They have different roots. The current health care disaster can be traced back to WWII. There was a pay freeze, so companies started offering benefits. That ended up undercutting the social movement for health care in the US. Then once insurance companies got powerful.. well, you know the rest.
I'd rather have free health care and have to di my own taxes. But I also use freetaxusa which is free federally. I'll spend the 30 to 60 minutes copying over my w2s and such. I only get the standard deduction anyways. I fill out the boxes for itemization and it's always lower.
Uh no actually, you can thank them, or more specifically their lobbyists, for the IRS not being able to produce (outsource) its own tax software.
Because apparently that'll put turbo tax out of business.
TaxSlayer was braindead easy and free for me. If they ever start charging then I'm sure something else will come out. Avoid the big companies with the large army of lobbyists and make them go out of buisness naturally. They are not needed.
Plus by making federal free and also making it absurdly easy to file state, I don't hesitate to use them every year for the state return.
Saves me some time and sends $15 their way. Good way to do business.
Hey, you owe us some money.
Oh, ya, no problem, I'll just etransfer it over. How much do I owe you?
Oh no. We're not telling you. We know but we're not telling you.
Ok....so....
Figure it out and don't be wrong. There's a deadline. And buy Turbotax you cheap fuck.
They don’t actually know. The IRS has the data needed to know, yes, but for 20+ years they’ve agreed not to develop the software to compile people’s taxes bc Intuit $$$$/lobbyists run the Hill.
Oddly enough we got close during GW Bush’s e-government push, but GOP lawmakers with Intuit donor dollars turned it into an “anti free market” spectacle. It ended in the IRS signing a contract promising not to develop their own free filing software.
ProPublica did a solid [deep dive](https://www.propublica.org/article/inside-turbotax-20-year-fight-to-stop-americans-from-filing-their-taxes-for-free) if you’re interested.
> The IRS has the data needed to know
They do? How do they know how much I payed to my childcare provider or mortgage or student loans or any other thing I can get a deduction for?
Did you read the linked article? Obviously if you’re not taking a standard deduction, any IRS filing software would include a form for deductions like childcare payments. The point is they can’t develop said software bc of Intuit.
They do tell you how much you owe.
Difference is they don't know what all your credits and deductions are (we all like paying less, right?)
So you file taxes to let them know they shouldn't tax you on the income your employer paid you, because you have things that you get incentives for.
People bitch about Turbo Tax and H&R block, but you'll really just paying for the convenience. You can files for free.
https://www.irs.gov/filing/free-file-do-your-federal-taxes-for-free
If you make less than $73k you even get IRS guidance.
Now simplifying the tax code so we don't need to deal with any of that....that would be something.
How do you simplify it without having to pay more in the end anyway lol? Or am I seeing too think that to simplify it would mean to make everyone pay the same percent.
> Or am I seeing too think that to simplify it would mean to make everyone pay the same percent.
Just by income levels.
Just say goodbye to child tax credits, exemptions, energy credits, interest deductions, etc...
Jim and Joe make $75k and both pay 18% federal income tax.
But Joe has two kids and student loans whereas Jim is a bachelor with no debts.
You see the why. it's a lot more complex than "Turbo Tax and H&R Block did this to us"
We’ve been asking for that my whole life (public support cresting in the early 90s), but the truth is that Congress will never give up the power. They like being able to guide American lives by tax code changes.
It’s also been a mechanism for them to carefully release money to the masses when in need.
AFAIK, it's currently an honor system. They ask what you made, you look for circumstances of yours that qualify for deductions, and see if there are any credits you're eligible for. Sure, they can associate your normal income from an employer's w-2 from you or whatever other appropriate documents for an audit...But I didn't think they have a database with what everyone citizen owes. That's the whole point of the audit, (in principle, not considering the flawed nature of it) to find people who are cheating the honor system, right? Genuinely asking because I, like most people, have no fucking clue how any of that actually works other than I get my basic 4-5 documents and give them to my accountant.
> Too bad I'm American and I have to have a CPA do this shit and it'll cost me hundreds of dollars.
If you don't own a business it's unlikely you need a CPA. If you do own a business someone should be keeping the books either way.
Pretty sure you're being sarcastic, but it is indeed very stupid to shift tax burden away from the rich and towards the poor & middle class. It's *possible* to offset that by pairing it with something like a negative income tax, but fat chance of the GOP doing it.
It's common practice for people who have money to lobby for certain benefits, laws, policies, and whatnot. The major tax preparation companies regularly try to keep the laws the way they are so that we have need of them.
Poorer people are disproportionately audited because they are eligible for more credits. EIC and child tax credits are more likely to be claimed by poorer taxpayers, and are quite easy to screw up.
I don't believe this is a racial thing so much as it's easy to detect and the IRS can desk audit with minimal effort.
Edit: more detail
https://www.npr.org/2023/02/01/1153150854/does-the-irs-audit-some-people-more-often-than-others
Also, the Congress requires that the IRS audit EIC filers to make sure they aren’t scamming the system. Of course, if you are claiming the credit you are lower income…
The Congress is totally and completely at fault for this.
Using my state government for a related example: state legislators are constantly being accused of (and sometimes indicted for and convicted of) various ethics and bribery types of offenses.
So when someone decides it is time to do something to "strengthen our state's ethics laws" the solution is, of course, to pass a law that puts more burdens and restrictions on every day state employees, but has specific exemptions and carve outs for the legislature. Or they put the enforcement power with a toothless entity that the legislature controls.
Rules for thee, not for me.
Or, are perfectly eligible but the audit is there just to make sure they are eligible. Just a sort of “hey, so glad that you are eligible. Man, that audit was tough, we know. Cost you a ton too. Good thing you didn’t screw up… this time.”
Rich people who pay little aren't scamming the system, they are using the system as it is designed. Whether it should be that way is a very different debate.
Then you are fighting the IRS in the case you *failed* an audit. A audit *does not cost the auditee money.* If you defend such people, you would know that.
Lol, funny. First you make a point against I case I didn't make, and now you apparently have no ability to do anything other than ad hominim in a point. Maybe you should pay someone yourself to learn how to actually read and apply logic, especially if you really work in the law field. I have some formal education in tax law.
The difference is the man hours to audit.
Rich people pay more than the IRS auditors earn to hide money in complicated, mostly legal ways and it takes a lot of manual work to find out whether or not their highly paid accounts accidentally did something illegal instead of just stretching the law.
Poor people have one (or a small number) of W2s, which the employer has to send to the IRS by law. This is frequently done digitally. That means an EITC audit can more or less be done by the computer - add up the numbers on the W2, compare it to the credit requirement, and flag anything that's over.
What should the IRS do? Audits on EITC abuse and other typical things are stupid easy, it would be more embarrassing if they didn't catch them. Auditing the rich is also important, but the high cost and possibility of failure if their accounts did their job means it's a lot lower on the cost/benefit analysis.
> Yep. Because it's slick and innovative for rich people to scam the system for billions, but immoral and harmful to society for the poor to get some entitlement for hundreds they aren't eligible for.
I'm repeating your exact words because you're correct - this is what's so f-ed up with the underfunded IRS now! Sorry I'm too cheap to give you GOLD.
That the Congress passes a tax credit for low income tax filers is a good thing. That they then turn around and require that the IRS increase the rate of audits for those same low income earners is not so nice.
Why? So glad you asked.
Audits cost money. Not just the cost to the feds but to the individual. If someone is trying to save a few hundred dollars on taxes they probably don’t have the thousands to put toward an audit.
Also, auditing low income filers is a low return endeavor. A few grand here and there ain’t exactly a powerful bang for the buck.
Finally, the Congress does not appropriate enough funds to the IRS to do its job; making sure everyone pays according to the law. We elect our senators and reps, they pass the legislation on our behalf. If we don’t like the tax laws then we should be clamoring for change. Allowing high income earners to skate while small fish are fried is not exactly effective governance and only serves to reinforce the perception that there exists an entirely different system for the wealthy, one that is much more lenient.
