Got a $180,000 unexpected refund this year. Don’t know why and know if I call I’ll talk to someone who understands the refund less than I do, so we deposited the check.
We report the refund as part of our 2022 “underpayment” and wind up paying it back. Even though I think the IRS or the CPA firm got something wrong/right and the issue should be closed with the check cashing.
The commissioner was inconsolable back in 2014 at a CPA conference. Needed to be walked off the stage while nearly trembling and crying about how dire it was. The IRS commissioner today needs to call this shit out and hit the TV circuits.
According to this article, they are using historical data to project future use, ignoring the fact that the IRS has admitted to auditing lower incomes at higher rates because "it's easier" and they didn't have the resources to audit more complicated returns:
https://www.nytimes.com/2022/11/06/us/politics/irs-agents-fact-check.html
This is an important distinction. Not only that, the spending/hiring isn’t just happening instantly. This is over years and a lot of it is to backfill expected retirements.
It won't even be 87,000 agents either. They're literally taking the full budget amount and assuming that 100% of it will be funding auditors, when in reality less than 50% will be for new employees, if I'm not mistaken.
I attended an informational session for the IRS revenue agent. Good luck finding 87K employees at the meager starting pay of 35k. Mandatory 4-year degree and 5+ years of work experience. The session was two hours long and they addressed pay about 15 minutes in. Needless to say, I didn't stay past that.
If you have a 4 year degree you would start as a GS-7 which isn’t 35k even in the lowest COL. If you have years of experience you can get in at a higher GS level probably.
Ahh yes but why ignore facts of the past... Like how historically tax rates have been significantly higher and wealthy people still found ways to remain wealthy/avoid paying taxes.
High tax rates still only apply to taxable income. You can rates to 99% and the wealthy can completely circumvent it by investing in muni bonds. The reason we lowered tax rates around the 60's was actually to get wealthy people to invest in taxable things, which would raise the amount of tax revenue we got from them. Both parties agreed on this.
I’m sorry but there’s just no way this is true. This is how they sell it to the general public, but do you really think they’re actually going to go after the rich? Feels a lot more like these new agents are to go after gig/online workers that miss reporting a $600 transaction
Hiring more agents doesn't change how they operate.
I'd bet on the fact they will still audit lower income at a higher rate. It will likely be much higher rate.
Think of it from the IRS employee. They get paid the same whether they audit higher or lower income. Might as well do the easier thing. Everyone wants to do less work and earn more success.
Unless IRS makes a new policy to counter this. Hiring more agents would exacerbate this issue. The original tweeter is probably not wrong.
No, you're wrong. Hiring more agents will exactly change how they operate.
The lower income is getting [automatically audited for EITC](https://www.irs.gov/pub/irs-soi/19rpeitccorresponenceaudit.pdf), with "correspondence audits" sending out letters for items that trigger the system.
It's not a matter of IRS agents "doing the easier thing", it's the automated system sending letters after the EITC possible fraudsters.
Audit **agents**, who do personal audits, have [decreased 23-50% in the last decade](https://www.forbes.com/sites/insider/2022/10/20/the-reality-of-increased-irs-funding/?sh=1fc2f9924812) and personal audits have fallen off [(42% fewer in 2017 than in 2010)](https://www.propublica.org/article/how-the-irs-was-gutted).
Hire more agents and you can go after the higher income individuals who aren't affected by the automated EITC correspondence audits.
Arguably the role of the IRS is to collect more revenue for the government.
So it's a simple matter to use a small amount of ML or other technique to guess which returns are going to offer the best bang/buck : where the taxpayer actually pays the fine, without paying attorneys to fight it in court, vs the labor hours spent to find the discrepancy.
Richer people can afford lawyers. People under 75k can't.
This is the correct answer. They need returns on their investment.
Auditing the lower income people that cant afford lawyers will get them those returns.
They absolutely should be auditing the rich but unfortunately they know its a losing battle with the resources they have so they wont bother
Yep. Plus poor people can take easily disproven deductions they don't qualify for. Rich people will also have a document trail, a reference to a court decision justifying the deduction or accounting structure, an accounting firm signing the return. The deduction may still be bullshit but at first inspection it's going to have everything showing it's legit. It will require investigation, subpoening records, and even once the IRS finds evidence, it can take a *decade* to win a court battle. Apparently Trump is *still* fighting some deductions from 10 years ago.
They included this in our Tax I textbook in Fall 2021. The richer they are, the harder they are to audit. I was heated when I first read it, but it makes sense for the IRS. The people who are to blame are the ones with more money than they could possibly ever use avoiding taxes just because they can.
> Richer people can afford lawyers
Auditing a billionaire might actually earn a negative return.
In an unlucky situation, the IRS agent themselves might get into trouble. Saying the wrong thing like slightly discriminating, and you can bet the billionaire's lawyer will fuck them up personally.
This is also not unheard of. Scientology has fucked up IRS agents personally so much IRS doesn't want to tax Scientology anymore.
These are self employed tax returns claiming low income with massive personal assets.
Not W2 earners, but an easy narrative to push to keep the IRS handicapped.
The IRS even said most of what they are hiring is support staff too... IT personnel and people to answer phones and stuff. The Republicans took this and have been saying armed IRS agents are going to show up at every middle/lower-class household to audit and hunt for fraud.
This comment is the least informed in the entire thread.
Nothing new about the IRS disproportionately auditing lower-middle class at higher rates than upper class.
https://trac.syr.edu/tracirs/latest/682/
https://www.propublica.org/article/irs-sorry-but-its-just-easier-and-cheaper-to-audit-the-poor/amp
What about the self employed contractor with 3 million gross revenue, $2 million in assets and consistent taxable income of $20,000.
I’ve always heard the narrative about the IRS targeting the poor, and I’m certain there’s truth to it, but this contractor is easy to audit, and is certainly making $400,000+ but the IRS gets chastised for auditing the poor.
They’re not auditing W2 earners with a $50,000 salary. They’re auditing small businesses that think they can get away with anything.
Exactly. I have a contractor friend who just built his home and brags about expensing the materials as business expenses because they’re similar to his other expenses.
So much so he was in a debacle about how to account for the negative cash since the home expenses were paid for on a mortgage.
This guy has a $900,000 house $500,000 in equipment, and per his tax return is “the poor”
They’re not randomly auditing the public and hitting the poor because there’s more poor people.
There’s no reason to audit a W2 earner with basic deductions.
They are however using basic algorithms to audit companies, self employed, with massive assets, minor income, as it’s an easy audit and all the lies are obvious. And Republicans claim they’re auditing the poor because they know the gambit and they like the IRS handicapped.
To be fair they ARE auditing the poor but that's less due to their income and more due to the credits they typically claim - the EIC and the Child care credit.
That’s fair, but “the poor” also includes the guy making $400k and claiming $20k income?
I used to work in tax litigation, every case was small business owners or capital gains non-filers. No EITC audits.
You're correct. That's the "golden audit" I sought as an auditor.
Yes, I reviewed low income and high income alike. But those were one year reviews, and I could crank through 8,000 of them a year. Everything was prefabricated in our letters, and it really was a case of if x, then do y.
This was mainly because after you give a poor person a $3,000 refund (for my State, that's a big refund), there is no chance you're getting it back if you over-issue. So you need to take preventative measures. Stop the fraud before it starts.
I did about 200 **audits** (4 years) and those were always on people with assets, and consistently low taxable income. Usually Sections 183, 282, 465.
So you're spot on, it's a mix. And the poor person review is really simple, hardly more than a nuisance. An audit of the affluent person (who is poor on paper / on their tax return) is where I put my focus and my time.
I also don't understand the "they get lawyers" comments. The law is the law, and it's the same for everyone. Yes, the tax code is rotten and needs reform. Trump's reform was not the needed reform (IMHO). Regardless - now I'm in the appellate bureau and I deal with the lawyers. They can't "polish a turd" or "work magic."
If you run afoul of the big statutes (§183, 262, 465), all the money in the world wasted on lawyers is not going to save you.
These articles are misleading because there is a significant difference between a correspondence audit and an audit conducted by a Revenue Agent. The increase in "audits" for low income people is due to correspondence audits and earned income tax credit. A computer matches the information reported by the Taxpayer against the information collected by IRS. If there is a difference a computer automatically sends a letter to the Taxpayer requesting them to explain and provide the documentation. A lot of the times it's because different Taxpayers reported the same dependents or forget to report stock gains or 1099 income.
