Pugs Enraged That IRS Scrutinized Teaparty Groups. They Forget That They Themselves Once Subjected People to Enhanced Scrutiny.

[Lisa Lisa]

Pug hypocrisy makes me want to vomit. What a bunch of two-faced
fuckers. Let's remember what they did in the mid-nineties---besides
shutting down the government.






I.R.S. More Likely to Audit the Poor and Not the Rich
By: David Cay Johnston
April 16, 2000
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Last year, for the first time, the poor were more likely than the rich
to have their tax returns audited, new Internal Revenue Service data
compiled by Syracuse University researchers shows.

The I.R.S. audited 1.36 percent of all tax returns filed by people
making less than $25,000 last year, compared with 1.15 percent of
returns filed by those making $100,000 or more. Since 1988, audit
rates for the poor have increased by a third, from 1.03 percent, while
falling 90 percent for the wealthiest Americans, from 11.4 percent.

The need to audit the highest income taxpayers is somewhat less today
than in 1988, I.R.S. officials say, because more of these individuals
are wage earners whose pay is fully reported by employers and because
Congress has eliminated some of the deductions most likely to be
abused.

But there has been no reason to reduce audits of corporations and the
self-employed, which fell to record low levels last year because
Congress did not authorize funds to keep up with the increased number
of such taxpayers. These taxpayers received less scrutiny even though
the General Accounting Office, the investigative arm of Congress, said
in 1997 that they are more likely than the working poor to pay less in
taxes than they owe.

The focus of I.R.S. audits on the bottom of the income ladder extended
to businesses as well.

In 1999, unincorporated businesses with less than $25,000 in sales,
classified by the I.R.S. as Schedule C enterprises, were more likely
to be audited than larger unincorporated businesses. The I.R.S.
audited 2.7 percent of the tiny ventures, more than double the 1.3
percent rate for those with $25,000 to $100,000 in sales and more than
the 2.4 percent rate for those with more than $100,000 in sales.

The intensified focus on low-income taxpayers resulted from pressure
on the I.R.S. beginning in 1995. Newt Gingrich, who was then House
speaker, and other Republican Congressional leaders were concerned
about misuse of the earned income tax credit, a program that allows
the working poor, especially those with children, to receive money
from the government through a form of negative income tax. They
proposed to sharply reduce the credit, prompting Pesident Clinton to
counter with a plan to bolster audits to reduce fraud and mistakes.

The I.R.S. was also far less likely to take action last year against
those who did not pay their income taxes, the new data shows. Levies
on paychecks and bank accounts were down 85 percent from 1997, and
liens to secure the government's interest were down 69 percent.

Seizures of property to pay back taxes, the most severe enforcement
action, were down 98 percent, to 161, from about 10,000 annually the
previous 10years. Auditors recommended $4.5 billion in taxes and
penalties last year,down from $6.3 billion in 1993.

Much of the decline in enforcement is because of shrinking staff and
complex new rules enacted by Congress in the I.R.S. Restructuring and
Reform Act of 1998. Seizing property, for example, now requires a 54-
step process that more than two dozen revenue officers have described
as virtually impossible to navigate. And the permanent I.R.S. staff is
the same size now as in 1983,even though the total number of tax
returns has increased one-third and the number of complex returns by
high-income individuals has grown even more.

Over all, one of every 66 corporations of all sizes was audited, a
level of scrutiny significantly lower than the one in 37 audit rate
for Schedule C businesses with less than $25,000 of revenue. Among the
largest corporations,those with more than $250 million of assets, the
audit rate was 34.5 percent last year, down from 54.6 percent in
1992.

These findings emerge from an exhaustive compilation of tax data
posted on the Internet by the Syracuse researchers. The data, covering
I.R.S. audit and enforcement actions through last Sept. 30, the end of
the government's 1999 fiscal year, was provided to the university's
Transactional Records Access Clearinghouse by the I.R.S.

Charles O. Rossotti, the commissioner of internal revenue, said that
overall audit rates had fallen so far that he feared the tax system
could not bear any more cuts.

Last week, asking a House subcommittee to support a 9 percent increase
in his budget, Mr. Rossotti said that "we're really risking the entire
tax system" by continually slashing audit rates.

In an interview, Mr. Rossotti said: "I am not going to make the claim
that at this moment the system is threatened because I don't know at
what point it is threatened by falling audit rates. But longer term,
the threat is there if a belief begins to develop that, 'Hey, I am
paying my taxes but the guy next door or the business across the
street isn't, and the I.R.S. is not, or cannot, do anything about it.'
"

Mr. Rossotti said that the only reason audit rates for the working
poor had risen while the rates for wealthier taxpayers had declined
was a mandate from the White House and Congress for close monitoring
of the earned income credit.

A couple without children can use the credit to eliminate all income
taxliability and get back an additional $347, but working parents can
wipe out their liability and collect as much as $3,816 more.
Representative Bill Archer,the Texas Republican who heads the House
Ways and Means Committee, said studies had showed that more than 20
percent of returns claiming the credit had misused it.

