IRS goes after mother who makes $10 an hour

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66 Responses to “IRS goes after mother who makes $10 an hour”

  1. Shay Guy says:

    They didn’t have to do this.

    Really. Even if someone did discover a questionable discrepancy, it wasn’t necessary to act on it. It’s not so bad if someone in her situation gets a little more of a break than the law says she’s entitled to.

  2. Antinous / Moderator says:

    To paraphrase Severus Snape:

    The US tax code is varied, ever-changing and eternal. Fighting it is like fighting a many-headed monster, which, each time a neck is severed, sprouts a head even fiercer and cleverer than before. You are fighting that which is unfixed, mutating, indestructible.

    • PTBartman says:

      I love you sir(in a platonic, heterosexual, non-threatening sort of way). This is definitely the comment of the day. You can be my new best friend if you want.

  3. Cowicide says:

    Ok, I’ll say the two words conservatives despise and liberals will only say in hushed whispers…

    CLASS WARFARE

    It’s here. It’s now. Face it.

    http://www.google.com/search?hl=en&source=hp&q=tax+loopholes+for+the+rich&aq=0&oq=tax+loopholes&aqi=g10

  4. CastanhasDoPara says:

    This is some fucked up, repugnant shit. Even more so given the economic situation and the fact that a bunch of fat-cats were just given a pass (and millions of dollars as a reward for doing a good job of borking everything up.)

    What they should be doing is giving everybody that made less than (at an arbitrary stab) 75K all of their money back and maybe more. Now that would be a real economic stimulus. Doubt the bean-counting, pencil pushing, congressional knob-slobbers will go for that one though.

  5. davewolfgang says:

    The sad part is even if everything you file is correct under the rules and regulations you know – there is just as many, if not MORE, that are out there that say you did something wrong and illegal – not only fine-able but JAIL-able.

  6. DIYer says:

    Darth,
    “Hey its easy to hate the tax man, but he is just doing his job for you and me.”

    That’s just silly. The IRS almost certainly lost money on this — it is a clear case of bullying someone who lacks the resources to fight back. If they really wanted to do the “job for you and me” they’d run some of the Wall St. kleptocrats thru the wringer.

  7. ausPPC says:

    Government. Mafia. Spot the difference.

  8. DJBudSonic says:

    I was once told by a high-powered tax attorney that the IRS has a formula for figuring out how much you should be earning, which seems to be confirmed by this article. Unfortunately, like most gov’t functions created by ‘rich persons who represent us’, it is very out of touch with life on the ground. He read some items off to me, for instance, my family of four was assumed to spend $400/month on ‘clothing and shoes’; $600 a week on ‘groceries and dining’, $400/month ‘movies and entertainment’ etc. !!

    Unlike their expectations for most of America, we are savers, and don’t spend money on anything! I haven’t bought new clothing in years, except socks and underwear; all thrift shop or re-used for me and the kids; at the time I was dumpster diving food to the tune of $600 a month retail value. I was told that in the event of an audit I would be expected to:

    1) show proof of my ‘undeclared income in form of the value of all items gained from the trash’

    in order to
    2) be able to refute each item in the IRS Expenditures Calculations, for each month.

    So I assume that dealing with the IRS is a no-win situation, catch 22 right? I just keep hoping that they have bigger fish to fry than me and my barely living wage income… maybe not.

  9. Anonymous says:

    If you make $10, IMO you should pay NO income taxes. Honestly people shouldn’t be taxed a dime on their income until they make over $50k or something like that.

  10. knitmeapony says:

    Many many hairdressers/cosmetologists/similar-jobs-and-titles are actually considered indepedant contractors. Sometimes they even pay the business in order to use the salon spot.

    It’s not surprising to me that she needed an accountant for that.

