doesn’t involve the government. There was a restaurant owner in the county who was doing extremely well. He employed scads of people and directly or indirectly operated a fair-sized fishing fleet. The fish his “fleet” of private people caught were sold across the country. One day the IRS showed up and said they’d looked at his enterprise and he was under reporting his income. They used something called “imputed income.” Because he had paid off houses, cars, commercial buildings, etc. he owed X millions in taxes. The IRS took everything he owned and sold his many buildings, boats, cars, all at a fraction of their value because...hey, government. He reportedly asked the IRS, what about all the people working for me? To which they allegedly replied, “Not our concern.”
I think what brought this particular man to the IRS’ attention is he was LOUD, brash, and extremely visible. He wasn’t, apparently, dealing in drugs, gambling, or prostitution, but he was living the lifestyle of a kingpin. He didn’t start the enterprise. He inherited and it had apparently been going on as long as the memory of anyone I’d asked about it. Thus, he must have felt confident he was okay. He had paid taxes, but not nearly enough to account for his apparent wealth.
As for the rest of my renters, many are living a lifestyle I would not live because I’m conservative in thought and money. These include tourist travel to exotic climes, purchasing an extraordinary amount of expensive “stuff” and generally flinging money around as if it had no end. (A sailor once said to me, “I’m offended by the phrase ‘spending like a drunken sailor.’ When I’m drunk and spending, unlike government, when I run out of money, I stop spending.’”) But they spend a lot. Over time I’ve come to learn some of them had one or more side jobs. Some of them dabbled in drugs and just couldn’t bear having a pile of unspent cash.
I related all of that to tell you what I’ve read about IRS audits is true. They hardly ever audit the rich because the rich have lawyers and accountants and the IRS code runs about ten million words. For every thou shalt, there are ten thou shalt-nots. The lawyers and the accountants screw up the IRS closure statistics so they don’t waste time with them. It doesn’t become “profitable” to audit people until you get down to the middle class. The middle class has money and can be easily bullied into paying a fine. And, when the IRS threatens to take your bank accounts and home, you pay up even if you don’t think you owe. The IRS is like the Mafia, but with full medical and a better dental plan.
And, interestingly, the most lucrative guy to hit is like the man running a fresh fish and restaurant empire but who is, per taxes paid, at the lower end of the scale. Another good place to hit, and I know this from having spent a few years catering to this business, is the family-owned jewelry store. They laugh when you ask them about taxes. One told me, “I pay whatever I think they deserve.”
The real irony of this is that the poor blacks this article talks vote about 99% democrat and will until the day they die (or longer). Look at an electoral map and the counties where they live stick out like a neon light. Blue islands in a sea of red.
Do most of the middle class tax payers itemize their tax returns? The poor class taxpayers most certainly do. So are the 80,000+ auditors the IRS is going to hire will make sure taxpayers who take a standard deduction aren’t cheating?
After the big Trump tax cuts in 2017 the number of itemizers went down drastically. I’m one of them.
Thank you President Trump!
The IRS Bosses say that it is an effective use of resources, aka ROI (Return on Investment).
Not said in article is that IRS auditors are ranked on settled ‘win’ cases where they get more taxes out of the taxpayer. Simpler tax returns have simpler errors. Complex tax returns (think Trump) have no simple errors, only disputes about applicability of options taken by the preparer and the staff of CPAs & tax lawyers.
If you were an IRS Auditor or Revenue Agent, which career-influencing path would you choose?
For an IRS agent, it's like shooting fish in a barrel. Find a couple of expenses without supporting documentation, disallow them, and voila, increased SE income, which in turn reduces the child tax credit, and adds more taxes, penalties, and interest. These filers are terrified of the IRS, and won't appeal.
I prepared taxes professionally for over 25 years, one learns a lot of tips and strategies in that amount of time. I have no desire to do that anymore, I'm a simple bookkeeper for a family enterprise in Grapevine, and am enjoying every minute.
I spent several hours at the IRS agent's office, "educating" her on the business of training horses. I established to her satisfaction that it was a legitimate business, primarily because 75 per cent of his expenses went to trainers and boarding for the horses.
Later, when I met with my client, my last bit of advice was, "you better start showing a profit, because you're in their sights now." They don't like to lose, and you just can't keep claiming losses ad infinitum.
Yeah my buddy had the same deal with his race car side biz. I think he bailed out rather than try and show some profits which were pretty impossible in reality.
EITC. There’s gold in those returns.
Biden's Build Back Better is more appropriately coined "The Tax Professional Full Employment Act of 2021/2022". CPA Firms and Tax Attorneys are gearing up for the extra business, which will be lucrative for them, enabling them to charge the max hourly rate.
True that. I pay my cleaner in cash. I doubt she files.
Cash for labor is rife in construction, landscape maintenance and small farming gigs.
How owners come up with the cash to pay out is baffling to me but the Frustration of trying to hire someone who demands cash is very common.
Most workers I suspect are already drawing money from some other gov giveaway program and need to stay off the radar. They are more than happy to walk away from a good job opportunity seemingly because they know they can find someone else who will pay them cash.
I always kept myself out of trouble by following the rules but saw my (un)fair share of IRS audits. While I never worried about the outcome I felt I was a target because of the $ volume my businesses did and number of sales transactions. Lots to look at for the auditor but disappointing for them in the long run because of my record keeping.
Always felt the IRS audits were more successful against unorganized business owners whose inability to keep good records made them good targets.
The idea of the IRS going after the lower end of the working class doesn’t make sense as most don’t have assets they would need to protect. Garnishing wages on the little people at the current tax rates also seems a waste of time as the threshold of the tax tables almost guarantees them to be left alone.
The whole idea of the IRS banking on squeezing more money out of mostly honest business people is absurd and smacks of the thinking that successful entrapaneurs somehow must be cheating.
The difficulty in managing a private business is daunting and most often a long road before reward.
The cavalier attitude of politicians and bureaucrats and how they handle our money is what needs to be audited.
I question that last part.
“Most workers I suspect are already drawing money from some other gov giveaway program and need to stay off the radar. “
I know a man I’d dearly love to hire. He has had several bouts of various cancers. He is on Medicaid. According to him, if he takes a job, he’ll be kicked off Medicaid. I can’t possibly pay him enough to cover the various medical issues and live too. Just one episode could potentially cost many times what he could earn in a year. So, he lives off the radar
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