I've been doing taxes seasonally for a few years now. We desperately need more folks at the IRS as you simply cannot get through to a human being anymore. Congress also needs to stop fiddling with the tax code every year. The Trump administration made things so much more convoluted for businesses especially. These tax cuts are scheduled to sunset in 2025 and the industry is waiting with bated breath to see if they are made permanent.
Given all these constant tax code changes and inability to resolve tax issues in a timely way due to chronic underfunding of the IRS, the tax preparation industry is struggling to recruit and retain employees. As a result, many high-maintenance clients get dropped by their accounting firms every year. This also ends up being an equity issue as the lower income folks cannot find representation when the IRS comes knocking. Then you have the bottom-feeder fly-by-night tax prep operations luring naive or willfully blind folks with tax refund advances for shoddy or even fraudulent work. A LOT of the IRS cases are outright fraud committed not necessarily by the taxpayer - they are just rubes sucked in to the idea of fast, easy money by charlatans who file false returns on their behalf. There is also plenty of fraud committed by taxpayers themselves and I have had to turn away potential clients who wanted me to fib to the IRS on their behalf. Its a jungle out there!
"chronic underfunding of the IRS" and "constant tax code changes" and "cannot get through to a human being" - all quite representative of an actual inability for the regulators themselves being able to interpret ever more complex regulations. I suppose it's possible to create a system so complex that any given answer to a specific question might be correct or incorrect depending on the examiner. And in your business "struggling to recruit and retain employees", the exact same issue facing the IRS. I doubt that the IRS itself is capable of on-boarding and training their new examiners. And the base stock of those new hires likely to those with minimal practical skills in business where compensation might be much better.
The money might better be spent in trying to analyze those shelves of regulations and rulings by experts from your industry in an attempt to reduce complexity, if that is possible. Just like the fraud in Medicare, the tax fraud is a product of complexity and inability to police a complex system.
For the IRS, I imagine complexity now results in contradictions where experts may not agree. Of course, that leads to my expert is "better" than yours, particularly if my expert has an inside advantage. Keeps lawyers at work for those with deep packets. The rest of us just pay what they require and hope they stay away.
My sister-in-law is a semi-retired CPA that was a partner in a mid-size regional accounting firm on the left coast (she specialized in medical non-profits, not taxes per se, but as a senior partner, was aware of the tax issues of various clients, including "yeoman" family businesses). Her firm had to hire 10 CPAs that were each specialized in a distinct segment of the tax code to meet their clients' tax needs. Her view as a professional accountant was that the tax code was absurdly overcomplicated (mostly due to "politics" and the use of the tax code for various political and policy purposes to encourage or discourage various economic practices).
Tax enforcement of EITC and Law enforcement of Drugs is the same racket. Easy targets, easy prosecution and the staffers rack up the stats and have evidence of "doing their jobs". Good policing and good tax enforcement, going after the REAL criminals, is incredibly difficult and a lot of times yields nothing.
Now *that* is a fascinating critique of the IRS-expansion, using the Left's own purported commitment to "antiracism." Add to that, these 87k new IRS agents are supposed to be armed and willing to use deadly force, making them essentially police, and now you have the "defund the police" Left hiring a bunch of new police, which, based on your analysis, will most likely be disproportionately used against black people and other POC. It's almost like the Left doesn't actually believe their own principles, but merely uses them as a pretext for pursuing some secretive and possibly nefarious agenda that completely undermines those very principles they claim to care so much about.
I am less convinced that all of the 87k are going to be carrying firearms. I suspect that presumption comes from a single job posting for a very small number of positions that is being mentally extrapolated to the whole. Don't forget to wear your HWFO glasses - if something is viral on either/any side, its chances of being wrong scale with how viral it is.
Very true, and thanks for the reminder. I guess I'll never outgrow the need to be reminded that the cognitive biases I see so easily in others, I am susceptible to myself but generally unable to see them at work in my own thinking.
It is a constant struggle for all of us to not let confirmation bias rule our sense making apparatus. I personally did not realize the connection between the maps I posted last week and the EITC until I started doing research into it yesterday, and the results were interesting enough I thought I'd share.
Expanding sensemaking is hopefully part of what we seek to do around here on HWFO.