  11. Anonymous says:

    Every year for 3 years now, I have had to pay more than my annual income to the IRS (over the actual amount I pay in taxes at the appropriate time) because they say “we know you don’t owe it, but if you don’t pay this additional figure right now you will be in deep federal doo-doo” OK maybe that’s not a direct quote. They promise it will be refunded to me the instant they receive it. In actuality, it takes a few weeks before the check reaches me, but they always call the following morning after receiving my wire transfer to assure me that I will be getting my money back.

    I have to keep all of my savings in cash so that I can facilitate this nonsense every year.

    Our tax dollars at work.

  12. Anonymous says:

    So the reality of trying to make in America hits the IRS and they hit tilt. Interesting. Bastards.

  13. Anonymous says:

    My first thought was also Earned Income Tax credit. When I was a single mother and could claim this credit, I often received back more tax money than I had paid in, because of my low income. You can currently claim $5,028 for 2 children. Once the IRS determined (wrongly in my opinion) that she couldn’t claim the 2 children as dependents because of the living situation, she may have also lost the right to claim the EITC and that’s where the huge tax bill may now be coming in. They may be telling her that she has to repay large refunds due to EITC that she received in those years.

    Single mothers living with their parents (usually paying nominal rent) is very common these days. I can’t believe the IRS hasn’t figured out how to deal with this.

  14. Anonymous says:

    Those griping about Earned Income Credit fraud: are you aware that the credit may provide a refund, but the employee still pays taxes out wages all year long? They don’t get the entire amount of paid taxes back, they get a much smaller amount refunded.
    It’s hard to imagine that EIC fraud outdoes fraud from corporate welfare & income-hiding.

  15. bayamus says:

    This is so sickening I personally sent a message to the administration, via whitehouse.gov, declaring it so. But aside from that I’d like state how ridiculous it is that the majority of the commenters didn’t actually read the full article. Why is it that people feel the need to join in on conversations after reading mere headlines? I’ve stopped reading the comments on the NPR Facebook page for the same reason.

  16. benher says:

    This sort of thing scares the pants off of small business would-be entrepreneurs. The fear of being taxed to death (and audited as insult to injury) like my parents (small business owners themselves) drove me to begin my business overseas.

    The IRS should have bigger fish to fry than the below poverty-level working poor.

  17. RevEng says:

    Actually, I think you are all missing the biggest point here. The reason they tried to pull her Earned Income Tax Credit ($16k worth) is because she was living with her parents. Even though she was still providing for them (paying rent, buying their necessities), the IRS claimed she couldn’t claim them as dependents.

    After $10k spent on an accountant to figure it all out (basically paying for a lawyer), the IRS let her keep the tax credit, but says she can’t claim her kids as dependents. Not only that, but her parents can’t either! As far as the IRS is concerned, the kids belong to nobody, despite the fact that somebody is clearly providing for them.

    The IRS added insult to injury when they audited her parents when they found out she was living with them.

    What a mess. The whole reason we require highly-paid accountants for filing our taxes is because of the complicated, Byzantine tax codes. If there weren’t so many special cases and restrictions written in legalese, there might be a hope for the average person. Besides that, the IRS is its own adjudicator, deciding ambiguities as it sees fit. It’s entirely broken and bent towards maximizing the benefit to the IRS.

    I think this calls for an investigation. The IRS owes her a serious apology, if not the cost of her accountant. They certainly owe her some answers to the still outstanding issue of her children.

  18. greermahoney says:

    How can they possibly consider this worthwhile? In my job, I have to find accounting errors. Do I bother with the low dollar ones? No, I don’t have time. My company expects me to use my payroll wisely and find the biggest dollars I can. Why is the government less willing to do this? Oh…wait. Because it’s not their money. it’s ours.

  19. rageahol says:

    the “libertarianoid idiocy” comment was based on the following:

    mark really loves to repost radley balko’s writings from reason magazine.

    he also loves to paint the government as “the problem” whether they are or not.

    ergo, this situation (which sucks, certainly, but you pays your money and you takes your chances) is simply another attempt to gin up the same sort of kneejerk anti-government techno-teabagger nonsense in other people.

    otherwise, why exactly would he post it?