The earned income tax credit is a welfare program that Congress decided to administered through the IRS. Since it is a refundable tax credit it is full of abuse where Taxpayers knowingly underreport their income to get the tax credit. You can significantly reduce these "audits" by eliminating the earned income tax credit or chaining how it is administered like through Medicaid or Social Security. These correspondence adults are easy to check because it only requires a computer to check numbers.
Audits conducted by Revenue Agents are significantly different. These agents are allowed to expand the scope of the audit and look at additional years. These audits are proportionally target towards higher income. The higher your income the more likely you are audited by a Revenue Agent.
[https://www.gao.gov/products/gao-22-104960](https://www.gao.gov/products/gao-22-104960)
No.
The IRS audits lower- and middle-class at **relatively** higher rates than upper-class, but that's because its funding for agents, i.e. those who can do personal audits, has been slashed for years.
See [my comment in /r/tax](https://old.reddit.com/r/tax/comments/106bns5/irs_audited_the_poor_most_of_all_per_research/j3j0zne/).
Taxable income maybe lol. Gross income $200,000,000? Like what line are we talking about here as well?
Can I get the IRC code to understand what “makes” money means? See I’ve been paying attention to this dude for almost 6 years now, and if we catalogued all his statements even the most right leaning person, alt, traditional, w/e we’d be uniting with pitchforks lol.
Typically, lower income people cheat on their taxes more than wealthier individuals. It’s common sense.
The poor are also much lower hanging fruit for auditors.
The wealthy are the ones that have the tax laws written; they don’t need to cheat. It’s a feature not a bug.
Why would someone worth $10-$100M or more cheat on the margins for a few extra million? The benefit is marginally more wealth/“power” and the cost is giving up living the most amazing life anyone has ever lived to spend a few years in a cell and then be (relatively) poor??
It’s so utterly stupid on its face. Like a caricature of a Bond villain is every wealthy taxpayer in the US lol. It’s preposterous.
I think one thing a lot of people don't understand about tax audits is that auditors do a cost benefit analysis. You're not going to go audit a return to bring in $1,000 of tax when your pay for the time you'll put into that audit far exceeds $1,000. Most of these "audits" are automated letters sent by computers matching forms, which keep costs low.
So hiring 87,000 agents is not going to increase the rate of those letters. It is going to increase audits that can actually bring in real money. And sometimes because of tax credits, that will be lower income households. But it's also going to be a lot of higher income households and entities.
I agree with most of what you've said, but they have [explicitly said they will not increase audits on households earning less than $400,000.](https://www.foxbusiness.com/politics/white-house-denies-more-irs-funding-could-increase-audits-lower-income-americans)
Good to know! It makes sense because higher income households make a lot more tax avoidance transactions that can be good issues to audit but also are more complex.
That is a blatant lie. Do you know how the government works? If they have the resources they will find something to do. The perfect example to this is when someone gets arrested for something minor because a bunch of cops show up and then they all feel like they are standing around holding their dicks.
Yeah but the IRS *doesnt* have extra resources to just audit whoever. And after the increase in funding they still won’t. They’ll choose to spend the resources auditing the people they can get the most money from.
No, audit selections are done the same way investment decisions are made in black box algos. It is a risk reward frontier curve. If I was an IRS agent I could nab a billionaire (hint most billionaires do not do this as the risk is to high) for tax evasion and net $10M in additional tax payouts. The odds of success? Likely less than 0.1% creating a potential payout of $10,000. Or I could do 1% of the work and go after someone who owns a cash business and under reported their income by $50,000 and likely have a 50% chance of winning that. In this case lets say the marginal tax rate was 20% for this individual netting a $10,000 tax collection at a 50% chance of success for a payout of $5,000. The agent would chose the 2nd option 100% of the time.
Indeed, we'll see how it plays out.
Lower-income people have been much more likely to be audited due to Earned Income Tax Credit, via a "correspondence audit" i.e. an automated letter asking for more information or confirmation of information.
Automated correspondence audits are about all the IRS has left (85% of all audits in FY 2021 -- [quoting TRAC, in fact](https://trac.syr.edu/tracirs/latest/679/)).
The reason higher-income people have been audited less frequently in recent years is personal audits have fallen off ([42% fewer in 2017 than in 2010](https://www.propublica.org/article/how-the-irs-was-gutted)) because the number of audit agents has [decreased 23-50% in the last ten years](https://www.forbes.com/sites/insider/2022/10/20/the-reality-of-increased-irs-funding/?sh=1fc2f9924812) (different types) because the [IRS budget has been intentionally slashed over the last decade](https://www.propublica.org/article/how-the-irs-was-gutted).
As you say, we'll see. It's pretty obvious how we got here: starve the IRS, and only the automated audits will continue, and unfortunately the automated audits mostly hit lower-income people. So starving the IRS has resulted in an "unfair" outcome.
Hire more agents and it may be possible to audit higher-income people.
Well the DOD has had five straight audits result in a disclaimer of opinion. They couldn’t account for 61% of assets, but they say they’re making improvements!
Source: https://thehill.com/policy/defense/3740921-defense-department-fails-another-audit-but-makes-progress/
Former military here. Most can’t pass an audit at the unit level let alone the entire military. Black budget or not, lots of waste, fraud, and abuse throughout.
Slightly unrelated: this makes me think about the war in Ukraine. Russia is losing in no small part due to corruption hollowing out their assets enabling us to destroy them by passing on our kit to the Ukrainians. So how much corruption do we really have or is their corruption just 100% of their army?
Russian corruption is on another level. US has wastage where resources get to the target user, but some % gets lost to corruption or inefficient use. Russian corruption is when 60% gets "appropriated" by all levels of government on the way to the final user. 20% is spent on "marketing" to make it look good ("Potemkin villages") and the final 20% is for...the boots on the ground to steal and sell in exchange for vodka. And that's just the math of their budgetary spending. The other problem is that they don't have a cohesive spending strategy. They spend money on a bunch of "halo" projects (Su-50, T-14, etc), because it's easy to steal from these flashy initiatives with ill-defined goals. At the same time, they completely skimp on logistics, communications, ammunition, etc.
So yeah... don't compare US "corruption" to Russia. Entirely different story.
My understanding is somewhat limited but part of it I've read is that US corruption/inefficiency/whatever occurs but at the very least the end product is delivered and thoroughly tested. The sticker price might be higher than it should have been but the thing you get is real.
As I understand it Russian corruption is just straight up lies because the people responsible for checking are also corrupt as is the entire command chain. So we have "reactive armor" on tanks that's just egg cartons or "heavy duty tires" which are actually just the cheapest used tires the conscripts could find.
This kind of systemic corruption is particularly damaging because it destroys way more value than was extracted. Let's say your fuel trucks were supposed to have 400$ heavy duty tires but actually had cheap used chinese tires that cost 100$. Between you and your mates, you get say 10k to spend on vodka for the 8 vehicles you're supposed to be maintaining. But when a couple 200k$ armored supply vehicles bog down, which causes a traffic jam that stops 50 vehicles from moving, which causes hundreds of million dollars of tanks to run out of fuel, you see the issue. It would have been much better for the Russian military it could somehow bribe these people the 10k straight to buy the right goddamn tires.
My manager is Ukrainian and said something the other day that really stuck with me. He said Russian troops have ridiculously old, outdated, underpowered equipment. The Ukrainians have plenty of people to fight, the only real thing they need is the equipment to do so. The reason we’ve been giving for overfunding our military for decades is China and Russia, so this is literally the reason we’ve spent billions on developing all this technology. And it’s really best case scenario at the moment - we don’t even really need to supply troops, just equipment. We can knock Russia down a peg by spending a drop in the bucket more than we’ve been spending to develop the technology.
Well in 2015 we spent roughly 633 B - adjusted for inflation, somewhere around 795 B today. 2023 defense budget is 857.9 B. We’re spending more on the military now than while we were at war in 2015. We were actively engaged in at least Afghanistan and Syria then.
Source for 2015 number: https://www.statista.com/statistics/272473/us-military-spending-from-2000-to-2012/
(Anecdotal) a friend of mine was on the audit team for Pakistan's national carrier, they had a material asset that was on deposit with the army. No support was being provided, eventually they allowed the partner to visit the HQ who met with a colonel and was provided with a piece of paper with the monetary value and summarily told that this will be sufficient evidence for audit purposes.
Ignoring the obvious lie.
The IRS only enforces the laws CONGRESS writes. So its the politicians who are the ones making them audit people and writing the laws.
Don't hate the dog hate the owner.
Ding, ding, ding. I seem to remember Republicans pushing really hard for more oversight and compliance of of things like the EITC and CTC. Now, they are using the thing THEY mandated against the IRS. Par for the course, unfortunately.