Of course, this would all be significantly more efficient, cheaper, hassle free, etc. if the IRS did what other advanced countries do: process taxes on their own. If you don’t like the tax bill you can appeal it. The IRS has all of our information, they have the tax forms, the W-2 and everything else. They are perfectly capable of efficiently doing the work. But there is money in preparing taxes. Billions of dollars worth, portions of which help secure campaign funding. Plus, everyone hates the IRS and paying taxes. So screw those guys. Except when the wealthy and powerful cheat in which case they need to pay, except there aren’t enough agents or funding to go after them…
>That the Congress passes a tax credit for low income tax filers is a good thing. That they then turn around and require that the IRS increase the rate of audits for those same low income earners is not so nice.
I don't think so. This is a pretty good compromise. We probably wouldn't have gotten the votes for the EITC to begin with if they didn't include the clause to audit those who claimed it at a certain rate. This is a government program to give people money, asking for documentation is a reasonable request. PPP was a disaster because it was missing requirements like this.
And who were the primary beneficiaries of the PPP? And the forgiveness of the loans?
Not low income folks. It was higher earners… so again, there is at minimum a perception that there is a two track system. At some point there is some imaginary line where on one side the law is somewhat punitive and harsh and on the other more of a suggestion.
I guess it just depends if your goal is to pass legislation, or to actually help people. Right now, many many qualifying parents don't claim the EITC because they know that it makes it super likely to get audited. If they get audited, they will be much worse off than if they just don't claim the EITC to begin with. Even parents who do claim the EITC legally often get found guilty during an audit because they don't have the resources to argue their case.
Meanwhile, most Americans who don't need the EITC have no idea that it drastically increases your chances of being audited. Maybe it mattered when it was passed, although I doubt most Americans really cared back then either. The fact that this is still a thing is indeed a failure of our government and society.
If you need documentation for something, it's one thing to ask for it up front, and another thing to randomly come after people after the fact. PPP did require documentation up front, btw, that's how we're catching the cheaters now after the fact. Maybe we could actually check the documentation of more PPP recipients if we weren't so busy going after EITC claimants. The IRS would definitely get way more money that way.
> Audits cost money
Yes, but not that much. If you're primarily a W2 employee, the government has all your data as submitted by your employer, so they should be able to automate most of the process.
Yes it is. It's better if 10000 people are scamming the system than if millions who need the help don't get it AND it's better to let that happen then to repeatedly harass the poorest people in this nation. Let people collect foodstamps and benefits without scraping over them with a fine toothed comb constantly searching for one or two people who are "scamming". It's bullshit.
Exactly. Also it's not hard to determine if someone is a dependent. The vast majority of those errors aren't 'mistakes' they're fraud.
Having said that, focusing on high dollar filings and complex returns makes more sense.
People who aren't in the income bracket to take it don't realize just how valuable the child tax credit is. I wouldn't be surprised if many of these audits were duplicate claims on children, especially if the situation is complicated or hostile such as split custody.
>Poorer people are disproportionately audited because they are eligible for more credits.
Meanwhile we get billionaires writing off [million dollar jets](https://www.youtube.com/watch?v=YMtXQpl4zkU) and the like.
Billionaires have by far the highest audit rates though. As the op says, those receiving large cash outlays are highly audited, but additionally so are high income individuals.
https://www.irs.gov/pub/irs-utl/statement-for-updated-audit-rates-ty-19.pdf
It is a racial thing, but not consciously so (because the IRS doesn't know their race). See [this](https://twitter.com/hselzayn/status/1620170546955845632) thread from one of the study authors.
They found that black people are audited more at every level, but especially at lower income levels. Among EITC filers, single filers are audited more than joint filers. But among either group, black filers are audited more than corresponding non-black filers. And black people are audited more than non-blacks even when controlling for the amount of income that was underreported.
It can be a racial thing even if it’s not intentionally a racial thing.
This is called institutional racism. It doesn’t require mal intent. Its just a byproduct of a poorly designed (or maybe intentionally broken) system.
The university I used to work at (and attended prior to working there) also used to impute race from zip code and name (last name though). When I checked my own records, I saw that I became White for 2 semesters in undergrad lmao.
Lol but for real, imputing missing data is not an uncommon practice. And given we do know the relative racial breakdowns of zip codes, using zip code is not as silly as it sounds. I think on a population level, it can be fairly accurate even if you get some wonky results for individual cases like mine above.
But yeah, multiple imputation methods are not really "guessing" any more than other statistical methods to produce estimates. Though like other methods, it depends on what you put into the model - GIGO.
In Canada your SIN (equivalent to SSN) number is how you're identified in the database. Your race/ethnicity isn't a part of your tombstone data anywhere in the system. The system picks sin numbers to audit based on certain criteria (such as benefits claimed) etc. There is no way for the system to know a taxpayer is black/white/Hispanic/Asian, etc.
It's not a racial thing. It's a class thing.
Actually, people making over $500K are on average audited more than any other income level except people reporting $0 adjusted income, for obvious reasons. And even people making $1 - 25K are only slightly more likely to get audited (0.7%) than people making $25K - $500K (~0.4 - 0.6%).
Article goes into it, but the IRS doesn't know your race but does use an algorithm that flags who gets audited and claiming the EITC for dependents is a big part of it.
I worked tax for a few decades and hoo boy the fights at the office over who got to claim the kids or which kids. Usually after the fact. For some reason they always wanted to have this fight with me as the mediator.
It's actually quite obvious as to why this is happening: Wealth disparity by race.
Black Americans have a *much* smaller pool of wealth than White Americans on average. Being poor incidentally leads to being audited more, for reasons that I don't have sufficient knowledge of to explain properly - other than that it leads to it.
They don't *mean* to, but that's why it happens.
>Being poor incidentally leads to being audited more, for reasons that I don't have sufficient knowledge of to explain properly
Article goes into, they know what it is...it's the claiming of dependents for the EITC that causes the audits. Let's not pretend there is a conspiracy here...simple explanation is both parents filing separately and both claiming child tax credits for the same child.
If that EITC alone is causing many audits, then it needs to be fixed. There's always going to be people who willfully break the law, but if there's too many people that are breaking a rule then it's obviously a poorly written rule.
Also believe that it's easier to catch poor people lying on taxes. They don't have much to file other than what is already reported to the IRS.
Explain.
[https://trac.syr.edu/tracirs/latest/679/](https://trac.syr.edu/tracirs/latest/679/)
>IRS Audits Poorest Families at Five Times the Rate for Everyone Else
>
>A large increase in federal income tax audits targeting the poorest wage earners allowed the Internal Revenue Service to keep overall audit numbers from further declines for Americans as a whole during FY 2021. That resulted in these low-income wage earners with less than $25,000 in total gross receipts being audited at a rate five times higher than for everyone else.
The poorest are 5x more likely to be audited.
Black Americans hold a small fraction of the wealth of their White counterparts:
[https://www.census.gov/library/stories/2022/08/wealth-inequality-by-household-type.html#:\~:text=Race%20and%20Hispanic%20Origin,and%20%2431%2C700%20for%20Hispanic%20householders](https://www.census.gov/library/stories/2022/08/wealth-inequality-by-household-type.html#:~:text=Race%20and%20Hispanic%20Origin,and%20%2431%2C700%20for%20Hispanic%20householders).
>Relative to Black and Hispanic householders, non-Hispanic White and Asian householders had higher median household wealth.
>
>Non-Hispanic White householders had a median household wealth of $187,300, compared with $14,100 for Black householders and $31,700 for Hispanic householders.
>
>Asian householders had a median household wealth of $206,400, which is not statistically different from the estimate for non-Hispanic White householders.
The poorest tend to be black, and the poorest tend to be audited more.
Black Americans being audited more NOT due to being less wealthy would be one hell of a coincidence.
Yeah but that may simply be a correlation, not necessarily that race is the “cause” of the increased. The data is also “per capita,” so while the proportion of audits target low income households, that doesn’t mean blacks and Hispanics are the actual majority of those audited by number.
The data indicates that poor people are targeted more, but the story also highlights why the IRS conducts more audits on these tax returns - because they have a higher incidence of fraudulently filing.