    • Antinous / Moderator says:

      otherwise, why exactly would he post it?

      It’s an interesting story from a major newspaper. Your accusation about Mark having an agenda seems to stem from you having an agenda.

    • mdh says:

      otherwise, why exactly would he post it?

      um, because this is his blog? -1 internet.

  20. Russell Letson says:

    About the practicality of preparing one’s own tax return in the US:

    I did our taxes for a long time, but a few years into my life as a freelancer, I had to throw in the towel and hire a CPA who specialized in small businesses and sole proprietors. I clearly remember thinking, “I have a Ph.D., read two dead languages, and built my own computer, but I just spent a half hour trying to decode the rules for depreciation without any success. Time to find a specialist.” The same accountant has kept our records and provided plain-English explanations of what he was doing and why and how we needed to proceed. Tax prep is not for sissies.

  21. KeithIrwin says:

    This is a consequence of changes to the IRS which began during the Clinton years and which we accelerated under George W. Bush’s administration. The IRS has been decreasing the rate at which it audits corporations and increasing the rate at which it audits individuals. And once they’re spending more effort auditing individuals and less effort going after corporations, they’re inevitably going to wind up having to target smaller and smaller fish.

    Here’a an older article about it which includes some statistics:
    http://www.budgetcorporationservices.com/Tax_audits_aim_more_at_individuals.htm
    I’ve been unable to find anything more recent.

  22. tuscanytrace says:

    Can’t believe no one has mentioned The Fair Tax. Obviously the tax system is seriously flawed as it is.

  23. Anonymous says:

    I am a self employed artist and make about between 15 and 20 thousand a year. I scape by live in a bad neighborhood, my house is valued at about 30 thousand. I have only one credit card but don’t buy on credit. I don’t go out to dinner by new cloths maybe every three years at Wal Mart, don’t have cable TV, don’t by gadget, live as a vegan no meat, saves me tons of money. Lots of rice and beans. SURPRISE i am getting audited or better yet, it’s more of a special investigation according to the IRS, I can’t live on what I claim to make. They want to see records for every penny I spend. I have news for them million of people are doing it it’s not fun but it can be done. Millions of people live poor and some like me actually are WORKING POOR, I don’t have any widescreen tv, no kids either, no Movie going or any of that sort of thing. I basically live in my basement where I paint seven days a week hoping to sell the occupational painting which is what I do and that is so I don’t have to go to the government to beg for help in the unemployment line. Yet is has become a crime in the US to be poor. Shame on this Government! I am considering stopping to paint and apply for food stamps and unemployment like everyone else!

  24. Anonymous says:

    for all those outside of the US, saying things like “unless it is different that where I’m from…”

    yes. different. crazy.

    In grad school, where all my money came from a single federal grant, it still took me hours to complete, even then I messed up. If you are an “independent contractor” it would be a nightmare. Why do you think we have all the tax filing software? Even then, not simple.

  25. Anonymous says:

    I went ahead and read this article about something that happened several years ago to a woman who (rightly) gained the attentions of the IRS for being able to get by when it was clear she should have been seeking some form of government assistance. She was being supported (kinda of) by her parents and this is what tipped off the IRS.

    Now, the really issue here is that the IRS was specifically targeting people who were looking for tax relief due to minimal income, but lets keep on waving that bloody shirt.

    She’s a victim of her own success, I guess.

  26. mdh says:

    inhuman bureaucracy behaves inhumanly.

    What can we DO?

  27. Bottle Imp says:

    #38, #39, all the other people decrying this as some sort of sinister IRS tax man intentionally doing this to be mean to poor people.

