How you can resist funding the government →
about the IRS and U.S. tax law/policy →
IRS incompetence →
enforcement effort/results →
Transactional Records Access Clearinghouse reports on
The Transactional Records Access Clearinghouse keeps a close eye on what the U.S. government is up to, and can be pretty relentless in trying to shine a light in the dark corners of the bureaucracy.
They’ve battled the IRS in court to try to get the agency to be more forthcoming with its statistics, and they won, but the IRS continues to drag its heels.
[O]nly 30 of the nation’s thousands of millionaires were subject to a face-to-face IRS audit in .
The very small number selected for the traditional and sometimes intensive audits were drawn from 184,054 individual tax returns reporting a total positive income of $1 million or more.
…the audit rate for America’s wealthiest taxpayers is substantially lower than for the poorest.…
Restricting the comparison to the agency’s comprehensive face-to-face audits, taxpayers reporting less than $25,000 in total positive income were six times more likely to be audited than those reporting $200,000 or more in income.
When the simpler and far more common correspondence audits are combined with the face-to-face audits, the poor taxpayers were still almost twice as likely to be audited as the wealthy.
And there’s more in the report.
The overall gist of it seems to be that the IRS is inflating its audit numbers by targeting the returns of poorer people and smaller businesses — both because their returns tend to be simpler and easier to audit, and because the people who file such returns have a harder time fighting back.
See the IRS response here.
They claim that the audit numbers that TRAC reports for millionaires are the result of the IRS changing the way it reports its data, and don’t accurately represent the rate of audits.
In war tax resistance circles, there have been whispers of a recent increase in the speed and number of IRS enforcement actions such as liens and levies.
The bottom line for our enforcement efforts shows that dollars collected rose again last year.
There’s a strong trend line going up.
was a watershed year for us, with a number of big initiatives that helped push enforcement revenues up 10% to $47.3 billion.
In , enforcement revenues — the monies we get from our collection, examination, and document matching activities — increased to a record $48.7 billion.
The press release breaks down the numbers a little more thoroughly.
For instance, sure enough:
In our collection activities, levies and liens continue to top their levels.
Levies increased by 36% to 3,742,276. Liens rose nearly 20% to 629,813.
These numbers are data but the IRS seems over-eager to jump from that to conclusions about the underlying situation.
Are increased enforcement efforts leading to more enforcement revenue, or is there just more tax money in general lying around for audits to discover — either because improving financial markets have caused people and corporations to owe more than in recent years or because they are more likely to be trying to illegally evade their taxes?
Hard to say.
I’m even more skeptical of the IRS’s own spin on the numbers when I learn how resistant the agency is to providing the raw data to groups like Transactional Records Access Clearinghouse so that they can do independent analyses.
(TRAC characterizes it as “continuing intransigence and unwillingness to providing public access to detailed statistics about many agency activities, along with a closed-door policy on releasing any meaningful results from taxpayer-financed studies on how our tax system is functioning.”)
Today, for instance, TRAC released its own analysis of IRS audit numbers for big corporations (which “controlled 90% of all corporate assets and received 87% of all the corporate income”).
TRAC finds that “the annual audit rate for these corporations, all with assets of $250 million or more, while increasing in has now receded to about the level it was in and is much lower than levels that prevailed a decade or more ago.”
In addition, the number of hours that the IRS spends on each of these audits has declined.
In , it spent 1,210 hours per audit of such corporations; in , it spent 958. But perhaps it is just being more efficient and effective and doesn’t need to spend as much time as it used to?
TRAC’s opinion:
Some economists and tax experts believe that other explanations are possible, namely that a massive surge in non-compliance is believed to have swept through corporate America.
Although government enforcement activities can be measured, accurately tracking the number individuals or corporations who secretly decide to break the law is extremely difficult.
In recent years, however, [IRS] Commissioner Everson, his immediate predecessor and many others have argued that case-by-case evidence strongly suggests more and more corporations are skirting the law.
The bottom line: a real increase in the number of non-compliant taxpayers may explain the increase in enforcement revenues.
Therefore, while it is true that enforcement dollars are up, particularly for recommended audit adjustments among the largest corporations, the reason remains unclear.
In the face of lowered coverage and audit hours, this increase could be due to a more effective IRS audit program.
However, if corporate noncompliance is up, it could be that the dollars require less effort to find.
Anabaptist World features a letter from Harold A. Penner urging Mennonites to redirect their war taxes to the Mennonite Church USA Peace Tax Fund.
And here is some more news about the ongoing troubles at the IRS.
This CNN Business story goes in some depth into how a loose coalition of activists forced the IRS into an embarrassing and costly retreat from its plan to use facial recognition technology to verify the identity of taxpayers using its online account portal.
This note from the National Taxpayer Advocate gives more details about the IRS plan to stop issuing certain enforcement action notices while it tries to deal with the enormous backlog of unprocessed returns and other correspondence.
For example: “If a taxpayer’s account has been assigned to one of the IRS’s automated levy programs (ALPs), the IRS is also suspending the levies made by those programs…”
The agency will also not be able to pursue many new levies because in order to do so, it must first send the taxpayer a letter informing them of their right to request a Collection Due Process hearing, and they’ve temporarily stopped the automatic sending of those letters.
Some 53,000 IRS employees are still on remote work — about two-thirds of the agency’s workforce, which an IRS spokesperson characterized as “a maximized telework posture.”
But privacy rules prevent remote processing of the millions of paper tax returns mailed to the IRS, as well as the examination of returns with discrepancies from IRS records, the issuance of refunds and dealing with other taxpayer mail.
The Transactional Records Access Clearinghouse at Syracuse University issued a report showing that the IRS audits the poorest American households at five times the rate as the rest.
This seems to be an effect of the agency’s plummeting rate of audits of the well-to-do combined with its increasing use of cheap-and-easy “correspondence audits” against low-income taxpayers who apply for the Earned Income Tax Credit.
As the National Taxpayer Advocate puts it:
The IRS correspondence audit process is structured to expend the least amount of resources to conduct the largest number of examinations — resulting in the lowest level of customer service to taxpayers having the greatest need for assistance.
Last Summer, the U.S. House of Representatives passed a spending bill that would have boosted the IRS budget.
That bill got bogged down in Congress before anything could come of it.
A recent appropriations bill resurrected the IRS budget boost, but pared it way back, so now the agency budget will only rise by 6%.
These days that’s hardly enough to keep up with inflation.
And the appropriations bill restricts how various parts of the increase can be spent, so some parts of the agency budget — tax enforcement for example — will see even smaller increases.
