Lowest-Income Taxpayers Are the Most Likely To Be Audited

March 15, 2022   |   Tags: , ,
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IRS audits target the poor. Data from the Transactional Records Access Clearinghouse (TRAC) at Syracuse University shows the IRS audited the lowest-income Americans—"wage earners with less than $25,000 in total gross receipts"—at five times the rate of everyone else during government fiscal year 2021.

"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," TRAC reports.

It's another sign that the Biden administration's plan to beef up IRS funding, hire more than 80,000 new tax cops, and increase monitoring of cash flow into and out of bank accounts could harm the Americans who are just barely scraping by, not only ultra-wealthy tax cheats, as officials say.

In 2021, the IRS conducted 306,944 audits of the lowest-income earners and 352,059 audits of people of all other income levels, according to TRAC. Just 39,449 audits were of people with taxable incomes between $200,000 and $1 million per year.

Put another way, high-income earners had one-third the odds of an audit compared with their low-income counterparts. Only 4.5 out of every 1,000 returns of the $200,000-to-$1 million bracket were audited, compared to 13 out of every 1,000 returns of the lowest-income bracket.

The audit rate for all earners with positive incomes over $25,000 was just 2.6 per 1,000 returns.

"IRS accomplished over 650 thousand audits last year by jacking up its already high reliance on so called 'correspondence audits'—essentially a letter from the IRS asking for documentation on a specific line item on a return," notes TRAC. And "over half of these correspondence audits were targeted at the small proportion of workers with incomes so low they had claimed an anti-poverty earned tax credit to offset the tax otherwise due on their modest earned income."

Fifty-four percent of correspondence audits were aimed at "the small proportion of returns with gross receipts of less than $25,000 claiming an earned income tax credit."

"Does it make sense from either an equity or revenue standpoint to focus IRS's limited firepower on the poorest taxpayers among us—those with incomes so low they have filed returns claiming an anti-poverty earned income tax credit?" TRAC asks. "This question alone raises profound issues.


FREE MINDS

State rescinds FART license plate. Though North Carolina initially approved a "FART" license plate for Asheville resident Karly Sindy, it threatened to rescind the plate after three months when someone complained.

When the state "told her she had to remove the plate unless she could make a convincing case to keep it," Sindy "created a website for an organization named the Friends of Asheville Recreational Trails. They held their very first meeting that night," notes Jeremy Markovich in the North Carolina Rabbit Hole newsletter:

Fifteen people showed up. Soon after, people made logos, and the story got a ton of media coverage. Sindy herself ended up on Jimmy Kimmel Live! to plead her case to America. She also mailed an appeal to the DMV, saying FART the plate represented F.A.R.T. the hiking group.

Well, it turns out that Sindy won't be able to keep the plate on her truck after all. Yesterday afternoon, she got a call from the NCDMV saying her appeal was denied.

"Ms. Sindy will not be able to keep the plate on her vehicle," NCDOT spokesman Marty Honan said in an email to the Rabbit Hole. "The text has been on our unapproved list for some time and should not have been issued."

The decision is at odds with a federal court holding that license plates are free speech. In 2020, a federal court held that California's ban on plates with "connotations offensive to good taste and decency" was unconstitutional—paving the way for QUEER and SLAAYRR license plates.


FREE MARKETS

Permit-free concealed carry OK in Ohio. Republican Gov. Mike DeWine has signed into law a bill that will allow concealed carry weapons without a permit. More from The Columbus Dispatch:

Senate Bill 215 will let Ohio residents 21 and older conceal firearms they are legally allowed to own without training or permits. It also removed the legal requirement for gun owners to tell police they are armed when stopped. Law enforcement will have to ask, but lying about a concealed weapon will be a misdemeanor offense.

"This is a day that will go down in history…," Buckeye Firearms Association Director Dean Rieck said in a statement. "This is a great moment for Ohio and for those who wish to more fully exercise their Constitutional right to keep and bear arms."

DeWine's decision to sign the bill into law came over objections from law enforcement groups, county sheriffs and Democrats who worried that taking away training requirements would make communities less safe.


QUICK HITS

• COVID cases are rising again in parts of Asia and Europe. "The death rate in Hong Kong has soared this month, surpassing 25 per 100,000 residents in the past week," notes David Leonhardt at The New York Times. "Covid is also spreading rapidly in New Zealand, Singapore, South Korea and several other Pacific countries that had previously kept caseloads low." And European countries including the U.K., Germany, and Italy are also seeing rising case rates, attributed largely to a rise in omicron subvariant BA.2.

• Timothy B. Lee at Full Stack Economics on oil and inflation: "The US has had seven recessions in the last 50 years. Four of these—in 1973, 1980, 1981, and 1990—were preceded by conflicts in the Middle East that disrupted oil supplies and drove up oil prices. Two others—in 2001 and 2007—followed oil price increases driven by strong demand rather than supply disruptions."

• "The three former Sharon Hill police officers who opened fire at an Academy Park High School football game in August, killing an 8-year-old girl, were held for trial Thursday on criminal charges relating to her death," reports The Philadelphia Inquirer.

• Freddie de Boer on demographic averages, identity politics, and maddening contradictions. "If you want to discourage projecting averages onto individuals, you should do that with all kinds of people" and not just when it's convenient for progressive politics, he writes. "If the idea is that we should pay a lot less attention to demographic identity because these groupings always distort who we are as individuals, I say, yeah! I'm on board. But that attitude usually offends the social justice set."

• Massachusetts is revising down its COVID death count. The state "will start using a new public health surveillance definition next week that will result in 4,081 deaths once linked to the virus being recategorized as stemming from other causes," NBC 10 Boston reports.

• A look inside America's first official safe injection site.

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