INTERNAL REVENUE SERVICE
FISCAL YEAR 2010 ENFORCEMENT RESULTS
It seems that the good folks at the IRS are burning the mid-night oil. Their results are up across the board, with only one exception. Audited returns for companies with assets greater than $250 million fell by nearly 50% between 2005-2010 (2010:23.44%, 2005:44.1%). This, no doubt, reflects the fact that our large corporations are so honest these days.
Some bits from the report. Note that there are two ways of looking at this. The results are presented in both percent and raw data. The percent numbers may lead you to conclude that you might not get caught if you fudge some numbers. But the raw data will scare you in a different direction.
-Only 1% of taxpayers with incomes under $200,000 are audited. So you have a 1 in 99 chance of getting hit. However, in 2010 1,428,000 people got “the letter”. There are only six cities in America that have a population greater than 1.4mm.
-If you make more than 200k, but less than a mil you have more to worry about. 153,000 (3%) in this group got nailed.
-If you are lucky enough to make more than a mil you have the IRS looking over your shoulder. The odds are 1 in 12 for an audit. 32,500 rich folks got porked in 2010.
-Speaking of high incomes these graphs blow me away. We hear again and again about how terrible it was during the deep recession of 2007-2009. Nonsense. The number of people filing big-ticket returns never dipped. It steadily rose.
-If I was wearing an IRS hat the first place I would look is at partnerships. The opportunities for abuses jump out at you in these set ups. The IRS would not hire me. They think quite differently of partnerships in general. Of the 3.4mm partnership and 4.4mm Sub-S returns (7.8mm total) only 28,700 were looked at. A scant 0.37%. Go figure.
-There are 22,700 IRS agents looking for trouble. They find it. In 2010 they filed 1.64mm cases and as a result collected an extra $57 billion (100% ten year increase). That aint hay. It comes to more than $2.5mm per agent. These nice people are not bounty hunters working commission. They are civil servants. But don’t for a second believe that there is no connection to what they collect, and what is their pay grade.
-If you did slip up, you get a letter that goes like this:
Dear Taxpayer,
We have audited your return……..
It ends with:
……..So please stop by next Tuesday at 2. Bring your papers and a lawyer might be nice. Don’t be late, we will just lean on you harder.
Should you get the black letter; just bend over. The IRS wins 90+% of the cases it pursues.
-The final thing to consider when contemplating stiffing Uncle Sam is, "What's the downside?" In 2001 the average tax cheat spent 18 months in the slammer. If you get banged in 2011 you're looking at 27 months.
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The number of people filing big ticket returns is probably skewed by the massive number of bailing on stocks.
ReplyDeleteYou might just as well become an IRS agent.
ReplyDeleteYou have spent a lot of time telling your readers WHY they shouldn't try to save/cheat on taxes. You imply that jail awaits anyone trying. You have spent several blog entries recently arguing AGAINST tax reductions and bailouts.
As you have said you yourself pay a lot of tax, yet obviously you have no fear of Big Government...
The question waiting to be answered is: are today's high taxes part of the reason for the malaise in which the U.S. employment picture remains mired? Taxation does not do much to encourage wealth creation, saving or investing. Under-the-table or weekend work is the only area of growth. And you'd have to be mad to open a small business, let alone a big one, in a G-8 country. And obviously buying property is risky and expensive...
How about some ideas on avoiding or evading tax? Wouldn't it be more productive for you to reverse course and lobby FOR free enterprise and AGAINST the governments?
My IRS tale. Some years ago I took a job with a municipal utility. They had a defined benefit
ReplyDeletepension program but one is not vested in it until you have worked there for 5 years. I therefore continued making my annual IRA contribution on the assumption that, not being
vested, I was not yet covered under that pension program. The IRS saw it differently and made me cough up my IRA deductions with the usual interest and penalty.
The writer Joe Sobran called the IRS the 'business end of the liberal welfare state', he was spot on. There is no reasoning with them. They are in the business of extracting money from the citizenry not in hearing your good faith explanations.
Kreditanstalt,
ReplyDeleteI'm not preaching. Just reporting.
What would I do different? Everything. I would do away with our entire way of raising revenue. I would do it with consumption taxes. This would require some addition income tax. For me that would be a flat tax. No deductions, no long-term/short-term/capital/ordinary, no nonsense, no accountants no lawyers no IRS agents.
I want the government to be about 15% of GDP. I want the budget to be balanced during normal economic periods. This would require a VAT of ~15%, and a flat tax of~10%.
I want to take issue that I have articles in support of higher taxes. What I have been pounding on is the deficits. They are destabilizing, they will cause great pain. The time frame for that pain is not for far off.
You can't stabilize the budget with cuts. Not possible. You show me the numbers. There is no way to significantly cut spending.
We have to suck it up and dig into our pockets. That means lower services, smaller government (including military) it also means high taxes.
This is not the way I want it to go. This just way I think it is going to.
b
BK: "You can't stabilize the budget with cuts. Not possible. You show me the numbers. There is no way to significantly cut spending."
ReplyDeleteCome on Mr Krasting, stop trying to play your readers. You wouldn't have lasted 10 minutes on Wall Street if you believe government spending can't be cut.
Whole departments can be eliminated. Dept of "Education" does not operate a single school. Not one.
Dept of Energy was created to ween the country off foreign oil in 1977. Thirty years later, we are MORE dependent. That's a fail. Shut it down.
How many redundant (and ineffective) financial regulators does one country need? Pick one that works least bad, and shut the rest down.
Not even Enron would pull the accounting scams that are embedded into GASB regulations. Make "public servants" abide by the same rules as the rest of us.
While there are some hard working government workers that are the exception to the rule, mostly it takes 4-5 government idiots to equal the productivity of one private sector worker. And yet they get paid, on average, twice as much.
Anyone who can't find at least $2 trillion in spending cuts at the Federal level with their eyes closed is just lying, stupid or both.
And our children will pay dearly for our cowardice.
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