    The IRS is bound by the laws that Congress enacts. This result was a pretty simple result of 23 U.S.C § 152, which governs who you can can call a dependent on your tax return. Why do I care? Because it’s Congress you should be pissed at, not the IRS. They’re just the functionaries, and to those who are wondering why they aren’t going after Wall St. bureaucrats (though I’m sure some of them are and we just don’t see it) it is in part because those guys pay lawyers $400 an hour to go through their returns and make damn sure that they maximize the avoidance THAT CONGRESS ALLOWED. Those guys can afford to make sure that they get big breaks legally by 1) paying lawyers a mint 2) having lobbying groups work to get them better tax breaks.

    Is there anything in the U.S. we don’t misdirect our anger at anymore?

  28. theawesomerobot says:

    I honestly can’t blame the IRS for looking into it BUT once they found out the basics of the situation they shouldn’t have pursued her so ferociously. It’s just how they go about catching people who are evading taxes, if you claim way less than what it seems you need/have spent – then yes, you should be audited.

    Also, it almost sounds to me that her parents should be able to claim all three of them (herself and the two children) as dependents. I think if that were the case they wouldn’t have run into so many issues.

    Good to know that the IRS is working so hard at turning around their public image. /s

  29. Anonymous says:

    How much did she claim in tips? I always tip the people who cut my hair, and it can account for a huge chunk of income. Sort of how wait staff doesn’t earn just their hourly rate. Just curious what she claimed is all.

  30. rageahol says:

    Wth vry rtcl, mrk gts sckd frthr nd frthr nt th mw f lbrtrnd dcy.

    • mdh says:

      libertarianoid idiocy

      I can understand your anger. I’d be mad too if I kept visiting websites that reminded me of my failings as a decent human being. May I suggest a sabattical to 4chan? You’ll be among friends there, and equals.

    • The Chemist says:

      Lolwut?

      I say this as someone who’s about as opposed to libertarianism as one can be: How is post this exclusively libertarian in sentiment?

  31. Joe says:

    Even if they disallow the deductions for her two kids, how could than turn to $16,000 over two years? If she only makes $18K per year, even if single her tax would be only about $1K.

    • Courtney says:

      I read this on another site a day or two ago and from what I gathered in the discussion some of it had to do with her claiming the Earned Income Tax Credit (which is allegedly also why she was using H&R Block).

  32. JeffF says:

    From the article:

    “Why did this happen? The IRS won’t say, but Congress has been fighting for years about the earned income tax credit for the working poor.

    Republicans have called the credits “backdoor welfare” and tried to cancel them. When they controlled Congress, they ordered the IRS to ramp up audits of people who claim the credit.

    In 2006, credit recipients such as Rachel were more than twice as likely to get audited as the rest of the 140 million individual tax filers.”

  33. jessemoya says:

    Well, this is something else disgusting being done in my name as a taxpayer.

  34. DarthVain says:

    This is a sob story.

    This is really about the “gray economy”, which can be alternatively called “Tax Evaders”.

    People who get paid in Tips, or in Cash basically. Many report their earnings. Many/Most do not. Everyone knows about it, and many accept it.

    Sorry it sucks to get caught, most don’t. I know many people that make good money this way, and because they pay only a little tax make almost as much as some other people who actually pay all their taxes.

    This has been a problem in both US and Canada for a long time, and I suspect it will continue to be a problem. Particularly when they apply for tax credits that are for people making even less money and can’t hide income in tips and cash.

    Hey its easy to hate the tax man, but he is just doing his job for you and me.

  35. Bucket says:

    If you work a job where you get tips, and don’t report those tips, the IRS will audit you.

    Unless you’re a Rabbi. Ba-da-ching.

    It doesn’t matter how much you make. They audit waitresses and waiters and pizza delivery people all the time.

    I have sympathy for anyone facing the often Kafkaesque machinations of the IRS, but in this case they know what they’re doing. They’re not telling her that she’s not making enough money to support her children, they’re telling her that they know she’s lying about how much money she actually made vs what she reported.