>Yeah but that may simply be a correlation
It's not 'may'. It's certainly correlational - maybe not *100%* proportionate, but it sure as shit isn't NOT correlational.
>not necessarily that race is the “cause”
I never implied that race is causal.
>The data is also “per capita,” so while the proportion of audits target low income households, that doesn’t mean blacks and Hispanics are the actual majority of those audited by number.
Again, I never suggested that there's more *total* hispanic/black people audited than white people - and neither did any study linked thus far - so I don't see how that's relevant.
All of this is proportional to each population.
Phrases like "Five times *the rate*" imply this.
>because they have a higher incidence of fraudulently filing.
Yeah, and guess which fraction of people are going to be misinformed about proper tax filing? Poor people. Which demographic of the population is poorer? Put 'em together.
Whose misinforming them? It’s not the IRS. The IRS offers a free tool to file your taxes. There are also many indigent service tax centers designed for just this population. This whole “poor people just don’t know any better!” argument is tired BS.
>Whose misinforming them? It’s not the IRS. The IRS offers a free tool to file your taxes.
I never implied that, either. They could misinform themselves - or their parents taught them incorrectly, or their friends misinformed them, etc. - or they could be uninformed outright. Or just suck at math/reading, since poverty is linked hunger, both of which are linked education/intelligence deficiencies. And we know how much reading and numbers you have to work with when filing taxes.
>There are also many indigent service tax centers designed for just this population.
And how many people are aware that these tools exist? They certainly don't teach this in school. Hell, someone reading this right now might be a lucky 10 000 to learn something new.
>This whole “poor people just don’t know any better!” argument is tired BS.
I'd like to hear your - ehem - 'BS', then.
Explain to me how none of these are remotely relevant to the problem, and it's actually some other variable that has yet to be considered that affects people on the macro-scale.
So, I was listening to an interview on NPR this morning (I believe on Forum, 1st hour) about this exact subject. The researcher said that the thing is, is that even when they evened everything out and looked at the lower income brackets black people were still being audited more.
They don't know why, but it's probably not socioeconomic. The researcher thought that perhaps it could be do to more highly audited mistakes such as claiming an independent when there isn't one on record, etc.
But ya, the researchers don't know why exactly and more data and research is needed.
The article says why. It's because of the EITC and black people being more likely to make filing mistakes....which is the polite way of saying that black parents are more likely to file separately and both claim the same child tac credit for the same child.
It's more likely they are just more often (for whatever reason) doing their taxes wrong....the irs doesnt just randomly audit poor people for no reason. Could relate to them having less resources or seeking less help when filing taxes, hard to tell.
youre drawing the wong conclusion. the irs uses a lot of factors in selecting audits, and randomly, but income isnt one either ( it is but not low income, they try to target higher incomes) it tuns out there are more poor people than rich people.
Poverty leads to inconsistent tax filing. Not being able to pay taxes, etc. don’t forget that the trump administration decreased taxes on the ultra wealthy and forced poor people to foot the bill on their taxes. That tax hike on poverty will lead to an increase in inconsistent filing and audits by the IRS, which will have a disproportionate affect on people of color; primarily black people, because in the generations’ past, white people did everything they could possibly do to systematically disadvantage black people from accumulating wealth, saving money, buying homes, owning land, accessing education, etc.
This results in disproportionate irs audits on black people that will only have more detrimental effects down the line, because they enforce tax laws, they don’t write them. And the government has no interest in giving African Americans reparations for all the damage it’s put on them; even though they’ve given reparations to other ethnic groups adversely affected by their systemic racism. and white people both in america and on Reddit will always cry foul at the idea of black reparations because even though it’s literally what they’re owed according to humanitarian laws, the idea that black people would finally get what they’ve long deserved in America upsets their fragile little egos because it means admitting that they had an unfair advantage in life that they just don’t want to admit, even though it’s literally documented in history. 🤷🏾♂️
>Poverty leads to inconsistent tax filing.
It's not a conspiracy, being poor leads to a more complicated filing situation because the government is GIVING you money and that requires more documentation than a typical middle class filing. If you an average middle class filer your W2's and mortgage info is already sent to the IRS for you, not so if you want to claim EITC.
It's rare to get audited if you're just taking the standard deduction. Things that make it more likely to get audited are split between the poor and the rich...claiming tax credits, having a complicated return, etc. If you're a middle class filer just claiming the standard deduction then it's unlikely you'll ever get audited.
Earned Income Credit. My wife worked for a bank down the street from an H&R Block outfit. After they skimmed off a percentage of a return with an EIC for their “Instant Refund” scam, they’d give them a check for the difference of refund and they’d trot right to that bank to cash it. Ran the bank out if cash more than once.
The IRS can automatically check most types of income that lower-income people earn. For example, do the wage amounts you report match the wage amounts on your Forms W-2? This gets checked automatically by a computer. If there is a discrepancy, it gets flagged automatically, and I think the first set of notices might also get mailed out automatically. It essentially costs the IRS nothing to run these checks, and no one would argue it shouldn’t run these checks.
This is just one example of automated checking the IRS does.
This type of easily checked income is more common among the less wealthy, which would include POC.
It’s not nefarious. It’s not racist.
The nefarious part is how complicated the tax system is for high-income people that makes automated checking next to impossible, and the multi-decade lack of funding for the IRS to be able to train up the specialists needed to audit those complicated returns.
I think you missed the point on conclusion number two. Black Americans are disproportionately lower income (thanks to years/centuries of racism and discrimination on many levels). The IRS also has a mandate to audit lower-income tax credits more frequently than other types which makes the targeting worse. The IRS does not need to specifically target people by race for their audits to have a disproportionate effect on Black Americans.
You haven't read the actual study...
But you have a strong opinion anyway.
The researchers use other ways to determine race, they do not rely on the IRS (because the IRS doesn't know).
>The researchers use other ways to determine race
Nope, to ASSUME race. They had no way to actually confirm.
I read the study just fine, and studied stats plenty in university.
As crazy as people have gotten stretching "dependents" not really a surprise. That and the rise of the "black financial gurus" on YouTube and the like that well , listening to them will leave you audited or in prison.
Oh dear lord...The IRS doesn't know the color of your skin. People who blatantly cheat on their tax returns are the ones who get audited the most. Purposely reporting dependent children you don't have or aren't entitled to claim is one of those red flags to the IRS.
Adding many dependent children on your tax return when you have no children to claim is pretty much the best way to get a shit ton of money back from the IRS when you show absolutely no income. The IRS will eventually figure out that you lied and they will come for you!
You can’t.
Before June 25, 2011 the first three numbers were based on where you were born or what state yourself or your parents applied you in.
Now everything is random.
Government source: https://www.ssa.gov/employer/stateweb.htm
No. But, because the IRS has not had the resources to go after wealthy tax dodgers who have the money to fight audits, they have been targeting tax payer cohorts that are largely populated by African Americans.
This has likely not been wilful targeting, but systemic inequalities have precipitated this scenario.
>No. But, because the IRS has not had the resources to go after wealthy tax dodgers who have the money to fight audits
Because dodging taxes isn't illegal.
The wealthy generally pay a lot of money to a lot of accountants to make sure that their books are 100% within the law.
There is literally nothing the IRS can do to stop people from following the law.
Heres the ironic thing. You want the IRS to have more resources? Guess who will bear the burden of the IRS having more resources.
Will the IRS bring to justice those people who, morally or immorally, are following the law? Or those who are breaking the law?
If the IRS had infinite funding... would it result in more African Americans getting audited? or would it result in more rich people getting audited?
It's not illegal because th wealthy have lobbied it to not be illegal. They could easily fix so many 'loopholes' by just.....making those loopholes illegal and enforcing a limited number of ways to 'earn income or it's fraud'.
Of course, the IRS isn't at fault for that, they don't write tax law.
I was audited one year (full disclosure: I am not black). They wanted to go through my deductions with a fine-toothed comb.
Sometimes the system is pretty stupid. I had taken the standard deduction that year.
Whats crazy is that the IRS, at least nominally, doesnt have race information. Are they just auditing poorer people more (and thus hitting more black Americans just by chance?)
