VITA: Retake Money from the Government to Give to the Poor

I’m a fan of the VITA program, in which the IRS trains volunteers like me to help low-income people fill out their tax forms.

The reason why I’m enthusiastic about working arm-in-arm with the tax collector is that most of these low-income filers are filing for refunds, and that if they fail to file — or fail to get help applying for the deductions and credits to which they are legally entitled — they leave their money in the government’s hands. And the way I see it, that’s a dangerous place to leave your money.

Anyway, one of the drawbacks of relying on an army of quickly-trained volunteers to help people navigate the notoriously labyrinthine tax code is that they will frequently screw up.

The Treasury Inspector General for Tax Administration developed two model taxpayers with certain typical characteristics and used these taxpayers to test a set of VITA volunteers. Only 39% of the resulting tax returns were prepared accurately.

This isn’t a good thing, even though the errors were usually beneficial to the taxpayer:

In the sampling of hypothetical returns, taxpayers would have gotten a total of $31,828 more than they should have.
In the few cases when taxpayers were deprived of benefits they should have gotten, those taxpayers would have paid $4,411 more in taxes than necessary.

The taxpayer is the one who will be held responsible for the errors, not the volunteer tax preparer (who is typically anonymous anyway). It is unlikely that the IRS would bring down the hammer on someone for having had the bad luck of having been assigned to a bumbling volunteer, but they will correct the forms and lower the refund if they catch errors.

Any low-income filer who anticipated a big refund only to have that refund chopped down by an IRS computer will be very disappointed, or worse if they’ve already made purchases in expectation of the refund.

But I hope this news encourages more people to become volunteer tax preparers — if you’re worried you’ll make mistakes, well, consider that par-for-the-course. And remember that even the IRS’s own employees make a lot of screw-ups. A couple of years ago, auditors gave a similar test to IRS tax preparers and found that 19 of the 23 returns they examined were wrong, and another set of testers who called the IRS help line to ask tax questions got correct answers only 62% of the time.

Tax evasion ethics researcher Robert McGee has made two additional papers available on-line:

Jewish Perspectives on the Ethics of Tax Evasion (with Gordon Cohn)
A comparative Study on Perceived Ethics of Tax Evasion: Hong Kong vs. The United States (with Simon S.M. Ho and Annie S.Y. Li)

The first of these is most notable for the response given to the following statement:

Tax evasion would be ethical if I were a Jew living in Nazi Germany in 1940.

Asked to rate their response to this question on a scale of 1 (strongly agree) to 7 (strongly disagree), the average response from the 107 Orthodox Jewish undergraduates from New York who were surveyed was 3.12. That’s about smack dab in the middle.

McGee notes that there is a strong bias against tax evasion in the literature of Jewish religious ethics, for a number of reasons, which may be why this group was one of the most disapproving of tax evasion of all those McGee has surveyed (see The Picket Line 6 July 2006).

U.S.A. Today reports the tantalizing news that Offshore tax shelters [are] not just for the rich.

“This growing access to people who aren’t wealthy and are willing to pay a $3,000 fee … to someone to help hide their assets offshore is getting to be a huge problem,” says Sen. Carl Levin, D-Mich., ranking minority member of the Senate Permanent Subcommittee on Investigations, which in August released the latest in a series of reports on potential offshore abuses. “Honest taxpayers get socked with the bill” as tax avoiders transfer assets offshore, Levin said.
That cost is high.
Although no precise estimates are possible, as much as $1.6 trillion in North American wealth is likely held in offshore accounts, according to a 2005 report by the Tax Justice Network, an international group opposed to tax avoidance.
Americans with assets offshore probably avoid about $50 billion in taxes annually.

Looks like Dave Ridley has signed on to Russell Kanning’s crusade to get IRS employees to reconsider the ethics of their line of work. Ridley went to the Nashua, New Hampshire IRS offices and stood there, quietly, holding a sign that read “Is it right to work for the IRS?”

The IRS employees summoned the police, who ordered Ridley out of the building after he’d been there for about half-an-hour.