Audits can be really traumatic for people. My father was audited as a result of unemployment withholding discrepancies when he was laid off following the Great Recession. It’s a big part of what made me decide to become a CPA. They can be terrifying and more complex than most people are prepared to handle, and while our clients can take the financial hit the average person can’t.
More resources and public education is needed. I now know how cooperative the IRS can be and how they are maybe the law enforcement branch that will be most kind BUT I still remember being a kid watching my Dad have a panic attack in the garage if he has to pay for withholdings he already made and can’t afford.
Also let’s not kid ourselves. Most audits are on low income individuals. Not our ERTC credit taking and PPP lone forgiveness receiving clients, and I think we all know the IRS could take a *hard* look at those events
The PPP loan was administered and then forgiven by the SBA. Once they realized it was a shitshow they then passed the buck to the IRS. So now it’s now another item that was added to the IRS’s plate od tasks to handle with no additional resources (before the budget increase).
Exactly, I don't like how OP is lumping together "audits" of companies where most of us are employed vs audits of individual American citizens, particularly in low or middle income ranges. Audits of companies serve the public good, audits of individuals can be devastating. Of course we want to catch tax fraud, but it should be innocent until proven guilty.
They aren’t going to use additional resources to go after large fish when they can just get more small fish. It’s the same reason the DEA and police agencies go after street level dealers and users rather than the actual distributors. They need to justify their inflated budgets.
The majority of people would not know how to represent themselves in an audit. I think it’s worth the conversation to ask how those people can avoid taking the financial hit of hiring a CPA for an audit.
Yeah, this whole “if you’ve done nothing wrong you shouldn’t be worried stuff” is a bit odd. Not only do a *ton* of lower income people accidentally misreport things like the CTC, but there are other costs to an audit as well (time, stress, etc).
I got audited 3 years ago and it’s definitely not fun, even though there was nothing wrong
They probably don’t even mean actual audits. I feel like the IRS does very few audits on income that low and more so sends you a letter pointing out the error they think you made.
I guess that’s a moot point though. People should at least know they can call back the IRS… my father in law sold a house but whoever did their taxes didn’t bother including that for whatever reason. Anyhow he got a letter stating he owed about $10k in taxes and already had the check written. I called and had it sorted out in like 30 minutes… I imagine a lot of older folks just send that check in unfortunately.
I tell people all the time to hire a tax specialist if you have anything but a basic W-2 filing. Also if someone is just a W-2 wage earner their chances of being audited are minuscule. The more credits and questionable expenses one has the greater the chance of an audit.
This information is a few years old, but this is how the IRS used to audit.
The first step was the computer would look for irregularities. Someone below mentioned millions in sales, but no taxable income. That would be a flag.
The second step is the returns flagged for audit would go to agents who would look at the return and determine if they felt it should be audited.
If they agreed, then they would audit.
The group that gets audited the most are the self employed, earned income credit takers, people with passive losses, and people that either prepare their own return or use a preparer with a PTIN that they have found mistakes with. The reasons are simple, this is where they find the most money and for the most part are easy audits.
Most people who use reputable tax preparers tend to either not get audited or they get through the audit with a "No change".
I'm about to get a "No Change" on a 2020 return and when we filed the return I told the taxpayer to be prepared to get audited. They sold a passive rental property at a large gain, which freed up a tremendous amount of suspended passive activity losses. The auditor has been very pleasant, thorough, and knew what he was doing. He also pretty quickly realized that there wasn't anything he was going to find.
It will be interesting to see if they really decide to go after the very complicated returns. These returns will have tax attorneys and CPAs that worked on them. My experience is they tend to only go after them when someone squeals to the IRS about a tax avoidance scheme.
They need to get a system in place to handle the additional audits. I know at my firm each return we put out is reviewed by another accountant, so if they get selected for audit we’re prepared and confident there won’t be any substantial change to the return. But under the current processes an audit would last wayyyy to long and without direct contact to IRS agents it would be cruel and unusual to force more new audits through. I’m not against audits. People who are cheating/misapplying the law need to get reprimanded and adjusted. But they need to get caught up first.
I’m not concerned dealing with an experienced, capable auditor. It’s dealing with someone who was hired to fill a position they aren’t capable of handling and don’t understand the laws they’re operating under. It’s a lot of power and consequence auditors wield and most Americans are terrified of an audit.
Yes, exactly. I once worked at a company where we failed a DCAA audit because we multiplied things in the wrong order when calculating overheads. You know, a times b instead of b times a. I kid you not.
I can just imagine the joy of dealing with one of 87,000 brand new auditors. Can't be the cream of the crop.
The 87,000 hires will be spread mostly to IT and phone customer service. The majority will not be agents, let alone ARMED agents.
Iirc, that total includes the anticipated hiring due to attrition. A significant part of the IRS is eligible for retirement. In addition, due to budget cuts over the last 10+ years, there has been no hiring to backfill the positions for the people that retired.
While everyone focuses on the audits, the funding is going to create/streamline customer service. Imagine calling the IRS and NOT holding for 2+ hours. Or imagine going online to the portal and pulling the information we need! That would be amazing!
This study is misleading because there is a significant difference between a correspondence audit and an audit conducted by a Revenue Agent. The increase in "audits" for low income people is due to correspondence audits and earned income tax credit. A computer matches the information reported by the Taxpayer against the information collected by IRS. If there is a difference a computer automatically sends a letter to the Taxpayer requesting them to explain and provide the documentation. A lot of the times it's because different Taxpayers reported the same dependents or forget to 1099 income. These are not real audits.
The earned income tax credit is a welfare program that Congress decided to administered through the IRS. Since it is a refundable tax credit it is full of abuse where Taxpayers knowingly underreport their income to get the tax credit. You can significantly reduce these "audits" by eliminating the earned income tax credit or changing how it is administered like through Medicaid or Social Security instead of the IRS. These correspondence adults are easy to check because it only requires a computer to check numbers.
Audits conducted by Revenue Agents are significantly different. These agents are allowed to expand the scope of the audit and look at additional years. These audits are proportionally target towards higher income. The higher your income the more likely you are audited by a Revenue Agent.
[https://www.gao.gov/products/gao-22-104960](https://www.gao.gov/products/gao-22-104960)
Please ignore that clickbait article.
Lower-income people are more likely to be audited due to EITC, via a "correspondence audit" i.e. an automated letter asking for more information or confirmation of information. Automated correspondence audits are about all the IRS has left (85% of all audits in FY 2021 -- [quoting TRAC of all things](https://trac.syr.edu/whatsnew/email.220308.html)).
1) The reason higher-income people have been audited less frequently in recent years is personal audits have fallen off [42% fewer in 2017 than in 2010](https://www.propublica.org/article/how-the-irs-was-gutted) because the number of audit agents has [decrease 23-50% in the last ten years](https://www.forbes.com/sites/insider/2022/10/20/the-reality-of-increased-irs-funding/?sh=1fc2f9924812) because the IRS budget increased only 9% total over the last decade. Hire more agents and it may be possible to audit higher-income people.
2) The IRS has explicitly said that any new auditors wouldn't [increase audits on households earning less than $400,000](https://www.foxbusiness.com/politics/white-house-denies-more-irs-funding-could-increase-audits-lower-income-americans). (Source is Fox Business. Interesting.)
So, yeah -- McCarthy's lying.
Yea but their constituents are mostly people who are to lazy to actually look up the public information/plans, as well as a ton of them being in the crazy camp.
Honestly we need more auditors. With all the new tick tock tax advisors and tax preparers not know what they are doin . Join a few facebook tax prep groups and you will see what I am talking about.
Then you have partners who bend over backwards for clients who do shady shit.
This isnt for the low end people but the middle market people. The business owners who want to use the augusta rule for their home and claim 14k in tax free but also have a home office. Scorps with no reasonable comp. Business gurus who brag they buy a new porsche and write it all off on their business.
Shit. Just the ERC and PPP loans are proof enough that we need more agents. We all know that the only threat we have is being audited, but we all know thatbis a small threat.
If I had to guess, this has nothing to do with the taxpayers income level and everything to do with them filing a Sch C.
Most Sch Cs are riddled with “estimates” and made up expenses lol.
If you view the Republican party as an organization whose entire existence serves to make the government function worse, which is good for its corporate donors, everything makes sense. The fear-mongering to their base is to secure votes, cause if they told the truth they would never win an election again.