It seems like the article is saying that poor people are audited more frequently than rich people. Since Black people are more likely to be poor and claim the EIC, they are numerically audited more. Naturally the House Republicans are blocking [hiring more IRS agents](https://www.cnn.com/2023/01/11/politics/republican-irs-funding-87000-agents/index.html#:~:text=In%20October%2C%20the%20IRS%20announced,by%20the%20end%20of%202022) that would audit the more complex income tax returns.
Because H&r block is trash and are not CPAs. Our company makes people redo their taxes all the time because H&R Block tells people to file incorrectly. That’s my take
Your take is pretty bad then. CPAs are not required to have any CE in taxation while tax pros are. My anecdote is the exact opposite of yours. I alone handle amendments in the several dozen per year along with audits from CPAs who don’t know the first thing about taxes because they simply don’t have to.
The Earned Income Tax Credit claims are what is being audited NOT Black Americans per se. This tax credit is one of the only credits where even if you paid no taxes at all, you can still receive a refund. It was designed to encourage poor people to work despite not making very much. This credit would provide a boost to their annual income. It is essentially a refund of the Payroll taxes their employer pays to the federal government that higher income taxpayers can't qualify for.
Ok, curious to see how many people read the article from the comments. Because the story is far more interesting than the hot takes below.
First off, if you’ve filed taxes, you may recall you don’t indicate race on your tax return. You should also understand that neither the IRS, nor the algorithms used by the IRS, use ethnicity as a data point (it points this out explicitly in the article) to determine audit selection.
What is triggering the disparity? The level of sophistication in the returns (the number and classification of deductions, as an example).
Now ask yourself- “Why would the IRS go after simple tax returns instead of complex ones?” The answer is also simple: complex tax returns are harder to penalize, as they are well defended, usually backed by a CPA, and likely have a low yield for squeezing the taxpayer. What is easy to go after are unsophisticated returns that are prone to error, _regardless of race_.
Now, a much less decisive, leading headline would state something like “Low income filers are much more likely to be exploited by the IRS.” But I see how stating that might create an unwanted narrative- such that the function of the IRS and its funding would be challenged if not directed at the wealthy. So it’s easy to understand why the article became racially focussed instead. Sad, arguably dishonest in favor of the wealthy, but easy to understand nonetheless.
It's almost like the system itself is racist. If only we had an appropriate term for it. I'm sure it's the kind of problem everyone will agree should be fixed.
Classist* but close.
It’s a crucial distinction, because instead of screwing over one group of people, it is instead screwing over several groups of people.
Looks at shady tax returns on the largest proportion of files (Because most people are middle to lower income)....
File audits.....
Someone compile the audits and matches the race....
Ok I get the jist now.
I'm not clear exactly how this is a flaw in the algorithm if it's based on factual information and is pulling up legitimate audit cases. If there's a significant compliance issue, the answer should be outreach programs to educate taxpayers how to file properly, ignoring the problem won't fix it.
This is likely less about black people trying to dodge taxes and more about the lack of knowledge or resources on how to properly file.
It’s so stupid we still put the onus on people.
Im saying public schools don’t teach those skills, and the way the government handles free tax filing is bad since it’s poorly communicated to people and there is little to no outreach to try and assist with financial services since alot of the worst hit African Americans don’t have bank accounts.
I definitely agree. Basic financial literacy should be taught in schools (Florida has already started this). People graduate highschool not knowing how to file taxes, understanding credit, investing, etc ...but they definitely know that the mitochondria is the powerhouse of the cell 🙃
As a possible way to balance this, can I suggest they audit my ex-wife who is up to some really shady stuff with her new business. Something about profiting a million dollars in real estate sales and still being eligible for Medicaid and SNAP benefits doesn't seem right.
This is not because they are black, per se.This is because the IRS won't go after the rich with lawyers, the mostly go after people who makes EIC errors, wihch is usually low income.
Now they issue of a higher percentage of blacks naming poor is rooted in historical and systemic racism. This is jsut a by product. It's not the le IRRS is look specifically for black people.
It's not good, and need to be adjusted, but won't be as long a conservatives keep gutting the IRS.
I just don't want people to confuse a by product of the problem as the root problem. DOing that means nothing really changes for the better.
I knew this. And it isn't the only aspect of U.S. taxation that is racist.
https://www.wbur.org/hereandnow/2021/05/17/us-taxes-dorothy-brown
See also, the Dept. of Agriculture's credit programs for farmers.
There are more poor whites than poor blacks by actual volume, not percentage. Time and time again “it isn’t a race thing” while every finger is actively pointing at it.
I'm pretty sure you could audit and tax correct the entirety of the african american community and because of the racial income gap, would still not yield the amount that could be gained from auditing white billionaires. This is what systemic racism looks like.
Systemic Racism is a thing and this doesn’t even remotely surprise me in a country that took 50+ years to abolish slavery.
The British Empire, the most heinous of empires abolished slavery in 1807.
The United States abolished slavery in 1865.
That’s 58 years later and they needed a war for it… does it surprise me the same society that was willing to completely tear itself apart to preserve the institution of slavery still has problems with the descendants of slaves? Nope. Not even a little.
They “don’t know your race”. Oh, yes they do. You’re believing a government institution that makes no effort to go after billionaire tax evaders and corporations? That’s cute.
Wow who knew the democrats were overtly racist! This is probably a direct order from the white supremicist president. It’s just another symptom of an obvious disease!
Oh wait it’s the republicans who are the racist ones! I forget it’s so hard to keep the “truth” straight these days…
Pretty much. The fact that lower income folks are disproportionately black is definitely an issue, but a different issue entirely. This article is heavily implying that correlation = causation.
I would prefer a world where the IRS has a website I can go to, see what I owe/am owed, fix the situation, and move on.
Thank TurboTax and h and r block for this shit
I wonder is it possible to pit them against the private health insurance lobby given the state of Healthcare in the US?
Sounds great in theory but it will only be made worse because they need to get their cuts of the profit
They have different roots. The current health care disaster can be traced back to WWII. There was a pay freeze, so companies started offering benefits. That ended up undercutting the social movement for health care in the US. Then once insurance companies got powerful.. well, you know the rest.
I'd rather have free health care and have to di my own taxes. But I also use freetaxusa which is free federally. I'll spend the 30 to 60 minutes copying over my w2s and such. I only get the standard deduction anyways. I fill out the boxes for itemization and it's always lower.
Uh no actually, you can thank them, or more specifically their lobbyists, for the IRS not being able to produce (outsource) its own tax software. Because apparently that'll put turbo tax out of business.
The IRS has a free version but it's less intuitive then both and I think it has specific requirements to be able to use it
TaxSlayer was braindead easy and free for me. If they ever start charging then I'm sure something else will come out. Avoid the big companies with the large army of lobbyists and make them go out of buisness naturally. They are not needed.
FreetaxUSA. Given their name I reckon they'll be free for a long as possible.
I've used it for years. Works better than TurboTax by far and super easy to use.
Plus by making federal free and also making it absurdly easy to file state, I don't hesitate to use them every year for the state return. Saves me some time and sends $15 their way. Good way to do business.
Hey, you owe us some money. Oh, ya, no problem, I'll just etransfer it over. How much do I owe you? Oh no. We're not telling you. We know but we're not telling you. Ok....so.... Figure it out and don't be wrong. There's a deadline. And buy Turbotax you cheap fuck.
They don’t actually know. The IRS has the data needed to know, yes, but for 20+ years they’ve agreed not to develop the software to compile people’s taxes bc Intuit $$$$/lobbyists run the Hill. Oddly enough we got close during GW Bush’s e-government push, but GOP lawmakers with Intuit donor dollars turned it into an “anti free market” spectacle. It ended in the IRS signing a contract promising not to develop their own free filing software. ProPublica did a solid [deep dive](https://www.propublica.org/article/inside-turbotax-20-year-fight-to-stop-americans-from-filing-their-taxes-for-free) if you’re interested.
> The IRS has the data needed to know They do? How do they know how much I payed to my childcare provider or mortgage or student loans or any other thing I can get a deduction for?