    • Avram / Moderator says:

      You’ve got that the wrong way around, Bucket. It does matter how much you make. If you don’t make much, the IRS is more likely to audit you, because you’re less likely to have a tax accountant to fight back.

  36. DIYer says:

    So, let’s see … the “national debt” is around twelve trillion. And let’s assume they succeed in wringing the $16K out of this woman … a quick back-of-the-envelope calculation, they only need to process another 12E12 ÷ 16E3 = 750 million victims like that.

    Go, Revenooers!

    • kgb says:

      So, let’s see … the “national debt” is around twelve trillion. And let’s assume they succeed in wringing the $16K out of this woman … a quick back-of-the-envelope calculation, they only need to process another 12E12 ÷ 16E3 = 750 million victims like that.

      I was under the impression that the point of IRS audits is not to make money from the auditing process but to scare all tax filers into being more honest on their returns. So they do not need 750mil victims, just a decrease in the number of people who cheat. Whether this publicity strikes fear into the hearts of the populace or serves as a mental justification for not paying an ‘immoral’ bureaucratic institution is up for debate.

  37. Gloria says:

    “She made $18,992 the previous year cutting hair at Supercuts. A few hundred of that she spent to have her taxes prepared by H&R Block.”

    Hmm, maybe the American tax system is different, but last year, I filed my own tax return for the first time and while it wasn’t *entertaining*, it wasn’t really that hard and I saved myself a bundle. I can’t imagine it should be for anyone with basic math skills and a solid grasp of the English language.

    • RevEng says:

      A few hundred? Here in Canada, you can get your taxes done for $50. Most places even have discounts for people under a certain amount. The whole time I was in college I used an online service and never once had to pay.

      Likewise, the paperwork is atrocious, but it’s doable. For a person making $10/hr, it would sure pay to do your own taxes, even if it took over 10 hours.

      • Toby says:

        It would “certainly pay” as you say, but only if you didn’t make any mistakes. A large chunk of what you’re paying for when you have your taxes prepared is accountability. Tax preparers are supposed to know what they’re doing, and if something turns out to be glaringly wrong on your returns, you can wave your hands helplessly and point at the accountant. Though I’m not sure how much that will help…

      • Gloria says:

        I am in Canada. From what I know, it does cost hundreds if you use a personal accountant. For years, my mother ran her own business and spent a sizable amount to have her tax return done.

        But yes, e-filing services and software tend to run about what … $20? $30? My parents used an e-program this past year to file and had no problems. They probably spent about $50 total to do their and my brother’s returns.

        At U of T, they did have free tax clinics for students (expressly because most of them would be away from home and probably doing their own returns for the first time). I was wondering whether there were subsidized services for anyone who wasn’t a student though.

      • Gloria says:

        That said though (I’ve really gotta start consolidating my comments better), e-filing services do require access to a computer, and even though I can barely comprehend a world without a computer, it’s quite possible a woman who makes $10 an hour does not own one.

      • tsoyptc says:

        I’d bet she was self-employed in some way – that $50-for-H&R-Block-to-do-you-taxes goes up to a starting level of $275 *minimum* if you’re self-employed, because then it becomes ‘business’ taxes, not ‘personal’ (I know this because I’m self-employed and considered getting their help with my taxes a few years back, and had some serious sticker-shock as a result).

        • Antinous / Moderator says:

          You can find a real CPA for less than $275. At H&R Block, the person who does your taxes may be roughly equivalent to Christmas help at the department store.

    • Anonymous says:

      Somebody with dependents, tip income on top of salary, and seeking an Earned Income Tax Credit is smart to get tax preparation help. Especially if she tried to itemize deductions, but even with the standard deduction, the EITC and a tipped job are probably enough to warrant getting help.

    • Antinous / Moderator says:

      I can’t imagine it should be for anyone with basic math skills and a solid grasp of the English language.

      I’ve had to pay an accountant to do it in years when I made less than 10K. If you get a W2, it’s easy. If you get a 1099, it can be a nightmare.