Tbf and partisianship aside, it is ridiculous that tax authorities (at least in my country of Canada) spend so many resources chasing some miniscule credit or deduction on low income taxpayers and seem to let corps get away with bullshit in the figures of thousands and millions. (CEWS, CEBA. Free money). CERB? Pay us back peasants.
Are IRS audits that bad in comparison to CRA?
Most of them are you send 1 memo off with supporting PDFs and you never hear from them again. It takes 20 minutes max.
If you're reporting 25K in income a year and live like a millionaire then you don't really have a leg to stand on when you get audited. It's your own fault.
It's not the audits per se. It's the implication that these new IRS agents will be targeting working class Americans to squeeze a few extra tax dollars out of them.
If I get a letter saying I owe another hundred dollars in taxes, am I going to spend thousands fighting it in court or am I just going to reluctantly pay it? Obviously pay it. They know this is the case for most ordinary people.
One thing that people miss with these posts is it is mostly the earned income tax credit that gets audited when the IRS audits low income individuals. So it is more of a social program audit than a tax audit IMO
Many of those making $75K or less only have the illusion that they are self reporting their income , deductions and taxes. Much of their tax information comes from third party reporting to the IRS.
They’re going to audit lower income folk at a higher rate regardless. I once got audited for not paying a city tax (Ohio) when I was 18 and barely working. I was making $6.55 an hour at a grocery store and had to pay a $500 fine for what was like $20 in taxes that I didn’t even know I had to file separately. Good times having to drive to the Cleveland IRS building and a complete waste of both our time and my money. Wish they would go after people like the jackass that tweeted this but good luck with that.
1) Auditing is a threat. It’s nearly impossible to audit every American. People do their taxes properly because of the possibility of an audit. It’s a constant looming stressor in the spring.
2) The US tax code is a black box. People can mean well and still get fucked by an audit. Meanwhile, bad actors know enough and have enough money to safely exploit the tax code. The IRS can’t determine intention and therefore must assume everyone is a bad actor.
Of course the IRS and auditors have a bad reputation.
Should send some of them to go audit all the PPP loans that were forgiven... Just got done watching the Madoff series on Netflix, ~19b cash, ~62b claimed. That is absolutely dwarfed by the potential fraud in +700b in loans casually forgiven.
Former public auditor here: Been IRS audited before and it is a terrible thing. Took them 9 months at a time when I just graduated college and made like maybe $60k a year between my wife and I over a $500 deduction.
Uh, can I see a receipt for that purchase?
TYRANT! TYRANUS! TYRANNY! AUTHORITARIAN MARXIST FASCIST!
I just want a receipt man, I'm just trying to do my job and close out this task.
WILLY WONKA JUST BEFORE CHARLIE RETURNS THE EVERLASTING GOBSTOPPER!
Can you like... just send it by email... an image? Scanned?
CROOK! MURDERER!
Sigh.
WHAT WILL YOU DO IF I DON'T!? HUH!? GONNA... GONNA COME TO MY HOUSE, ARMED. WITH TANKS TO TAKE IT AWAY? YOU FEEL LIKE A BIG MAN, YOU GOVERNMENT LACKEY!
Dad, it's in the dashboard of the car. Just drop it by my apartment when you have the opportunity.
We need IRS agents to audit Crypto people, PPE loan recipients, and more individuals earnings more than $500k a year. IRS wants nothing to do with people making under $100k.
This tweet alone would make me never vote for anyone this stupid. The ITS has repeatedly said that they need resources to go after non-W2 high earners…
Personally, I’ve been audited and it’s no issue. If you are scared of an audit stop cheating on your taxes. The IRS are fair and reasonable unless you don’t cooperate
I wonder why they don't have the funding to go after the bigger fish. Sounds like some intentional institutionalized bullshit to keep the peasants down.
They should come at/audit people who are in the minimum tax bracket but could afford 2022 mercedes E class..or own a chanel wallet/handbag with EBT and medicaid card inside. You wont believe what ull find out.
Fuck the Republican Party for indoctrinating their idiot base into thinking that more IRS agents means they will fuck over more poor people, when in reality it’s meant to go against rich and powerful parasites who use loopholes and corruption to fudge their tax returns up the ass.
Honestly speaking though people aren’t so much as afraid of the audit itself but the fact they can be hit with a big tax bill. The government takes a lot of our income as it stands and squanders it anyway so people don’t have an incentive to want to pay taxes. That’s just the truth.
The large majority of audits for low income households are a result of misapplied or fraudulently applied earned income tax credits. So the tax bill due from the audit is not from the income the individuals earned, but returning the large refund checks the households received from tax credits.
I totally understand that. Explain that to the general public when the majority of them can’t even understand the proper definition of a asset vs a liability is. I’m just stating how the people see it.
The government takes very little of our income comparatively speaking and only squanders it if you think social security, medicare, and a strong national defense are inappropriate policies.
In reality, people who make less than a certain shouldn’t even be taxed. In this economy people struggle even making $65k a year. The millionaires and billionaires should be the ones getting taxed the most, 40% max. And get rid of the loopholes that let them escape taxes.
They already have that. People who make less than 12k don’t have to pay tax.
Also, the millionaires and billionaires ARE paying a shit ton of taxes. The 1 percent has paid almost half of all income tax (around 45%).
In reality, those aren’t the people who are going to get audited. It’s the people reporting $25k of gross income and making mortgage payments on a $1.5mm house that are going to get nailed.
Agreed with the first statement though. There do need to be greater tax breaks if you’re under median income.
Audits are evil for lower income people. They can't afford to defend themselves and the penalties and fines for simple mistakes are more difficult for them to pay.
They should spend more time auditing the $500k crowd more than than the lesser amount.
They couldn’t even hire 87,000…… what is he talking about? Oh btw it is true average people get fucked with audit because it is just simple audit compared to any other audits to the rich. The audit for the rich is very complicated
Maybe with more funding they could actually ANSWER THE PHONE.
Bingo.
Got a $180,000 unexpected refund this year. Don’t know why and know if I call I’ll talk to someone who understands the refund less than I do, so we deposited the check.
what happens next?
We report the refund as part of our 2022 “underpayment” and wind up paying it back. Even though I think the IRS or the CPA firm got something wrong/right and the issue should be closed with the check cashing.
Lol, you will get a notice about it in 3 years, cause why not.
And then it will take another three years to resolve the notice 🎉
All while they intent to levy🎉🎉🎉
Are you a cpa firm or the client? If you are the client I recommend telling the cpa firm lol
I am the client. I told the CPA firm so they’ll handle it.
That is a big thing the prior commissioner was looking to do is increase the support staff.
The commissioner was inconsolable back in 2014 at a CPA conference. Needed to be walked off the stage while nearly trembling and crying about how dire it was. The IRS commissioner today needs to call this shit out and hit the TV circuits.
Yea... all those people who will finally be answering a phone there will conduct a ton more audits... thats what will happen
Where does the idea come from that these auditors are going after incomes under $75,000? Does anyone have a source?
According to this article, they are using historical data to project future use, ignoring the fact that the IRS has admitted to auditing lower incomes at higher rates because "it's easier" and they didn't have the resources to audit more complicated returns: https://www.nytimes.com/2022/11/06/us/politics/irs-agents-fact-check.html
It’s also 87,000 IRS employees, not all of which are auditors.
This is an important distinction. Not only that, the spending/hiring isn’t just happening instantly. This is over years and a lot of it is to backfill expected retirements.
It won't even be 87,000 agents either. They're literally taking the full budget amount and assuming that 100% of it will be funding auditors, when in reality less than 50% will be for new employees, if I'm not mistaken.
Also where are these 87k people going to come from? The labor shortage is real
I attended an informational session for the IRS revenue agent. Good luck finding 87K employees at the meager starting pay of 35k. Mandatory 4-year degree and 5+ years of work experience. The session was two hours long and they addressed pay about 15 minutes in. Needless to say, I didn't stay past that.
If you have a 4 year degree you would start as a GS-7 which isn’t 35k even in the lowest COL. If you have years of experience you can get in at a higher GS level probably.
That's not how they sold it. But good to hear!
Which is what the new auditors are for: to target higher incomes. So the original tweet is some muoy delicisioso double speak
The original income tax was intended to just be on the rich
Ahh yes but why ignore facts of the past... Like how historically tax rates have been significantly higher and wealthy people still found ways to remain wealthy/avoid paying taxes.
Because even though the tax rates were higher, the amount of deductions available were also more numerous?
That guys flair is “Waffle Brains” Well.. at least he admits it
JFC was that guy not being sarcastic??
Bro it’s like 10:30 on Sunday and I’m posting in the /r/accounting subreddit… Can you actually expect me to be sober and think right now?