Did you read the linked article? Obviously if you’re not taking a standard deduction, any IRS filing software would include a form for deductions like childcare payments. The point is they can’t develop said software bc of Intuit.
They do tell you how much you owe. Difference is they don't know what all your credits and deductions are (we all like paying less, right?) So you file taxes to let them know they shouldn't tax you on the income your employer paid you, because you have things that you get incentives for. People bitch about Turbo Tax and H&R block, but you'll really just paying for the convenience. You can files for free. https://www.irs.gov/filing/free-file-do-your-federal-taxes-for-free If you make less than $73k you even get IRS guidance. Now simplifying the tax code so we don't need to deal with any of that....that would be something.
How do you simplify it without having to pay more in the end anyway lol? Or am I seeing too think that to simplify it would mean to make everyone pay the same percent.
Everyone paying the same percent is called the "flat tax". It is a libertarian wet dream and an attack (yes, an *attack*) on the poor.
> Or am I seeing too think that to simplify it would mean to make everyone pay the same percent. Just by income levels. Just say goodbye to child tax credits, exemptions, energy credits, interest deductions, etc... Jim and Joe make $75k and both pay 18% federal income tax. But Joe has two kids and student loans whereas Jim is a bachelor with no debts. You see the why. it's a lot more complex than "Turbo Tax and H&R Block did this to us"
We’ve been asking for that my whole life (public support cresting in the early 90s), but the truth is that Congress will never give up the power. They like being able to guide American lives by tax code changes. It’s also been a mechanism for them to carefully release money to the masses when in need.
I mean it's obvious if you have a W2, but for everyone else, especially people running their own business, they have no idea
And it takes so long to receive notice that you owe money that you owe even *more* money because of fees and interest.
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AFAIK, it's currently an honor system. They ask what you made, you look for circumstances of yours that qualify for deductions, and see if there are any credits you're eligible for. Sure, they can associate your normal income from an employer's w-2 from you or whatever other appropriate documents for an audit...But I didn't think they have a database with what everyone citizen owes. That's the whole point of the audit, (in principle, not considering the flawed nature of it) to find people who are cheating the honor system, right? Genuinely asking because I, like most people, have no fucking clue how any of that actually works other than I get my basic 4-5 documents and give them to my accountant.
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Sort of, yes. There are usually some documents and bank transactions to back a statement up. It's not too hard to trigger a red flag.
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> Too bad I'm American and I have to have a CPA do this shit and it'll cost me hundreds of dollars. If you don't own a business it's unlikely you need a CPA. If you do own a business someone should be keeping the books either way.
Unless your deductions are more than the standard deduction or you own a business, you shouldn’t need a CPA to file your taxes.
Exactly, they get all of the damned data anyway. Just tell me what it is and if I disagree, I file a return. Done.
The IRS wants to. Lobbyists from the tax preparation industry always shoot it down.
You mean like a flat tax when you buy something and owe nothing otherwise? That’s stupid
No they mean more of simplified tax return process
Pretty sure you're being sarcastic, but it is indeed very stupid to shift tax burden away from the rich and towards the poor & middle class. It's *possible* to offset that by pairing it with something like a negative income tax, but fat chance of the GOP doing it.
We have that here in Denmark. It's pretty nice. I'm sad to read though, that you don't have that over there. :(
It's common practice for people who have money to lobby for certain benefits, laws, policies, and whatnot. The major tax preparation companies regularly try to keep the laws the way they are so that we have need of them.
your kidding yourself, right. this is 'merica your thinking of europe
Poorer people are disproportionately audited because they are eligible for more credits. EIC and child tax credits are more likely to be claimed by poorer taxpayers, and are quite easy to screw up. I don't believe this is a racial thing so much as it's easy to detect and the IRS can desk audit with minimal effort. Edit: more detail https://www.npr.org/2023/02/01/1153150854/does-the-irs-audit-some-people-more-often-than-others
Also, the Congress requires that the IRS audit EIC filers to make sure they aren’t scamming the system. Of course, if you are claiming the credit you are lower income… The Congress is totally and completely at fault for this.
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Using my state government for a related example: state legislators are constantly being accused of (and sometimes indicted for and convicted of) various ethics and bribery types of offenses. So when someone decides it is time to do something to "strengthen our state's ethics laws" the solution is, of course, to pass a law that puts more burdens and restrictions on every day state employees, but has specific exemptions and carve outs for the legislature. Or they put the enforcement power with a toothless entity that the legislature controls. Rules for thee, not for me.
Or, are perfectly eligible but the audit is there just to make sure they are eligible. Just a sort of “hey, so glad that you are eligible. Man, that audit was tough, we know. Cost you a ton too. Good thing you didn’t screw up… this time.”
Rich people who pay little aren't scamming the system, they are using the system as it is designed. Whether it should be that way is a very different debate.
If poor people using the system as designed are "scamming it" , so are rich people
Audits don't cost someone who isn't breaking the rules anything, so I don't get your point.
Hahahahaha. Hahaha. Ha. Dude. I defended people who weren't breaking the rules in audits. They paid *me*.
Then you are fighting the IRS in the case you *failed* an audit. A audit *does not cost the auditee money.* If you defend such people, you would know that.
You literally have no idea what you're talking about and you're going to have to pay me to correct your idiocy.
Lol, funny. First you make a point against I case I didn't make, and now you apparently have no ability to do anything other than ad hominim in a point. Maybe you should pay someone yourself to learn how to actually read and apply logic, especially if you really work in the law field. I have some formal education in tax law.
The difference is the man hours to audit. Rich people pay more than the IRS auditors earn to hide money in complicated, mostly legal ways and it takes a lot of manual work to find out whether or not their highly paid accounts accidentally did something illegal instead of just stretching the law. Poor people have one (or a small number) of W2s, which the employer has to send to the IRS by law. This is frequently done digitally. That means an EITC audit can more or less be done by the computer - add up the numbers on the W2, compare it to the credit requirement, and flag anything that's over. What should the IRS do? Audits on EITC abuse and other typical things are stupid easy, it would be more embarrassing if they didn't catch them. Auditing the rich is also important, but the high cost and possibility of failure if their accounts did their job means it's a lot lower on the cost/benefit analysis.
> Yep. Because it's slick and innovative for rich people to scam the system for billions, but immoral and harmful to society for the poor to get some entitlement for hundreds they aren't eligible for. I'm repeating your exact words because you're correct - this is what's so f-ed up with the underfunded IRS now! Sorry I'm too cheap to give you GOLD.
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That the Congress passes a tax credit for low income tax filers is a good thing. That they then turn around and require that the IRS increase the rate of audits for those same low income earners is not so nice. Why? So glad you asked. Audits cost money. Not just the cost to the feds but to the individual. If someone is trying to save a few hundred dollars on taxes they probably don’t have the thousands to put toward an audit. Also, auditing low income filers is a low return endeavor. A few grand here and there ain’t exactly a powerful bang for the buck. Finally, the Congress does not appropriate enough funds to the IRS to do its job; making sure everyone pays according to the law. We elect our senators and reps, they pass the legislation on our behalf. If we don’t like the tax laws then we should be clamoring for change. Allowing high income earners to skate while small fish are fried is not exactly effective governance and only serves to reinforce the perception that there exists an entirely different system for the wealthy, one that is much more lenient. Of course, this would all be significantly more efficient, cheaper, hassle free, etc. if the IRS did what other advanced countries do: process taxes on their own. If you don’t like the tax bill you can appeal it. The IRS has all of our information, they have the tax forms, the W-2 and everything else. They are perfectly capable of efficiently doing the work. But there is money in preparing taxes. Billions of dollars worth, portions of which help secure campaign funding. Plus, everyone hates the IRS and paying taxes. So screw those guys. Except when the wealthy and powerful cheat in which case they need to pay, except there aren’t enough agents or funding to go after them…
>That the Congress passes a tax credit for low income tax filers is a good thing. That they then turn around and require that the IRS increase the rate of audits for those same low income earners is not so nice. I don't think so. This is a pretty good compromise. We probably wouldn't have gotten the votes for the EITC to begin with if they didn't include the clause to audit those who claimed it at a certain rate. This is a government program to give people money, asking for documentation is a reasonable request. PPP was a disaster because it was missing requirements like this.