Ah. " and target wealthier folks who are actually cheating". I would think numerically, at least, the most common act of cheating is getting paid under the table or not reporting cash payments and tips.
And the unions will presumably try to implement more insane "equity" policies that do things like ensure that "whites" get laid off first, even if they have more seniority.
I find it very, very plausible that the reason that audits disproportionately target "low earners" is that many "low earners" aren't actually "low earners" at all - they're people committing tax fraud in ways that throw up red flags, which draw audits.
In 2019, the EITC cost $70B. Odd that cancelling it would save about what IRA adds to the IRS budget.
If the system improvements are even marginally effective, they will identify a host of audit targets using AI generated "potentials". They have enough information to make the target search more realistic about which EITC fact patterns are worthy of audit. Imagine an info merge of IRS data, Equifax, LexisNexis, ad nauseam. Throw in cash destruction and voila--instant and constant taxation. Ain't government grand?
The upgrades to better computing systems seem quite necessary. Of course, the canard of COBAL is reflective of an odd bias in that COBAL while less popular than modern languages is well suited to financial work in spite of age. But if it's like most large scale automation projects in the government it will be mismanaged by micro-managers who create moving target requirements and never talk with users. I do hope that groups like Obama's Digital Soldiers can be made useful. Nominally the IRS, like the NIH will not bow to any outsides who might be better. Just one of my rants for your consideration.
As noted in an earlier comment, somehow the complexities of the IRS regulations need simplification and that might require some of those new hires who might see it afresh.
In those charts, the "audits poor people five times more often than everyone else" rate is 13/1000 ... but the "few audited" among millionaires rate is 13725/617505, 22.2/1000, 70% higher.
Admittedly, that's not as high as the ratio I'd have expected, and I appreciate the explanatory information, but it's not quite "the millionaires aren't being audited" either.
I've been doing taxes seasonally for a few years now. We desperately need more folks at the IRS as you simply cannot get through to a human being anymore. Congress also needs to stop fiddling with the tax code every year. The Trump administration made things so much more convoluted for businesses especially. These tax cuts are scheduled to sunset in 2025 and the industry is waiting with bated breath to see if they are made permanent.
Given all these constant tax code changes and inability to resolve tax issues in a timely way due to chronic underfunding of the IRS, the tax preparation industry is struggling to recruit and retain employees. As a result, many high-maintenance clients get dropped by their accounting firms every year. This also ends up being an equity issue as the lower income folks cannot find representation when the IRS comes knocking. Then you have the bottom-feeder fly-by-night tax prep operations luring naive or willfully blind folks with tax refund advances for shoddy or even fraudulent work. A LOT of the IRS cases are outright fraud committed not necessarily by the taxpayer - they are just rubes sucked in to the idea of fast, easy money by charlatans who file false returns on their behalf. There is also plenty of fraud committed by taxpayers themselves and I have had to turn away potential clients who wanted me to fib to the IRS on their behalf. Its a jungle out there!
"chronic underfunding of the IRS" and "constant tax code changes" and "cannot get through to a human being" - all quite representative of an actual inability for the regulators themselves being able to interpret ever more complex regulations. I suppose it's possible to create a system so complex that any given answer to a specific question might be correct or incorrect depending on the examiner. And in your business "struggling to recruit and retain employees", the exact same issue facing the IRS. I doubt that the IRS itself is capable of on-boarding and training their new examiners. And the base stock of those new hires likely to those with minimal practical skills in business where compensation might be much better.
The money might better be spent in trying to analyze those shelves of regulations and rulings by experts from your industry in an attempt to reduce complexity, if that is possible. Just like the fraud in Medicare, the tax fraud is a product of complexity and inability to police a complex system.
Like all other industries in the USA there is a vested interest in keeping the rules so complicated that you have to hire an expert to comply.
For the IRS, I imagine complexity now results in contradictions where experts may not agree. Of course, that leads to my expert is "better" than yours, particularly if my expert has an inside advantage. Keeps lawyers at work for those with deep packets. The rest of us just pay what they require and hope they stay away.
My sister-in-law is a semi-retired CPA that was a partner in a mid-size regional accounting firm on the left coast (she specialized in medical non-profits, not taxes per se, but as a senior partner, was aware of the tax issues of various clients, including "yeoman" family businesses). Her firm had to hire 10 CPAs that were each specialized in a distinct segment of the tax code to meet their clients' tax needs. Her view as a professional accountant was that the tax code was absurdly overcomplicated (mostly due to "politics" and the use of the tax code for various political and policy purposes to encourage or discourage various economic practices).