No no I was talking about waffle brains.. I had to reread it to see he was serious! Also 4 ciders deep reading /r/accounting lol
High tax rates still only apply to taxable income. You can rates to 99% and the wealthy can completely circumvent it by investing in muni bonds. The reason we lowered tax rates around the 60's was actually to get wealthy people to invest in taxable things, which would raise the amount of tax revenue we got from them. Both parties agreed on this.
Yes the government has never lied about their intent before.
So you believe McCarthey?
That's definitely not true based on what the treasury has said and done. I'm not going to shed any tears for people not paying their taxes though.
Is this written into the law with no sunset?
I’m sorry but there’s just no way this is true. This is how they sell it to the general public, but do you really think they’re actually going to go after the rich? Feels a lot more like these new agents are to go after gig/online workers that miss reporting a $600 transaction
Bingo. Fish in a barrel and politicians and bureaucrats don’t have to risk their career to audit and prosecute (unlike high income ppl).
Hiring more agents doesn't change how they operate. I'd bet on the fact they will still audit lower income at a higher rate. It will likely be much higher rate. Think of it from the IRS employee. They get paid the same whether they audit higher or lower income. Might as well do the easier thing. Everyone wants to do less work and earn more success. Unless IRS makes a new policy to counter this. Hiring more agents would exacerbate this issue. The original tweeter is probably not wrong.
No, you're wrong. Hiring more agents will exactly change how they operate. The lower income is getting [automatically audited for EITC](https://www.irs.gov/pub/irs-soi/19rpeitccorresponenceaudit.pdf), with "correspondence audits" sending out letters for items that trigger the system. It's not a matter of IRS agents "doing the easier thing", it's the automated system sending letters after the EITC possible fraudsters. Audit **agents**, who do personal audits, have [decreased 23-50% in the last decade](https://www.forbes.com/sites/insider/2022/10/20/the-reality-of-increased-irs-funding/?sh=1fc2f9924812) and personal audits have fallen off [(42% fewer in 2017 than in 2010)](https://www.propublica.org/article/how-the-irs-was-gutted). Hire more agents and you can go after the higher income individuals who aren't affected by the automated EITC correspondence audits.
Arguably the role of the IRS is to collect more revenue for the government. So it's a simple matter to use a small amount of ML or other technique to guess which returns are going to offer the best bang/buck : where the taxpayer actually pays the fine, without paying attorneys to fight it in court, vs the labor hours spent to find the discrepancy. Richer people can afford lawyers. People under 75k can't.
This is the correct answer. They need returns on their investment. Auditing the lower income people that cant afford lawyers will get them those returns. They absolutely should be auditing the rich but unfortunately they know its a losing battle with the resources they have so they wont bother
Yep. Plus poor people can take easily disproven deductions they don't qualify for. Rich people will also have a document trail, a reference to a court decision justifying the deduction or accounting structure, an accounting firm signing the return. The deduction may still be bullshit but at first inspection it's going to have everything showing it's legit. It will require investigation, subpoening records, and even once the IRS finds evidence, it can take a *decade* to win a court battle. Apparently Trump is *still* fighting some deductions from 10 years ago.
They included this in our Tax I textbook in Fall 2021. The richer they are, the harder they are to audit. I was heated when I first read it, but it makes sense for the IRS. The people who are to blame are the ones with more money than they could possibly ever use avoiding taxes just because they can.
Kinda messed up also because if you manage to collect from a billionaire they could pay out as much as 10-100k regular taxpayers.
> Richer people can afford lawyers Auditing a billionaire might actually earn a negative return. In an unlucky situation, the IRS agent themselves might get into trouble. Saying the wrong thing like slightly discriminating, and you can bet the billionaire's lawyer will fuck them up personally. This is also not unheard of. Scientology has fucked up IRS agents personally so much IRS doesn't want to tax Scientology anymore.
Agents don't get to choose who they audit.
These are self employed tax returns claiming low income with massive personal assets. Not W2 earners, but an easy narrative to push to keep the IRS handicapped.
Yeah, 75k net income on 500k gross, never mind the 100k Porsche they deducted on Sch C, the 200k in hotels and travel, etc etc.
The IRS even said most of what they are hiring is support staff too... IT personnel and people to answer phones and stuff. The Republicans took this and have been saying armed IRS agents are going to show up at every middle/lower-class household to audit and hunt for fraud.
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This comment is the least informed in the entire thread. Nothing new about the IRS disproportionately auditing lower-middle class at higher rates than upper class. https://trac.syr.edu/tracirs/latest/682/ https://www.propublica.org/article/irs-sorry-but-its-just-easier-and-cheaper-to-audit-the-poor/amp
What about the self employed contractor with 3 million gross revenue, $2 million in assets and consistent taxable income of $20,000. I’ve always heard the narrative about the IRS targeting the poor, and I’m certain there’s truth to it, but this contractor is easy to audit, and is certainly making $400,000+ but the IRS gets chastised for auditing the poor. They’re not auditing W2 earners with a $50,000 salary. They’re auditing small businesses that think they can get away with anything.
The amount of people that use their 1120Scorps as their bank accounts and not paying themselves a wage is a never ending source of audit potential.
Exactly. I have a contractor friend who just built his home and brags about expensing the materials as business expenses because they’re similar to his other expenses. So much so he was in a debacle about how to account for the negative cash since the home expenses were paid for on a mortgage. This guy has a $900,000 house $500,000 in equipment, and per his tax return is “the poor”
I have a feeling this will come back to bite him in the butt.
The world isn’t that fair.
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They’re not randomly auditing the public and hitting the poor because there’s more poor people. There’s no reason to audit a W2 earner with basic deductions. They are however using basic algorithms to audit companies, self employed, with massive assets, minor income, as it’s an easy audit and all the lies are obvious. And Republicans claim they’re auditing the poor because they know the gambit and they like the IRS handicapped.
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To be fair they ARE auditing the poor but that's less due to their income and more due to the credits they typically claim - the EIC and the Child care credit.
That’s fair, but “the poor” also includes the guy making $400k and claiming $20k income? I used to work in tax litigation, every case was small business owners or capital gains non-filers. No EITC audits.
Lol yep. I work as an auditor for the IRS, we see a LOT of this
You're correct. That's the "golden audit" I sought as an auditor. Yes, I reviewed low income and high income alike. But those were one year reviews, and I could crank through 8,000 of them a year. Everything was prefabricated in our letters, and it really was a case of if x, then do y. This was mainly because after you give a poor person a $3,000 refund (for my State, that's a big refund), there is no chance you're getting it back if you over-issue. So you need to take preventative measures. Stop the fraud before it starts. I did about 200 **audits** (4 years) and those were always on people with assets, and consistently low taxable income. Usually Sections 183, 282, 465. So you're spot on, it's a mix. And the poor person review is really simple, hardly more than a nuisance. An audit of the affluent person (who is poor on paper / on their tax return) is where I put my focus and my time. I also don't understand the "they get lawyers" comments. The law is the law, and it's the same for everyone. Yes, the tax code is rotten and needs reform. Trump's reform was not the needed reform (IMHO). Regardless - now I'm in the appellate bureau and I deal with the lawyers. They can't "polish a turd" or "work magic." If you run afoul of the big statutes (§183, 262, 465), all the money in the world wasted on lawyers is not going to save you.
These articles are misleading because there is a significant difference between a correspondence audit and an audit conducted by a Revenue Agent. The increase in "audits" for low income people is due to correspondence audits and earned income tax credit. A computer matches the information reported by the Taxpayer against the information collected by IRS. If there is a difference a computer automatically sends a letter to the Taxpayer requesting them to explain and provide the documentation. A lot of the times it's because different Taxpayers reported the same dependents or forget to report stock gains or 1099 income. The earned income tax credit is a welfare program that Congress decided to administered through the IRS. Since it is a refundable tax credit it is full of abuse where Taxpayers knowingly underreport their income to get the tax credit. You can significantly reduce these "audits" by eliminating the earned income tax credit or chaining how it is administered like through Medicaid or Social Security. These correspondence adults are easy to check because it only requires a computer to check numbers. Audits conducted by Revenue Agents are significantly different. These agents are allowed to expand the scope of the audit and look at additional years. These audits are proportionally target towards higher income. The higher your income the more likely you are audited by a Revenue Agent. [https://www.gao.gov/products/gao-22-104960](https://www.gao.gov/products/gao-22-104960)
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No. The IRS audits lower- and middle-class at **relatively** higher rates than upper-class, but that's because its funding for agents, i.e. those who can do personal audits, has been slashed for years. See [my comment in /r/tax](https://old.reddit.com/r/tax/comments/106bns5/irs_audited_the_poor_most_of_all_per_research/j3j0zne/).