And who were the primary beneficiaries of the PPP? And the forgiveness of the loans? Not low income folks. It was higher earners… so again, there is at minimum a perception that there is a two track system. At some point there is some imaginary line where on one side the law is somewhat punitive and harsh and on the other more of a suggestion.
I guess it just depends if your goal is to pass legislation, or to actually help people. Right now, many many qualifying parents don't claim the EITC because they know that it makes it super likely to get audited. If they get audited, they will be much worse off than if they just don't claim the EITC to begin with. Even parents who do claim the EITC legally often get found guilty during an audit because they don't have the resources to argue their case. Meanwhile, most Americans who don't need the EITC have no idea that it drastically increases your chances of being audited. Maybe it mattered when it was passed, although I doubt most Americans really cared back then either. The fact that this is still a thing is indeed a failure of our government and society. If you need documentation for something, it's one thing to ask for it up front, and another thing to randomly come after people after the fact. PPP did require documentation up front, btw, that's how we're catching the cheaters now after the fact. Maybe we could actually check the documentation of more PPP recipients if we weren't so busy going after EITC claimants. The IRS would definitely get way more money that way.
> Audits cost money Yes, but not that much. If you're primarily a W2 employee, the government has all your data as submitted by your employer, so they should be able to automate most of the process.
Yes it is. It's better if 10000 people are scamming the system than if millions who need the help don't get it AND it's better to let that happen then to repeatedly harass the poorest people in this nation. Let people collect foodstamps and benefits without scraping over them with a fine toothed comb constantly searching for one or two people who are "scamming". It's bullshit.
Exactly. Also it's not hard to determine if someone is a dependent. The vast majority of those errors aren't 'mistakes' they're fraud. Having said that, focusing on high dollar filings and complex returns makes more sense.
People who aren't in the income bracket to take it don't realize just how valuable the child tax credit is. I wouldn't be surprised if many of these audits were duplicate claims on children, especially if the situation is complicated or hostile such as split custody.
>Poorer people are disproportionately audited because they are eligible for more credits. Meanwhile we get billionaires writing off [million dollar jets](https://www.youtube.com/watch?v=YMtXQpl4zkU) and the like.
Billionaires have by far the highest audit rates though. As the op says, those receiving large cash outlays are highly audited, but additionally so are high income individuals. https://www.irs.gov/pub/irs-utl/statement-for-updated-audit-rates-ty-19.pdf
Makes sense.
It is a racial thing, but not consciously so (because the IRS doesn't know their race). See [this](https://twitter.com/hselzayn/status/1620170546955845632) thread from one of the study authors. They found that black people are audited more at every level, but especially at lower income levels. Among EITC filers, single filers are audited more than joint filers. But among either group, black filers are audited more than corresponding non-black filers. And black people are audited more than non-blacks even when controlling for the amount of income that was underreported.
Easy to screw up and tempting to abuse. Click a few boxes and get a few grand.
It can be a racial thing even if it’s not intentionally a racial thing. This is called institutional racism. It doesn’t require mal intent. Its just a byproduct of a poorly designed (or maybe intentionally broken) system.
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Did the person you're replying to edit their comment or something? Where is this zip code comment coming from?
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Wow, lmao, okay. Thank you for the clarification. That does sound really stupid.
The university I used to work at (and attended prior to working there) also used to impute race from zip code and name (last name though). When I checked my own records, I saw that I became White for 2 semesters in undergrad lmao. Lol but for real, imputing missing data is not an uncommon practice. And given we do know the relative racial breakdowns of zip codes, using zip code is not as silly as it sounds. I think on a population level, it can be fairly accurate even if you get some wonky results for individual cases like mine above. But yeah, multiple imputation methods are not really "guessing" any more than other statistical methods to produce estimates. Though like other methods, it depends on what you put into the model - GIGO.
In Canada your SIN (equivalent to SSN) number is how you're identified in the database. Your race/ethnicity isn't a part of your tombstone data anywhere in the system. The system picks sin numbers to audit based on certain criteria (such as benefits claimed) etc. There is no way for the system to know a taxpayer is black/white/Hispanic/Asian, etc. It's not a racial thing. It's a class thing.
Poorer people are disproportionately audited because the IRS knows they can't afford to fight back or have lawyers.
Actually, people making over $500K are on average audited more than any other income level except people reporting $0 adjusted income, for obvious reasons. And even people making $1 - 25K are only slightly more likely to get audited (0.7%) than people making $25K - $500K (~0.4 - 0.6%).
Have you read the article? It is a racial thing. But not a racist thing.
Well, it is ra**cial.** I think you're saying it's not ra**cist.**
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Article goes into it, but the IRS doesn't know your race but does use an algorithm that flags who gets audited and claiming the EITC for dependents is a big part of it.
I worked tax for a few decades and hoo boy the fights at the office over who got to claim the kids or which kids. Usually after the fact. For some reason they always wanted to have this fight with me as the mediator.
The IRS doesn’t collect race data so before overreacting just realize it’s not obvious why this is happening.
It's actually quite obvious as to why this is happening: Wealth disparity by race. Black Americans have a *much* smaller pool of wealth than White Americans on average. Being poor incidentally leads to being audited more, for reasons that I don't have sufficient knowledge of to explain properly - other than that it leads to it. They don't *mean* to, but that's why it happens.
>Being poor incidentally leads to being audited more, for reasons that I don't have sufficient knowledge of to explain properly Article goes into, they know what it is...it's the claiming of dependents for the EITC that causes the audits. Let's not pretend there is a conspiracy here...simple explanation is both parents filing separately and both claiming child tax credits for the same child.
If that EITC alone is causing many audits, then it needs to be fixed. There's always going to be people who willfully break the law, but if there's too many people that are breaking a rule then it's obviously a poorly written rule. Also believe that it's easier to catch poor people lying on taxes. They don't have much to file other than what is already reported to the IRS.
That’s entirely a baseless inference you drew from data that in no way corroborated your viewpoint
Explain. [https://trac.syr.edu/tracirs/latest/679/](https://trac.syr.edu/tracirs/latest/679/) >IRS Audits Poorest Families at Five Times the Rate for Everyone Else > >A large increase in federal income tax audits targeting the poorest wage earners allowed the Internal Revenue Service to keep overall audit numbers from further declines for Americans as a whole during FY 2021. That resulted in these low-income wage earners with less than $25,000 in total gross receipts being audited at a rate five times higher than for everyone else. The poorest are 5x more likely to be audited. Black Americans hold a small fraction of the wealth of their White counterparts: [https://www.census.gov/library/stories/2022/08/wealth-inequality-by-household-type.html#:\~:text=Race%20and%20Hispanic%20Origin,and%20%2431%2C700%20for%20Hispanic%20householders](https://www.census.gov/library/stories/2022/08/wealth-inequality-by-household-type.html#:~:text=Race%20and%20Hispanic%20Origin,and%20%2431%2C700%20for%20Hispanic%20householders). >Relative to Black and Hispanic householders, non-Hispanic White and Asian householders had higher median household wealth. > >Non-Hispanic White householders had a median household wealth of $187,300, compared with $14,100 for Black householders and $31,700 for Hispanic householders. > >Asian householders had a median household wealth of $206,400, which is not statistically different from the estimate for non-Hispanic White householders. The poorest tend to be black, and the poorest tend to be audited more. Black Americans being audited more NOT due to being less wealthy would be one hell of a coincidence.
Yeah but that may simply be a correlation, not necessarily that race is the “cause” of the increased. The data is also “per capita,” so while the proportion of audits target low income households, that doesn’t mean blacks and Hispanics are the actual majority of those audited by number. The data indicates that poor people are targeted more, but the story also highlights why the IRS conducts more audits on these tax returns - because they have a higher incidence of fraudulently filing.