      • Anonymous says:

        Agreed – I have been self employed as an artist & consultant for over a decade and the only thing keeping me from insanity and audit nightmares come tax time has been tax preparers and now efile services. Worth every penny, even when I didn’t have the penny to spare

    • dculberson says:

      I think the American tax system can best be described as “different.” Really, it’s very confusing and you have deductions, exemptions, credits, etc that you have to keep track of. A simple error can cost you thousands (or in this case 16 thousand) so paying a few hundred for someone to prepare your return isn’t an enormous mistake.

      Now, H&R Block is pretty seedy, with their “instant” tax refunds that cost big money to get your money a few days early, etc, but the concept of a tax preparer is not unsound.

      At issue here is the Earned Income Credit which would probably result in a single parent of two getting a refund despite paying no taxes. Without that and the deductions for the kids, she would have paid some in taxes. However, if she’s paying anywhere near market rent then the IRS is full of crap. And $400 for a room or two isn’t out of the realm of possibilities. Perhaps it’s nicer than you would get on the open market but that doesn’t mean she isn’t paying a market rent for some sort of shared dwelling. (Does ‘quality’ enter into it? I don’t know, myself.)

  38. Gloria says:

    Oh, and of course, I mean for those employed. For those who freelance or own a business, the difficulty of tax returns achieves a whole new level of insanity.

  39. blueelm says:

    The IRS needs to catch up with the times. Lots of people are living in unusual situations these days. The kids are clearly being paid for by the family. So there’s no reason she or the parents shouldn’t be able to claim them… one or the other of them. Perhaps the grandparents should look into starting a homeless shelter.

  40. Anonymous says:

    A hairdresser at Supercuts is not making a living in tips. Ever. Their clientele spend only the price of the haircut.

  41. Anonymous says:

    Gloria:
    If she had basic math skills and a simple grasp of the English language, she would probably be able to make more…..

  42. Anonymous says:

    I’m not familiar with how IRS works, but assuming it’s similar with most countries, I’d like to ask how can the IRS justify going after someone with less then 30k income. I’d be more concern with audits on the millions tax credits side then someone claiming a very small earning income tax credit.

    Sorry, but I just don’t understand this:

    “The Porcaros say they get that the IRS can’t just audit the wealthy. Poor people commit fraud, too. But the intensity and duration of the IRS’ “obsession,” as Rob called it, as well as that it appears the agency was trolling for the working poor, remains a sore point.”

    YOU CAN justify on wasting your precious resources on auditing based on the difference of low thousands compared to millions? This is insane. It’s like being a cop that just goes after petty crime instead of important crime like murder.

    Sorry, but most countries don’t have unlimited resources in revenue service. They lean towards the wealthy side because they CAN justify going towards fraud on millions compared to low thousands.

    • Moriarty says:

      I think the idea is not that they really want these particular few thousand dollars, but that they need a deterrant for people – even poor people – not to cheat on their taxes. If they only ever audited people over a certain threshold of (claimed) income, everybody below that threshold could just stop paying taxes entirely without consequence.

  43. hungryjoe says:

    Earned Income Credit fraud is actually a pretty big problem, and the American public loses plenty to it every year. When the IRS audits someone in a situation like this, they are typically looking for abuse spanning multiple filings. In that case, a few hours or a day or two of investigation can uncover tens of thousands of dollars in unpaid taxes. It’s not as if these people have the resources to cover their tracks. In most cases where tax evasion/fraud is found, the back taxes more than pay for the investigation.

    However, in many cases, audits do not find any problems. This is not a failure of the system or misspent resources. Audits are intended as a deterrent, since the United States lacks the resources to stop even a fraction of the fraud out there.

    Re: H&R Block–A reliable source tells me that the IRS rarely bothers auditing the returns they prepare because H&R Block is wrong in favor of the American public as often as they’re wrong in favor of the individual filer.

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