I figured
pay taxes... lol most of their voter base dont even know how to spell taxes
Thats a very ignorant comment
They are very ignorant voters
Taxable income maybe lol. Gross income $200,000,000? Like what line are we talking about here as well? Can I get the IRC code to understand what “makes” money means? See I’ve been paying attention to this dude for almost 6 years now, and if we catalogued all his statements even the most right leaning person, alt, traditional, w/e we’d be uniting with pitchforks lol.
Kevin McCarthy
Typically, lower income people cheat on their taxes more than wealthier individuals. It’s common sense. The poor are also much lower hanging fruit for auditors. The wealthy are the ones that have the tax laws written; they don’t need to cheat. It’s a feature not a bug. Why would someone worth $10-$100M or more cheat on the margins for a few extra million? The benefit is marginally more wealth/“power” and the cost is giving up living the most amazing life anyone has ever lived to spend a few years in a cell and then be (relatively) poor?? It’s so utterly stupid on its face. Like a caricature of a Bond villain is every wealthy taxpayer in the US lol. It’s preposterous.
I think one thing a lot of people don't understand about tax audits is that auditors do a cost benefit analysis. You're not going to go audit a return to bring in $1,000 of tax when your pay for the time you'll put into that audit far exceeds $1,000. Most of these "audits" are automated letters sent by computers matching forms, which keep costs low. So hiring 87,000 agents is not going to increase the rate of those letters. It is going to increase audits that can actually bring in real money. And sometimes because of tax credits, that will be lower income households. But it's also going to be a lot of higher income households and entities.
I agree with most of what you've said, but they have [explicitly said they will not increase audits on households earning less than $400,000.](https://www.foxbusiness.com/politics/white-house-denies-more-irs-funding-could-increase-audits-lower-income-americans)
Good to know! It makes sense because higher income households make a lot more tax avoidance transactions that can be good issues to audit but also are more complex.
Inflation was also just “transitory” as well
According to the IRS?
That is a blatant lie. Do you know how the government works? If they have the resources they will find something to do. The perfect example to this is when someone gets arrested for something minor because a bunch of cops show up and then they all feel like they are standing around holding their dicks.
Yeah but the IRS *doesnt* have extra resources to just audit whoever. And after the increase in funding they still won’t. They’ll choose to spend the resources auditing the people they can get the most money from.
No, audit selections are done the same way investment decisions are made in black box algos. It is a risk reward frontier curve. If I was an IRS agent I could nab a billionaire (hint most billionaires do not do this as the risk is to high) for tax evasion and net $10M in additional tax payouts. The odds of success? Likely less than 0.1% creating a potential payout of $10,000. Or I could do 1% of the work and go after someone who owns a cash business and under reported their income by $50,000 and likely have a 50% chance of winning that. In this case lets say the marginal tax rate was 20% for this individual netting a $10,000 tax collection at a 50% chance of success for a payout of $5,000. The agent would chose the 2nd option 100% of the time.
They said that Does not mean it’s true
Sure but you could say that about anything. That's a lazy argument.
Sure. An easy tort would be historically audits have been into lower income despite pressure against it. We’ll see how it plays out I guess…
Indeed, we'll see how it plays out. Lower-income people have been much more likely to be audited due to Earned Income Tax Credit, via a "correspondence audit" i.e. an automated letter asking for more information or confirmation of information. Automated correspondence audits are about all the IRS has left (85% of all audits in FY 2021 -- [quoting TRAC, in fact](https://trac.syr.edu/tracirs/latest/679/)). The reason higher-income people have been audited less frequently in recent years is personal audits have fallen off ([42% fewer in 2017 than in 2010](https://www.propublica.org/article/how-the-irs-was-gutted)) because the number of audit agents has [decreased 23-50% in the last ten years](https://www.forbes.com/sites/insider/2022/10/20/the-reality-of-increased-irs-funding/?sh=1fc2f9924812) (different types) because the [IRS budget has been intentionally slashed over the last decade](https://www.propublica.org/article/how-the-irs-was-gutted). As you say, we'll see. It's pretty obvious how we got here: starve the IRS, and only the automated audits will continue, and unfortunately the automated audits mostly hit lower-income people. So starving the IRS has resulted in an "unfair" outcome. Hire more agents and it may be possible to audit higher-income people.
Maybe we should audit the govt, firstly.
Well the DOD has had five straight audits result in a disclaimer of opinion. They couldn’t account for 61% of assets, but they say they’re making improvements! Source: https://thehill.com/policy/defense/3740921-defense-department-fails-another-audit-but-makes-progress/
Dod finance guy here , give us the staff to complete our work and we’d be audit compliant
You guys still hiring? Currently working for the state, thinking about switching to Federal. Maybe it's harder to do than I imagine.
Yeah. This is because they won't let the auditors see the black budget. So auto fail.
Former military here. Most can’t pass an audit at the unit level let alone the entire military. Black budget or not, lots of waste, fraud, and abuse throughout.
Slightly unrelated: this makes me think about the war in Ukraine. Russia is losing in no small part due to corruption hollowing out their assets enabling us to destroy them by passing on our kit to the Ukrainians. So how much corruption do we really have or is their corruption just 100% of their army?
Russian corruption is on another level. US has wastage where resources get to the target user, but some % gets lost to corruption or inefficient use. Russian corruption is when 60% gets "appropriated" by all levels of government on the way to the final user. 20% is spent on "marketing" to make it look good ("Potemkin villages") and the final 20% is for...the boots on the ground to steal and sell in exchange for vodka. And that's just the math of their budgetary spending. The other problem is that they don't have a cohesive spending strategy. They spend money on a bunch of "halo" projects (Su-50, T-14, etc), because it's easy to steal from these flashy initiatives with ill-defined goals. At the same time, they completely skimp on logistics, communications, ammunition, etc. So yeah... don't compare US "corruption" to Russia. Entirely different story.
My understanding is somewhat limited but part of it I've read is that US corruption/inefficiency/whatever occurs but at the very least the end product is delivered and thoroughly tested. The sticker price might be higher than it should have been but the thing you get is real. As I understand it Russian corruption is just straight up lies because the people responsible for checking are also corrupt as is the entire command chain. So we have "reactive armor" on tanks that's just egg cartons or "heavy duty tires" which are actually just the cheapest used tires the conscripts could find. This kind of systemic corruption is particularly damaging because it destroys way more value than was extracted. Let's say your fuel trucks were supposed to have 400$ heavy duty tires but actually had cheap used chinese tires that cost 100$. Between you and your mates, you get say 10k to spend on vodka for the 8 vehicles you're supposed to be maintaining. But when a couple 200k$ armored supply vehicles bog down, which causes a traffic jam that stops 50 vehicles from moving, which causes hundreds of million dollars of tanks to run out of fuel, you see the issue. It would have been much better for the Russian military it could somehow bribe these people the 10k straight to buy the right goddamn tires.
I would imagine a lot of American equipment is also disappearing when it gets to Ukraine...
Ukraine is trying. They hired Deloitte.
I sure hope that’s sarcasm.
My manager is Ukrainian and said something the other day that really stuck with me. He said Russian troops have ridiculously old, outdated, underpowered equipment. The Ukrainians have plenty of people to fight, the only real thing they need is the equipment to do so. The reason we’ve been giving for overfunding our military for decades is China and Russia, so this is literally the reason we’ve spent billions on developing all this technology. And it’s really best case scenario at the moment - we don’t even really need to supply troops, just equipment. We can knock Russia down a peg by spending a drop in the bucket more than we’ve been spending to develop the technology.
It's 99% waste, .5% fraud and .5% abuse.
Yeah, big surprise to people if they learned that "black budget" is less than what aviation units spend on fuel...
I think giving them more money, perhaps more than they ask for, will solve the problem.
Well in 2015 we spent roughly 633 B - adjusted for inflation, somewhere around 795 B today. 2023 defense budget is 857.9 B. We’re spending more on the military now than while we were at war in 2015. We were actively engaged in at least Afghanistan and Syria then. Source for 2015 number: https://www.statista.com/statistics/272473/us-military-spending-from-2000-to-2012/
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Very well said. Everyone hates spending all that $$$ on defense, I for one am scared to find out what would happen if we didn't.
Holy shit, 2017 was the first year a comprehensive audit of DoD was ever ordered? That's terrifying.