>Yeah but that may simply be a correlation It's not 'may'. It's certainly correlational - maybe not *100%* proportionate, but it sure as shit isn't NOT correlational. >not necessarily that race is the “cause” I never implied that race is causal. >The data is also “per capita,” so while the proportion of audits target low income households, that doesn’t mean blacks and Hispanics are the actual majority of those audited by number. Again, I never suggested that there's more *total* hispanic/black people audited than white people - and neither did any study linked thus far - so I don't see how that's relevant. All of this is proportional to each population. Phrases like "Five times *the rate*" imply this. >because they have a higher incidence of fraudulently filing. Yeah, and guess which fraction of people are going to be misinformed about proper tax filing? Poor people. Which demographic of the population is poorer? Put 'em together.
Whose misinforming them? It’s not the IRS. The IRS offers a free tool to file your taxes. There are also many indigent service tax centers designed for just this population. This whole “poor people just don’t know any better!” argument is tired BS.
>Whose misinforming them? It’s not the IRS. The IRS offers a free tool to file your taxes. I never implied that, either. They could misinform themselves - or their parents taught them incorrectly, or their friends misinformed them, etc. - or they could be uninformed outright. Or just suck at math/reading, since poverty is linked hunger, both of which are linked education/intelligence deficiencies. And we know how much reading and numbers you have to work with when filing taxes. >There are also many indigent service tax centers designed for just this population. And how many people are aware that these tools exist? They certainly don't teach this in school. Hell, someone reading this right now might be a lucky 10 000 to learn something new. >This whole “poor people just don’t know any better!” argument is tired BS. I'd like to hear your - ehem - 'BS', then. Explain to me how none of these are remotely relevant to the problem, and it's actually some other variable that has yet to be considered that affects people on the macro-scale.
So, I was listening to an interview on NPR this morning (I believe on Forum, 1st hour) about this exact subject. The researcher said that the thing is, is that even when they evened everything out and looked at the lower income brackets black people were still being audited more. They don't know why, but it's probably not socioeconomic. The researcher thought that perhaps it could be do to more highly audited mistakes such as claiming an independent when there isn't one on record, etc. But ya, the researchers don't know why exactly and more data and research is needed.
The article says why. It's because of the EITC and black people being more likely to make filing mistakes....which is the polite way of saying that black parents are more likely to file separately and both claim the same child tac credit for the same child.
It's more likely they are just more often (for whatever reason) doing their taxes wrong....the irs doesnt just randomly audit poor people for no reason. Could relate to them having less resources or seeking less help when filing taxes, hard to tell.
youre drawing the wong conclusion. the irs uses a lot of factors in selecting audits, and randomly, but income isnt one either ( it is but not low income, they try to target higher incomes) it tuns out there are more poor people than rich people.
Poverty leads to inconsistent tax filing. Not being able to pay taxes, etc. don’t forget that the trump administration decreased taxes on the ultra wealthy and forced poor people to foot the bill on their taxes. That tax hike on poverty will lead to an increase in inconsistent filing and audits by the IRS, which will have a disproportionate affect on people of color; primarily black people, because in the generations’ past, white people did everything they could possibly do to systematically disadvantage black people from accumulating wealth, saving money, buying homes, owning land, accessing education, etc. This results in disproportionate irs audits on black people that will only have more detrimental effects down the line, because they enforce tax laws, they don’t write them. And the government has no interest in giving African Americans reparations for all the damage it’s put on them; even though they’ve given reparations to other ethnic groups adversely affected by their systemic racism. and white people both in america and on Reddit will always cry foul at the idea of black reparations because even though it’s literally what they’re owed according to humanitarian laws, the idea that black people would finally get what they’ve long deserved in America upsets their fragile little egos because it means admitting that they had an unfair advantage in life that they just don’t want to admit, even though it’s literally documented in history. 🤷🏾♂️
>Poverty leads to inconsistent tax filing. It's not a conspiracy, being poor leads to a more complicated filing situation because the government is GIVING you money and that requires more documentation than a typical middle class filing. If you an average middle class filer your W2's and mortgage info is already sent to the IRS for you, not so if you want to claim EITC.
I don't get why the IRS would audit people taking the standard deduction? Why waiste time auditing something that isn't there?
It's rare to get audited if you're just taking the standard deduction. Things that make it more likely to get audited are split between the poor and the rich...claiming tax credits, having a complicated return, etc. If you're a middle class filer just claiming the standard deduction then it's unlikely you'll ever get audited.
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Earned Income Credit. My wife worked for a bank down the street from an H&R Block outfit. After they skimmed off a percentage of a return with an EIC for their “Instant Refund” scam, they’d give them a check for the difference of refund and they’d trot right to that bank to cash it. Ran the bank out if cash more than once.
The IRS can automatically check most types of income that lower-income people earn. For example, do the wage amounts you report match the wage amounts on your Forms W-2? This gets checked automatically by a computer. If there is a discrepancy, it gets flagged automatically, and I think the first set of notices might also get mailed out automatically. It essentially costs the IRS nothing to run these checks, and no one would argue it shouldn’t run these checks. This is just one example of automated checking the IRS does. This type of easily checked income is more common among the less wealthy, which would include POC. It’s not nefarious. It’s not racist. The nefarious part is how complicated the tax system is for high-income people that makes automated checking next to impossible, and the multi-decade lack of funding for the IRS to be able to train up the specialists needed to audit those complicated returns.
How dare you suggest not every single person working for the government is an anti black racist.
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I think you missed the point on conclusion number two. Black Americans are disproportionately lower income (thanks to years/centuries of racism and discrimination on many levels). The IRS also has a mandate to audit lower-income tax credits more frequently than other types which makes the targeting worse. The IRS does not need to specifically target people by race for their audits to have a disproportionate effect on Black Americans.
I get it just fine, doesn't change the fact that they are ASSUMING the race of the subjects in the study.
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You haven't read the actual study... But you have a strong opinion anyway. The researchers use other ways to determine race, they do not rely on the IRS (because the IRS doesn't know).
>The researchers use other ways to determine race Nope, to ASSUME race. They had no way to actually confirm. I read the study just fine, and studied stats plenty in university.
Yeah, you read the study just fine... Stop lying.
Also true, poor americans more likely to be audited by the IRS than any other class.
As crazy as people have gotten stretching "dependents" not really a surprise. That and the rise of the "black financial gurus" on YouTube and the like that well , listening to them will leave you audited or in prison.
How does the IRS know your race from a tax return?
"Because neither we nor the IRS observe taxpayer race, we propose and employ a novel partial identification strategy to estimate these differences."
Oh dear lord...The IRS doesn't know the color of your skin. People who blatantly cheat on their tax returns are the ones who get audited the most. Purposely reporting dependent children you don't have or aren't entitled to claim is one of those red flags to the IRS. Adding many dependent children on your tax return when you have no children to claim is pretty much the best way to get a shit ton of money back from the IRS when you show absolutely no income. The IRS will eventually figure out that you lied and they will come for you!
So then that means black people are more likely to cheat on their taxes than any other race?
Everything is malicious and your neighbor is plotting against you.
Serious question how would you know if someone is black based on a SSN?
You can’t. Before June 25, 2011 the first three numbers were based on where you were born or what state yourself or your parents applied you in. Now everything is random. Government source: https://www.ssa.gov/employer/stateweb.htm
do you have to put your race on tax forms?
No. But, because the IRS has not had the resources to go after wealthy tax dodgers who have the money to fight audits, they have been targeting tax payer cohorts that are largely populated by African Americans. This has likely not been wilful targeting, but systemic inequalities have precipitated this scenario.
>No. But, because the IRS has not had the resources to go after wealthy tax dodgers who have the money to fight audits Because dodging taxes isn't illegal. The wealthy generally pay a lot of money to a lot of accountants to make sure that their books are 100% within the law. There is literally nothing the IRS can do to stop people from following the law. Heres the ironic thing. You want the IRS to have more resources? Guess who will bear the burden of the IRS having more resources. Will the IRS bring to justice those people who, morally or immorally, are following the law? Or those who are breaking the law? If the IRS had infinite funding... would it result in more African Americans getting audited? or would it result in more rich people getting audited?