Oh, absolutely, the tax code is the favorite tool of policy makers to reward or punish the industry sector du jour. Unintended consequences be damned.
My impression, which could be incorrect, was that "medical non-profits" were especially vulnerable to wild political swings in California's tax code.
Tax enforcement of EITC and Law enforcement of Drugs is the same racket. Easy targets, easy prosecution and the staffers rack up the stats and have evidence of "doing their jobs". Good policing and good tax enforcement, going after the REAL criminals, is incredibly difficult and a lot of times yields nothing.
Now *that* is a fascinating critique of the IRS-expansion, using the Left's own purported commitment to "antiracism." Add to that, these 87k new IRS agents are supposed to be armed and willing to use deadly force, making them essentially police, and now you have the "defund the police" Left hiring a bunch of new police, which, based on your analysis, will most likely be disproportionately used against black people and other POC. It's almost like the Left doesn't actually believe their own principles, but merely uses them as a pretext for pursuing some secretive and possibly nefarious agenda that completely undermines those very principles they claim to care so much about.
I am less convinced that all of the 87k are going to be carrying firearms. I suspect that presumption comes from a single job posting for a very small number of positions that is being mentally extrapolated to the whole. Don't forget to wear your HWFO glasses - if something is viral on either/any side, its chances of being wrong scale with how viral it is.
Very true, and thanks for the reminder. I guess I'll never outgrow the need to be reminded that the cognitive biases I see so easily in others, I am susceptible to myself but generally unable to see them at work in my own thinking.
It is a constant struggle for all of us to not let confirmation bias rule our sense making apparatus. I personally did not realize the connection between the maps I posted last week and the EITC until I started doing research into it yesterday, and the results were interesting enough I thought I'd share.
Expanding sensemaking is hopefully part of what we seek to do around here on HWFO.
like "heart" enablement comment
Heart
Ah. " and target wealthier folks who are actually cheating". I would think numerically, at least, the most common act of cheating is getting paid under the table or not reporting cash payments and tips.
A wealthy person who is substantially cheating would manifest as someone who reported low income.
Oh wait...
Adding 87,000 government employees means more union dues, which are then donated to DEMONcRAT campaigns 🤔
And the unions will presumably try to implement more insane "equity" policies that do things like ensure that "whites" get laid off first, even if they have more seniority.
Well allegedly that’s what their doing with Chicago teachers.
https://www.startribune.com/new-minneapolis-teacher-contract-language-disrupts-seniority-to-protect-educators-of-color/600179265/
I find it very, very plausible that the reason that audits disproportionately target "low earners" is that many "low earners" aren't actually "low earners" at all - they're people committing tax fraud in ways that throw up red flags, which draw audits.
In 2019, the EITC cost $70B. Odd that cancelling it would save about what IRA adds to the IRS budget.
If the system improvements are even marginally effective, they will identify a host of audit targets using AI generated "potentials". They have enough information to make the target search more realistic about which EITC fact patterns are worthy of audit. Imagine an info merge of IRS data, Equifax, LexisNexis, ad nauseam. Throw in cash destruction and voila--instant and constant taxation. Ain't government grand?
The upgrades to better computing systems seem quite necessary. Of course, the canard of COBAL is reflective of an odd bias in that COBAL while less popular than modern languages is well suited to financial work in spite of age. But if it's like most large scale automation projects in the government it will be mismanaged by micro-managers who create moving target requirements and never talk with users. I do hope that groups like Obama's Digital Soldiers can be made useful. Nominally the IRS, like the NIH will not bow to any outsides who might be better. Just one of my rants for your consideration.
As noted in an earlier comment, somehow the complexities of the IRS regulations need simplification and that might require some of those new hires who might see it afresh.
In those charts, the "audits poor people five times more often than everyone else" rate is 13/1000 ... but the "few audited" among millionaires rate is 13725/617505, 22.2/1000, 70% higher.
Admittedly, that's not as high as the ratio I'd have expected, and I appreciate the explanatory information, but it's not quite "the millionaires aren't being audited" either.