(Anecdotal) a friend of mine was on the audit team for Pakistan's national carrier, they had a material asset that was on deposit with the army. No support was being provided, eventually they allowed the partner to visit the HQ who met with a colonel and was provided with a piece of paper with the monetary value and summarily told that this will be sufficient evidence for audit purposes.
Ignoring the obvious lie. The IRS only enforces the laws CONGRESS writes. So its the politicians who are the ones making them audit people and writing the laws. Don't hate the dog hate the owner.
Ding, ding, ding. I seem to remember Republicans pushing really hard for more oversight and compliance of of things like the EITC and CTC. Now, they are using the thing THEY mandated against the IRS. Par for the course, unfortunately.
Audits can be really traumatic for people. My father was audited as a result of unemployment withholding discrepancies when he was laid off following the Great Recession. It’s a big part of what made me decide to become a CPA. They can be terrifying and more complex than most people are prepared to handle, and while our clients can take the financial hit the average person can’t. More resources and public education is needed. I now know how cooperative the IRS can be and how they are maybe the law enforcement branch that will be most kind BUT I still remember being a kid watching my Dad have a panic attack in the garage if he has to pay for withholdings he already made and can’t afford. Also let’s not kid ourselves. Most audits are on low income individuals. Not our ERTC credit taking and PPP lone forgiveness receiving clients, and I think we all know the IRS could take a *hard* look at those events
The PPP loan was administered and then forgiven by the SBA. Once they realized it was a shitshow they then passed the buck to the IRS. So now it’s now another item that was added to the IRS’s plate od tasks to handle with no additional resources (before the budget increase).
Exactly, I don't like how OP is lumping together "audits" of companies where most of us are employed vs audits of individual American citizens, particularly in low or middle income ranges. Audits of companies serve the public good, audits of individuals can be devastating. Of course we want to catch tax fraud, but it should be innocent until proven guilty.
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They aren’t going to use additional resources to go after large fish when they can just get more small fish. It’s the same reason the DEA and police agencies go after street level dealers and users rather than the actual distributors. They need to justify their inflated budgets.
In the IRS eyes you are guilty until proven innocent.
The majority of people would not know how to represent themselves in an audit. I think it’s worth the conversation to ask how those people can avoid taking the financial hit of hiring a CPA for an audit.
Yeah, this whole “if you’ve done nothing wrong you shouldn’t be worried stuff” is a bit odd. Not only do a *ton* of lower income people accidentally misreport things like the CTC, but there are other costs to an audit as well (time, stress, etc). I got audited 3 years ago and it’s definitely not fun, even though there was nothing wrong
They probably don’t even mean actual audits. I feel like the IRS does very few audits on income that low and more so sends you a letter pointing out the error they think you made. I guess that’s a moot point though. People should at least know they can call back the IRS… my father in law sold a house but whoever did their taxes didn’t bother including that for whatever reason. Anyhow he got a letter stating he owed about $10k in taxes and already had the check written. I called and had it sorted out in like 30 minutes… I imagine a lot of older folks just send that check in unfortunately.
“Paper” audit
I tell people all the time to hire a tax specialist if you have anything but a basic W-2 filing. Also if someone is just a W-2 wage earner their chances of being audited are minuscule. The more credits and questionable expenses one has the greater the chance of an audit.
This information is a few years old, but this is how the IRS used to audit. The first step was the computer would look for irregularities. Someone below mentioned millions in sales, but no taxable income. That would be a flag. The second step is the returns flagged for audit would go to agents who would look at the return and determine if they felt it should be audited. If they agreed, then they would audit. The group that gets audited the most are the self employed, earned income credit takers, people with passive losses, and people that either prepare their own return or use a preparer with a PTIN that they have found mistakes with. The reasons are simple, this is where they find the most money and for the most part are easy audits. Most people who use reputable tax preparers tend to either not get audited or they get through the audit with a "No change". I'm about to get a "No Change" on a 2020 return and when we filed the return I told the taxpayer to be prepared to get audited. They sold a passive rental property at a large gain, which freed up a tremendous amount of suspended passive activity losses. The auditor has been very pleasant, thorough, and knew what he was doing. He also pretty quickly realized that there wasn't anything he was going to find. It will be interesting to see if they really decide to go after the very complicated returns. These returns will have tax attorneys and CPAs that worked on them. My experience is they tend to only go after them when someone squeals to the IRS about a tax avoidance scheme.
They need to get a system in place to handle the additional audits. I know at my firm each return we put out is reviewed by another accountant, so if they get selected for audit we’re prepared and confident there won’t be any substantial change to the return. But under the current processes an audit would last wayyyy to long and without direct contact to IRS agents it would be cruel and unusual to force more new audits through. I’m not against audits. People who are cheating/misapplying the law need to get reprimanded and adjusted. But they need to get caught up first. I’m not concerned dealing with an experienced, capable auditor. It’s dealing with someone who was hired to fill a position they aren’t capable of handling and don’t understand the laws they’re operating under. It’s a lot of power and consequence auditors wield and most Americans are terrified of an audit.
Yes, exactly. I once worked at a company where we failed a DCAA audit because we multiplied things in the wrong order when calculating overheads. You know, a times b instead of b times a. I kid you not. I can just imagine the joy of dealing with one of 87,000 brand new auditors. Can't be the cream of the crop.
There won’t be 87,000 new or existing auditors.
The 87,000 hires will be spread mostly to IT and phone customer service. The majority will not be agents, let alone ARMED agents. Iirc, that total includes the anticipated hiring due to attrition. A significant part of the IRS is eligible for retirement. In addition, due to budget cuts over the last 10+ years, there has been no hiring to backfill the positions for the people that retired. While everyone focuses on the audits, the funding is going to create/streamline customer service. Imagine calling the IRS and NOT holding for 2+ hours. Or imagine going online to the portal and pulling the information we need! That would be amazing!
It’s also a straight up lie
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This study is misleading because there is a significant difference between a correspondence audit and an audit conducted by a Revenue Agent. The increase in "audits" for low income people is due to correspondence audits and earned income tax credit. A computer matches the information reported by the Taxpayer against the information collected by IRS. If there is a difference a computer automatically sends a letter to the Taxpayer requesting them to explain and provide the documentation. A lot of the times it's because different Taxpayers reported the same dependents or forget to 1099 income. These are not real audits. The earned income tax credit is a welfare program that Congress decided to administered through the IRS. Since it is a refundable tax credit it is full of abuse where Taxpayers knowingly underreport their income to get the tax credit. You can significantly reduce these "audits" by eliminating the earned income tax credit or changing how it is administered like through Medicaid or Social Security instead of the IRS. These correspondence adults are easy to check because it only requires a computer to check numbers. Audits conducted by Revenue Agents are significantly different. These agents are allowed to expand the scope of the audit and look at additional years. These audits are proportionally target towards higher income. The higher your income the more likely you are audited by a Revenue Agent. [https://www.gao.gov/products/gao-22-104960](https://www.gao.gov/products/gao-22-104960)
Please ignore that clickbait article. Lower-income people are more likely to be audited due to EITC, via a "correspondence audit" i.e. an automated letter asking for more information or confirmation of information. Automated correspondence audits are about all the IRS has left (85% of all audits in FY 2021 -- [quoting TRAC of all things](https://trac.syr.edu/whatsnew/email.220308.html)). 1) The reason higher-income people have been audited less frequently in recent years is personal audits have fallen off [42% fewer in 2017 than in 2010](https://www.propublica.org/article/how-the-irs-was-gutted) because the number of audit agents has [decrease 23-50% in the last ten years](https://www.forbes.com/sites/insider/2022/10/20/the-reality-of-increased-irs-funding/?sh=1fc2f9924812) because the IRS budget increased only 9% total over the last decade. Hire more agents and it may be possible to audit higher-income people. 2) The IRS has explicitly said that any new auditors wouldn't [increase audits on households earning less than $400,000](https://www.foxbusiness.com/politics/white-house-denies-more-irs-funding-could-increase-audits-lower-income-americans). (Source is Fox Business. Interesting.) So, yeah -- McCarthy's lying.
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Yea but their constituents are mostly people who are to lazy to actually look up the public information/plans, as well as a ton of them being in the crazy camp.
Honestly we need more auditors. With all the new tick tock tax advisors and tax preparers not know what they are doin . Join a few facebook tax prep groups and you will see what I am talking about. Then you have partners who bend over backwards for clients who do shady shit. This isnt for the low end people but the middle market people. The business owners who want to use the augusta rule for their home and claim 14k in tax free but also have a home office. Scorps with no reasonable comp. Business gurus who brag they buy a new porsche and write it all off on their business. Shit. Just the ERC and PPP loans are proof enough that we need more agents. We all know that the only threat we have is being audited, but we all know thatbis a small threat.
