IRS Audits Single Mother For Not Making Enough Money

[marmar]

via AlterNet:



IRS Audits Single Mother For Not Making Enough Money

Posted by Cara , Feministe at 2:57 PM on December 11, 2009.

They thought that she was too poor to be telling the truth about her income.





This is absurd. Via Raven’s Eye, Danny Westneat at the Seattle Times has uncovered a case in which the IRS audited a single mother with two kids, who earns $10 an hour at Supercuts and lives with her parents. What was their reason for doing so? Random selection? An incorrectly completed return? No, they just thought that she was too poor to be telling the truth:

“I asked the IRS lady straight upfront — ‘I don’t have anything, why are you auditing me?’ ” Porcaro recalled. “I said, ‘Why me, when I don’t own a home, a business, a car?’ ”

The answer stunned both Porcaro and the private tax specialist her dad had gotten to help her.

“They showed us a spreadsheet of incomes in the Seattle area,” says Dante Driver, an accountant at Seattle’s G.A. Michael and Co. “The auditor said, ‘You made eighteen thousand, and our data show a family of three needs at least thirty-six thousand to get by in Seattle.”

“They thought she must have unreported income. That she was hiding something. Basically they were auditing her for not making enough money.”

Seriously? An estimated 60,000 people in Seattle live below the poverty line — meaning they make $11,000 or less for an individual or $22,000 for a family of four. Does the IRS red-flag them for scrutiny, simply because they’re poor?

The IRS must either think that the United States is just filled to the brim with liars, or that they receive an awful lot of tax returns for people who don’t exist. A whole lot of people in this country, not just in Seattle, live under the poverty line — even though the poverty line is actually placed ridiculously low. And more still live above the official poverty line while still being poor. It’s usually not pretty. It’s sure as hell not just. And often, those people need the help of friends and family to get by. But as they will tell you, it can be done — because, simply, it has to.

As Westneat points out, it’s not as though low-income people can’t commit tax fraud. But choosing them as audit subjects specifically because of their low income is incredibly classist, and far from cost effective. It can also be just plain cruel and vindictive, as it turned in Porcaro’s case:

She had a yearlong odyssey into the maw of the IRS. After being told she couldn’t survive in Seattle on so little, she was notified her returns for both 2006 and 2007 had been found “deficient.” She owed the government more than $16,000 — almost an entire year’s pay.

She couldn’t pay it. Her dad, Rob, has run a local painting business, Porcaro Power Painting, for 30 years. He asked his accountant, Driver, for help.

Rachel’s returns weren’t all that complicated. At issue, though, was that she and her two sons, ages 10 and 8, were all living at her parents’ house in Rainier Beach (she pays $400 a month rent). So the IRS concluded she wasn’t providing for her children and therefore couldn’t claim them as dependents.

She stood to lose what is called earned income tax credit, a refund targeted to help low-income workers. You qualify only if you’re working, as Rachel has been.

So, according to the IRS, parents living in intergenerational housing aren’t caring for their children. Further, while I don’t personally know anyone for whom $16,000 is not a huge sum, it’s an impossible and mind-boggling one for someone who earns $18,000 a year. ...........(more)

The complete piece is at: http://www.alternet.org/blogs/peek/144526/irs_audits_single_mother_for_not_making_enough_money/

[ThomCat]

1. Holy Shit!

Can they fine any more ways to target and harass poor people?

Anything a poor person has to do to survive will be criminalized and penalized. Have to group together in order to combine paychecks to survive? You're no the one one taking care of your kids, we're taking away the tax credit that was supposed to help exactly people like you. Fuck whatever Congress intended.

The rich are the biggest tax cheats? Target the poor instead. They can't hire high priced lawyers to fight back.

The republicans have succeeded, little by little, in corrupting the IRS over the years. They have corrupted the purpose of the IRS so that they are now there primarily to target the poor. They have corrupted them so that they go out of their way to avoid targeting the rich.

If they see a tax information from a place that pays close to minimum wage then they should know that the person is legitimately poor. Someone working at Supercuts isn't going to have wealth stashed away somewhere.

That IRS employee was either very dense or very vicious. :grr:

[slampoet]

2. That IRS employee is following orders.

For DECADES the priority of the IRS is to go after those people who don't have the money or legal representation to defend themselves.

If this person's profession was law oriented she'd never have gotten audited.

[happyslug]

5. Only since Reagan, up till Reagan you had Audit Teams that went after the rich

Reagan broke those Audit teams up on the ground they did so few returns (but the ones they did you saw massive recoveries). Under Clinton the GOP controlled Congress made the Earned-Income Credit a political football. Enough GOP congressmen supported the Earned Income Credit so the GOP controlled Congress could NOT kill it, so the GOP leadership increased IRS funding for Audits of Earned Income Tax payers hoping to find some juicy cases they could then use to kill the program. The Funding still exists, low income people who claim the Earned Income Credit have a much greater chance of being Audited then anyone else FOR CONGRESS HAS CUT THE FUNDING OF AUDITS TO ALL OTHER GROUPS WHILE INCREASING FUNDING TO AUDIT PEOPLE WHO CLAIMED THE EARNED INCOME CREDIT.

Now the Democrats have had controlled of Congress for almost three years (Remember the Democrats won the Mid-term election of 2006) but for two of those years Bush was still the President so no change in funding for audits were made. This year, Obama in now President but Congress has had other things on their agenda so no change to the amount of Funding.

