Dorothy Philbin | CNBNews Contributor
There were recent articles in newspapers claiming that the Internal Revenue Service (IRS) targets the poor for auditing far more often than the rich. Is it true? After what we’ve been through with the federal government over the past few years, I think anyone would say “yes.”
I’m sure most people have heard that the vast majority of auto accidents happen within five miles of home. That is true, also. These statistics, though true, come from a philosophy called “how to lie by statistics.” I am in no way defending the Internal Revenue Service or the federal government as a whole. My goal is only to explain the lying by statistics.
Let’s start with what the IRS audits. This criteria can and usually does change every year. One year I had a 4-bedroom house and my own business so I took business use of the home as a deduction. My mother, who worked for the IRS at the time, told me not to do it but, hey, what do mothers know? I got audited. Business use of the home happened to be one of the criteria the IRS decided to audit that year. Mom was right!
This year, and many years, the IRS audits Earned Income and Childcare Credits. Are they picking on the poor? Maybe. The IRS hires hundreds or maybe thousands of seasonal employees at a level GS-4 every year. They have for decades. A seasonal employee can be trained to audit Earned Income Credit in about a half hour. The number of “errors” made by the taxpayers is very, very high. How high? I remember one case I worked where a group of children were being declared as dependents by 64 taxpayers! So, it costs very little time and money to make a lot of money. That is just good business.
The next question you might have is why doesn’t the IRS go after the millionaires/billionaires? That’s an easy answer. They do. The rich have very good accountants and lawyers. They are audited by GS-11s (CPAs or MBAs) or above. They are few and far between and the audit can go on for years. From my own experience, at the end of the audit the taxpayer and the auditor negotiate a figure with which they are both comfortable.
To turn over the coin and look at the other side I offer this. The ads on the tv and radio which try to scare you by saying that the IRS is hiring hundreds of new employees to audit you – that’s true but they are the GS-4 seasonal employees. What is said in the ads is a half truth. How about their claim that the IRS can attach your wages? My mother, a GS-7 in who worked in taxpayer contact over 17 years never, not once, attached someone’s wages. The next way these ads try to scare you is by saying the IRS will take your bank account. That’s another “no,” at least during my mother’s 17 year’s experience. She worked with anyone who worked with her, the IRS wants your money they don’t want trouble or attitude. Answer any letter they send you, go in for a meeting if they request and ask for a payment plan. That’s all.
There were only a half dozen times when mom froze bank accounts. Freezing means that the money stays in the account but no one can access it. In each case the taxpayer went more than five years ignoring all communications from the government.