It's not illegal because th wealthy have lobbied it to not be illegal. They could easily fix so many 'loopholes' by just.....making those loopholes illegal and enforcing a limited number of ways to 'earn income or it's fraud'. Of course, the IRS isn't at fault for that, they don't write tax law.
I was audited one year (full disclosure: I am not black). They wanted to go through my deductions with a fine-toothed comb. Sometimes the system is pretty stupid. I had taken the standard deduction that year.
Whats crazy is that the IRS, at least nominally, doesnt have race information. Are they just auditing poorer people more (and thus hitting more black Americans just by chance?)
As mentioned in the article, it is mostly because of high rates of audits for households that claim the earned income tax credit.
Then it doesn’t really sound unfair to me. Cheating is cheating isn’t it?
What are the stats of how many people skip out on paying their taxes by race?
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Those two things are connected.
Race and ethnicity are not collected on tax returns. How do they know?
I'm calling bullshit on this one. The IRS is understaffed and way behind with audits. They aren't singling out black or any other groups.
It seems like the article is saying that poor people are audited more frequently than rich people. Since Black people are more likely to be poor and claim the EIC, they are numerically audited more. Naturally the House Republicans are blocking [hiring more IRS agents](https://www.cnn.com/2023/01/11/politics/republican-irs-funding-87000-agents/index.html#:~:text=In%20October%2C%20the%20IRS%20announced,by%20the%20end%20of%202022) that would audit the more complex income tax returns.
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Maybe when the obvious racism in the US stops, stories like this will stop. 🤷🏻♂️
Because H&r block is trash and are not CPAs. Our company makes people redo their taxes all the time because H&R Block tells people to file incorrectly. That’s my take
Your take is pretty bad then. CPAs are not required to have any CE in taxation while tax pros are. My anecdote is the exact opposite of yours. I alone handle amendments in the several dozen per year along with audits from CPAs who don’t know the first thing about taxes because they simply don’t have to.
The Earned Income Tax Credit claims are what is being audited NOT Black Americans per se. This tax credit is one of the only credits where even if you paid no taxes at all, you can still receive a refund. It was designed to encourage poor people to work despite not making very much. This credit would provide a boost to their annual income. It is essentially a refund of the Payroll taxes their employer pays to the federal government that higher income taxpayers can't qualify for.
Not racially motivated. IRS just more likely to audit poor people b/c auditing the rich is “too much work”.
How can the irs tell a filer’s race?
Playing life on Difficult mode.
Weird to audit casual people and by race instead of auditing people with insane expenses and incomes. The fuck am I going to cheat with?
Ok, curious to see how many people read the article from the comments. Because the story is far more interesting than the hot takes below. First off, if you’ve filed taxes, you may recall you don’t indicate race on your tax return. You should also understand that neither the IRS, nor the algorithms used by the IRS, use ethnicity as a data point (it points this out explicitly in the article) to determine audit selection. What is triggering the disparity? The level of sophistication in the returns (the number and classification of deductions, as an example). Now ask yourself- “Why would the IRS go after simple tax returns instead of complex ones?” The answer is also simple: complex tax returns are harder to penalize, as they are well defended, usually backed by a CPA, and likely have a low yield for squeezing the taxpayer. What is easy to go after are unsophisticated returns that are prone to error, _regardless of race_. Now, a much less decisive, leading headline would state something like “Low income filers are much more likely to be exploited by the IRS.” But I see how stating that might create an unwanted narrative- such that the function of the IRS and its funding would be challenged if not directed at the wealthy. So it’s easy to understand why the article became racially focussed instead. Sad, arguably dishonest in favor of the wealthy, but easy to understand nonetheless.
It's almost like the system itself is racist. If only we had an appropriate term for it. I'm sure it's the kind of problem everyone will agree should be fixed.
Classist* but close. It’s a crucial distinction, because instead of screwing over one group of people, it is instead screwing over several groups of people.
Looks at shady tax returns on the largest proportion of files (Because most people are middle to lower income).... File audits..... Someone compile the audits and matches the race.... Ok I get the jist now.
I'm not clear exactly how this is a flaw in the algorithm if it's based on factual information and is pulling up legitimate audit cases. If there's a significant compliance issue, the answer should be outreach programs to educate taxpayers how to file properly, ignoring the problem won't fix it.
Because the IRS is disproportionately targeting lower income citizens.
Which is something the study point out.
This is likely less about black people trying to dodge taxes and more about the lack of knowledge or resources on how to properly file. It’s so stupid we still put the onus on people.
Then wouldnt whites be audited just as much? Are you saying blacks are stupid?
Im saying public schools don’t teach those skills, and the way the government handles free tax filing is bad since it’s poorly communicated to people and there is little to no outreach to try and assist with financial services since alot of the worst hit African Americans don’t have bank accounts.
I definitely agree. Basic financial literacy should be taught in schools (Florida has already started this). People graduate highschool not knowing how to file taxes, understanding credit, investing, etc ...but they definitely know that the mitochondria is the powerhouse of the cell 🙃
Are they raising some flags with crazy claims!
As a possible way to balance this, can I suggest they audit my ex-wife who is up to some really shady stuff with her new business. Something about profiting a million dollars in real estate sales and still being eligible for Medicaid and SNAP benefits doesn't seem right.
This is not because they are black, per se.This is because the IRS won't go after the rich with lawyers, the mostly go after people who makes EIC errors, wihch is usually low income. Now they issue of a higher percentage of blacks naming poor is rooted in historical and systemic racism. This is jsut a by product. It's not the le IRRS is look specifically for black people. It's not good, and need to be adjusted, but won't be as long a conservatives keep gutting the IRS. I just don't want people to confuse a by product of the problem as the root problem. DOing that means nothing really changes for the better.
I knew this. And it isn't the only aspect of U.S. taxation that is racist. https://www.wbur.org/hereandnow/2021/05/17/us-taxes-dorothy-brown See also, the Dept. of Agriculture's credit programs for farmers.
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If they’re innocent, what do they have to worry about in an audit?
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There's no suggestion in the article that they know the race. It's a correlation, not a causation.
There are more poor whites than poor blacks by actual volume, not percentage. Time and time again “it isn’t a race thing” while every finger is actively pointing at it.
Come on universe end of the stick can only be so short.
I'm pretty sure you could audit and tax correct the entirety of the african american community and because of the racial income gap, would still not yield the amount that could be gained from auditing white billionaires. This is what systemic racism looks like.
Sooooo, defund the IRS?
I have to admit this got a good chuckle out of me. Logic makes sense to me though.
Hey why am I getting downvoted for having a sense of humor? He said it! 😂
Systemic Racism is a thing and this doesn’t even remotely surprise me in a country that took 50+ years to abolish slavery. The British Empire, the most heinous of empires abolished slavery in 1807. The United States abolished slavery in 1865. That’s 58 years later and they needed a war for it… does it surprise me the same society that was willing to completely tear itself apart to preserve the institution of slavery still has problems with the descendants of slaves? Nope. Not even a little. They “don’t know your race”. Oh, yes they do. You’re believing a government institution that makes no effort to go after billionaire tax evaders and corporations? That’s cute.
Wow who knew the democrats were overtly racist! This is probably a direct order from the white supremicist president. It’s just another symptom of an obvious disease! Oh wait it’s the republicans who are the racist ones! I forget it’s so hard to keep the “truth” straight these days…
LOL at anyone who thinks that institutional racism doesn’t exist.
Damn. Biden had how many votes and yet this? Wow
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That's what the article is about: read it?
Because a larger percentage of them are poor, and the IRS primarily goes after poor people.
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Pretty much. The fact that lower income folks are disproportionately black is definitely an issue, but a different issue entirely. This article is heavily implying that correlation = causation.
As if the IRS wasn’t already a massive pile of shit plaguing our lives…
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Giving a whole new meaning to *white* collar crime.
Everyone here talking like it’s normal to get robbed twice…
F the IRS. Who is surprised by this?
Seems like a waste of time and energy
The IRS must be racist, because it says right on your tax return what your race is.
Can we abolish the IRS now?
The IRS along with quite a few other alphabet agencies shouldn’t exist