My point is simple, this is NOT entirely the IRS fault, Congress is the one who sets the funds that is used to do audits AND thus who gets audited. This woman sounds like she was caught up in the group the IRS believes were more likely then others to be cheating on the Earned Income Credit. The problem has been such people RARELY if EVER cheat on their income taxes, thus the IRS can NOT rely on traditional tests when it comes to audits excessive deductions (almost all, if not all Earned Income Credit payers used the Standard Deduction). Thus the IRS seems to have to go to the nearest test it could come up with, someone not reporting the Income they are actually earning. For the IRS that is a hard test to do, for the law is clear, taxpayers MUST prove they are entitled to any deduction, but the when it comes to Income, the burden of proof is on the IRS.

Notice, the traditional (and tend to be accurate) test of excessive deduction can not be used for Earned Income Earners rarely itemized (Thus no excessive deductions). The IRS then has to go to unreported income and that is hard to prove. The best way to prove non-reported income is to look at what the taxpayer is buying, but since she lives with her parents, her house is zero (For she has no home), her car costs are NOT addressed but if she is driving her parents old car (More then likely the case) her car costs are near zero. The traditional ways to catch someone who is NOT reporting income don;t work for people eligible for the Earned Income Credit, they are NOT making enough money.

My point is this case is a case produced by CONGRESS (when it was controlled by the GOP) providing all types of money for the IRS to do Audits on people who are the least likely to be cheating on their taxes. The IRS has to spend the money and make a good faith effort to do what Congress told it to do, but in doing so it has to bring in a lot of people who are innocent of tax cheating FOR THAT IS THE GROUP CONGRESS TOLD THEM TO AUDIT. The Democrats could change this by freeing the Audit Money to be used by the IRS on the groups the IRS would like to Audit BUT THE DEMOCRATIC CONGRESS HAS NOT DONE THAT YET. Thus until Congress changes the rules on how the funds are to be spent you will continue to get cases like this one. In simple terms the problem is CONGRESS not the IRS, for only Congress can re-direct the funds to go after real tax cheats instead of people who are the least likely to cheat on their taxes.

[eppur_se_muova]

7. Thanks for posting that info! nt

[provis99]

3. boy, do I hate the IRS.

just hate em! they're almost as bad as cops, Christian fundamentalists, survivalists, gun nuts, conservatives, rednecks, truck drivers, and garbage men.

[Igel]

4. parents living in intergenerational housing aren’t caring for their children."

"So, according to the IRS, parents living in intergenerational housing aren’t caring for their children."

No, that's not what's said. If you have a dependent you must provide at least half of the support to that person. So we have a kid, my dad kicks in some money just to make my dad feel like he's helping, but it comes no where close to 50% of what the kid requires.

My mother-in-law until very recently had a houseful of people. Her youngest son (in his mid-30s), her oldest son (well over 40), the oldest son's wife and her son (22 or so). She provides over 50% of their support, so she claims them as dependents, and properly so.

Even the 22-year-old step-grandson was her dependent.

So if the woman in Seattle was living at home and over 50% of the expense of taking care of her kids was borne by her parents, then the kids are her parents' dependents. She may be the one to wipe their noses when sick and comfort them when they're heartbroken or bullied in school, but the IRS looks at $--and if she's not providing over 50% of the $ that go to their upkeep, she loses the deduction. And the EIC.

[happyslug]

6. But the law has certain presumptions when it comes to minor children

One of those presumptions is that parents who are living with the children ARE providing half of their support. If you are claiming someone who is NOT your Child then you MUST be able to prove you provided half of that person's support, but that is NOT true of your own minor children who is living with you (Unless that child is providing over half of their own support). In the case where you are living with the minor, the minor is your child, the child is under age 19 (24 if the child is still in school), the child is NOT filing a joint return with another person (i.e. married, but if the return is just to get a refund does NOT count) and you can NOT be claimed as a dependent then you can claim that person as your "Child" (please note grandparents can also make that claim, if the grandchildren live with them and the intervening parent is another dependent of the Grandparents).

(See pages 16-19 of the following IRS instructions):
http://www.irs.gov/pub/irs-pdf/i1040.pdf

Now, once you go beyond direct decent (i.e. your brothers and sisters, your nephews and nieces) OR your children are over age 19 (if not still in school) or 24 (If in School) then WHAT they earn becomes a factor (Income must be below $3650) and you must provide 1/2 of their support. Also note, there is no age limits on claiming such people IF YOU CAN SHOW YOU PROVIDED OVER 1/2 of their support.

Notice the difference, when it comes to your children or grandchildren living with you and they are under age 19 (under 24 if still in school) you do NOT have to show you are providing more then 1/2 of their support. Support only comes into play if the Child is providing more then 1/2 of their own support. If someone else is paying for 1/2 of support for the Children, the parent
can still claim the child as a dependent (If the child is under age 19, or age 24 if still in school) and get the Earned Income Credit. The Mother only loses those rights if she is claimed on her parents Income tax, then the Earned Income Credit goes to the Grandparents (But given that the Mother earned over $3650 her parents can NOT claim the Mother for she is 19 and NOT in School, thus it is the MOTHER"s Earned Income Credit).

My point is while your Mother-in-law could claim all of those dependents under the above rules PROVIDED she provided over 1/2 of their support for the year. In the case being commented on the children are below 19 so the taxpayer does NOT have to show that the taxpayer is paying more then 1/2 of their support, that law makes that presumption UNLESS the child themselves is providing more than 1/2 of their own support (Which I doubt, I am assuming the two children mentioned are below age 10 lets alone age 19).

Just an observation that the Mother is entitled to the Deduction and the Earned Income Credit (Assuming the Father of the Children is NOT paying support and NOT able to claim the children himself).