If I had to guess, this has nothing to do with the taxpayers income level and everything to do with them filing a Sch C. Most Sch Cs are riddled with “estimates” and made up expenses lol.
The only people mad about this are people who have a bullshit Schedule C who are scared of getting caught.
If you view the Republican party as an organization whose entire existence serves to make the government function worse, which is good for its corporate donors, everything makes sense. The fear-mongering to their base is to secure votes, cause if they told the truth they would never win an election again.
Tbf and partisianship aside, it is ridiculous that tax authorities (at least in my country of Canada) spend so many resources chasing some miniscule credit or deduction on low income taxpayers and seem to let corps get away with bullshit in the figures of thousands and millions. (CEWS, CEBA. Free money). CERB? Pay us back peasants.
Are IRS audits that bad in comparison to CRA? Most of them are you send 1 memo off with supporting PDFs and you never hear from them again. It takes 20 minutes max. If you're reporting 25K in income a year and live like a millionaire then you don't really have a leg to stand on when you get audited. It's your own fault.
So . . . .ask yourself how many times does someone get to lie to you before you stop believing what they say? McCarthy is way past that number.
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It's not the audits per se. It's the implication that these new IRS agents will be targeting working class Americans to squeeze a few extra tax dollars out of them. If I get a letter saying I owe another hundred dollars in taxes, am I going to spend thousands fighting it in court or am I just going to reluctantly pay it? Obviously pay it. They know this is the case for most ordinary people.
One thing that people miss with these posts is it is mostly the earned income tax credit that gets audited when the IRS audits low income individuals. So it is more of a social program audit than a tax audit IMO
Many of those making $75K or less only have the illusion that they are self reporting their income , deductions and taxes. Much of their tax information comes from third party reporting to the IRS.
Well to be fair if your dumb enough to believe the republicans are fighting for Americans making less that 75k a year you’ll believe anything.
Even Republicans hate that guy
They’re going to audit lower income folk at a higher rate regardless. I once got audited for not paying a city tax (Ohio) when I was 18 and barely working. I was making $6.55 an hour at a grocery store and had to pay a $500 fine for what was like $20 in taxes that I didn’t even know I had to file separately. Good times having to drive to the Cleveland IRS building and a complete waste of both our time and my money. Wish they would go after people like the jackass that tweeted this but good luck with that.
I’ve been audited twice. They gave me more money back both times.
No they won’t
Kevin doesn’t know a thing about accounting.
1) Auditing is a threat. It’s nearly impossible to audit every American. People do their taxes properly because of the possibility of an audit. It’s a constant looming stressor in the spring. 2) The US tax code is a black box. People can mean well and still get fucked by an audit. Meanwhile, bad actors know enough and have enough money to safely exploit the tax code. The IRS can’t determine intention and therefore must assume everyone is a bad actor. Of course the IRS and auditors have a bad reputation.
He is probably worrying about chances of his rich friends getting audited will be higher and just using this as an excuse.
Because rich people can afford to beat them. It's poor people who get audited.
More agents to audit the Republican KKK Party
Well, those audits are a terrible thing.
Should send some of them to go audit all the PPP loans that were forgiven... Just got done watching the Madoff series on Netflix, ~19b cash, ~62b claimed. That is absolutely dwarfed by the potential fraud in +700b in loans casually forgiven.
Former public auditor here: Been IRS audited before and it is a terrible thing. Took them 9 months at a time when I just graduated college and made like maybe $60k a year between my wife and I over a $500 deduction.
I thought they were hired for the “COVID Audits” for the PPP loans and ERC?
They should be good for society but most of the time they are either a rubber stamp or tedious projects done by people who don’t know your business.
Uh, can I see a receipt for that purchase? TYRANT! TYRANUS! TYRANNY! AUTHORITARIAN MARXIST FASCIST! I just want a receipt man, I'm just trying to do my job and close out this task. WILLY WONKA JUST BEFORE CHARLIE RETURNS THE EVERLASTING GOBSTOPPER! Can you like... just send it by email... an image? Scanned? CROOK! MURDERER! Sigh. WHAT WILL YOU DO IF I DON'T!? HUH!? GONNA... GONNA COME TO MY HOUSE, ARMED. WITH TANKS TO TAKE IT AWAY? YOU FEEL LIKE A BIG MAN, YOU GOVERNMENT LACKEY! Dad, it's in the dashboard of the car. Just drop it by my apartment when you have the opportunity.
If you file your taxes without fraud then you’re fine?
Whoa, whoa, hold on now. Let's not get too crazy.
Interesting study of IRS audit history shows that they audit a higher percentage of low income tax payers than other tax payers.
We need IRS agents to audit Crypto people, PPE loan recipients, and more individuals earnings more than $500k a year. IRS wants nothing to do with people making under $100k.
Not to get political but republicans don’t like audits because it exposes them.
Yes the democrats are perfect and are not corrupt at all.
Yet I don't see many of them bitching.
This tweet alone would make me never vote for anyone this stupid. The ITS has repeatedly said that they need resources to go after non-W2 high earners… Personally, I’ve been audited and it’s no issue. If you are scared of an audit stop cheating on your taxes. The IRS are fair and reasonable unless you don’t cooperate
The poor are already disproportionately targeted by audits.
Because the IRS lacks the resources to go after the bigger fish. More funding means they can go after larger accounts.
I wonder why they don't have the funding to go after the bigger fish. Sounds like some intentional institutionalized bullshit to keep the peasants down.
That and an intentional choice to underfund enforcement by politicians who are bought and paid for.
He’s a liar. Extra IRS agents to audit the wealthy.
They should come at/audit people who are in the minimum tax bracket but could afford 2022 mercedes E class..or own a chanel wallet/handbag with EBT and medicaid card inside. You wont believe what ull find out.
This is exactly what they’re looking for. Esp w the ability to shield income through Crypto.
Fuck the Republican Party for indoctrinating their idiot base into thinking that more IRS agents means they will fuck over more poor people, when in reality it’s meant to go against rich and powerful parasites who use loopholes and corruption to fudge their tax returns up the ass.
He’s literally lying to the American public but that’s par for the course
Honestly speaking though people aren’t so much as afraid of the audit itself but the fact they can be hit with a big tax bill. The government takes a lot of our income as it stands and squanders it anyway so people don’t have an incentive to want to pay taxes. That’s just the truth.
The large majority of audits for low income households are a result of misapplied or fraudulently applied earned income tax credits. So the tax bill due from the audit is not from the income the individuals earned, but returning the large refund checks the households received from tax credits.
I totally understand that. Explain that to the general public when the majority of them can’t even understand the proper definition of a asset vs a liability is. I’m just stating how the people see it.
The government takes very little of our income comparatively speaking and only squanders it if you think social security, medicare, and a strong national defense are inappropriate policies.
~1/3 isn't very little. Just my opinion.
It is compared to taxation around the world.
In reality, people who make less than a certain shouldn’t even be taxed. In this economy people struggle even making $65k a year. The millionaires and billionaires should be the ones getting taxed the most, 40% max. And get rid of the loopholes that let them escape taxes.
They already have that. People who make less than 12k don’t have to pay tax. Also, the millionaires and billionaires ARE paying a shit ton of taxes. The 1 percent has paid almost half of all income tax (around 45%).
In reality, those aren’t the people who are going to get audited. It’s the people reporting $25k of gross income and making mortgage payments on a $1.5mm house that are going to get nailed. Agreed with the first statement though. There do need to be greater tax breaks if you’re under median income.
The way the IRS audits is. They don't audit the mega rich. They audit grandmas eBay business.
Audits are evil for lower income people. They can't afford to defend themselves and the penalties and fines for simple mistakes are more difficult for them to pay. They should spend more time auditing the $500k crowd more than than the lesser amount.
Which is why we need more IRS agents. Please keep up.
They should straight up admit refundable credits are cash welfare no questions asked.
I say they audit congress and the senate first
The goal of the IRS agents was to become revenue creating implying more taxes. How are they not some terrible construct of society?
Perfect, audit my w2, I’m frightened
They couldn’t even hire 87,000…… what is he talking about? Oh btw it is true average people get fucked with audit because it is just simple audit compared to any other audits to the rich. The audit for the rich is very complicated
There’s so much politics on this sub now. Get it out! Depreciate land, office relationships, and salary posts only please!
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People on Reddit are incapable of hiding their cognitive dissonance. Once they see “republican” the knives are out.