But John Karl Scholz, a University of Wisconsin economist who studied
the earned income credit in 1995 when he was a Clinton administration
tax policy adviser, said that while fraud was a continuing problem,
most of the issues uncovered in audits tended to be disputes over who
got the credit when a couple with children had separated or divorced.
Mr. Rossotti expressed the same view in an interview.

Mr. Scholz said that "if you consider the amount of noncompliant
behavior uncovered for a dollar of I.R.S. enforcement resources, the
amount of attention being given to the earned income tax credit is
much too large."

Excluding the special audits of the working poor and people who fail
to file a tax return, the audit rate for those making less than
$25,000 would fall from 1 in 74 to 1 in 300. For businesses with sales
under $25,000 the rate would fall from one in 37 to one in 588.

Mr. Rossotti said, "The issue of whether you are more likely to be
audited if you make less than $25,000 than if you make more than
$100,000 is totally distorted by the presence of the special earned
income tax credit program."

Senator William V. Roth Jr., the Delaware Republican who heads the
Senate Finance Committee and who was the sponsor of the restructuring
act, said he was troubled by many of these statistics. "The tax laws
must be applied with integrity and fairness," he said, adding that "I
am hopeful that with adequate resources, better training, the
leadership of Charles Rossotti and continuous modernization of the
agency, the I.R.S. will improve."

Mr. Archer, the chief tax writer in the House, said he had found no
flaw in the I.R.S. audit priorities and criticized the Syracuse
researchers.

"This entire analysis is terribly misleading and cynical," Mr. Archer
said in a statement. "Ninety-seven percent of all the so-called
'audits' relating to the earned income credit are correspondence
audits, which is a relatively simple matter of mailing additional
information to the I.R.S."

For now, though, the I.R.S. is scrutinizing the earned income credit
with such wariness that it is sometimes denying the credit to people
who are legitimately owed it on nothing more than suspicion, according
to several low-income taxpayer clinics run by law schools.

Last week in Los Angeles, a tax court judge heard the case of Maritza
Reyes, a cleaning woman who earns $7,000 annually and who was denied
the credit after an audit.

She had separated from her husband, and each had taken one child and
applied for the earned income tax credit. The I.R.S. rejected Ms.
Reyes's application for the credit but at trial produced no evidence
to support its position that she and her husband had not actually
separated. A ruling is expected in three months.

Professor Frank J. Doti of the Chapman University law school in
Orange, Calif., who with Pallavi Shah, a law student, represented Ms.
Reyes, said that many low-income people audited by the I.R.S. wound up
in worse straits than did Ms. Reyes. Few have access to low-income
legal clinics, and they give up when they are wrongly denied the
credit. Then their cases are added to the statistics on fraud and
errors on which Congress relied when it financed the increased audits
of the working poor.

"There is fraud in this program, but the handling of this case is
bizarre," Professor Doti said, adding that the situation was not
unique. The I.R.S. declined to comment on the Reyes case, as it does
in all cases involving individual taxpayers. "Our policy is to rely on
the facts and the law in determining eligibility," said Frank Keith,
an I.R.S. spokesman.

To identify tax cheating by high-income taxpayers and those with
complex returns the I.R.S. relies on face-to-face audits by highly
trained revenue agents. The number of such audits fell sharply again
last year.

In 1981, the earliest year for which data is available, one in 63 tax
returns received such an audit, but last year only one in 322 did,
down from one in 217 in 1998.

This decline partly reflects the shrunken I.R.S. audit staff, which
has less time to examine complex returns.

But a second factor, perhaps more significant, is also at work, said
David B. Burnham, who with Professor Susan Long is co-director of the
Syracuse research organization. The I.R.S. relies on data at least 11
years old to select returns for audits based on patterns of income and
deductions, Mr.Burnham said.

Changes in the economy, including companies offering more stock
options in lieu of cash compensation and taxpayers deducting interest
on home equity loans and margin debt, make much of this data useless
for identifying cheating.

But since 1995 Congress has barred new studies to measure taxpayer
compliance by the I.R.S.

The Syracuse University Web site, trac.syr.edu also lists data from
the Administrative Office of the United States Courts that shows that
criminal prosecutions for tax crimes, long a minor government
activity, continue to decline. Last year, there were just 722 such
prosecutions in the nation, half the figure in 1981, when there were
one-third fewer taxpayers.

The I.R.S. data also showed an area of increased activity that may
foreshadow the government's ability to collect taxes in the years
ahead. The number of cases opened on people who have stopped filing
returns has soared. In 1997, the I.R.S. initiated 822,898 taxpayer
delinquency investigations. Last year, that number nearly doubled to
1.58 million.


© 2000, The New York Times Company
Index for:Beat Reporting 2001

[Jorge]

In article
<b58dcee7-8eb9-49bb...@m2g2000vbb.googlegroups.com>,

Wait till they get ahold of your "health-care" account.
--
Karma ; what a concept!