Mark Winston Griffith

IRS kicks off the Season of Taking from the Poor

Ahh, the days are getting longer, envelopes stamped "official document enclosed" are arriving at our doorsteps, and the poor are getting taken from.

It must be tax time again.

A flurry of announcements and reports have come out over the past week that have exposed how the IRS puts low-income filers at a disadvantage.

First the New York Times reported that a Long Island Accountant who publishes a tax related newsletter uncovered sharp increases in fees that the IRS is charging people for tax advice. "For the top fee", David Cay Johnston writes, "the increase is more than 850 times the inflation rate...And many fee discounts that taxpayers of modest means received in the past will be reduced or eliminated, the IRS announced."

Then the Tax Foundation reported that the burden of tax compliance - tax planning and tax related paper work - is higher for the poor: "Compliance cost is found to be highly regressive, taking a large toll on low-income taxpayers as a percentage of income than high-income taxpayers. On the low end, taxpayers with adjusted gross income (AGI) under $20,000 incur a compliance cost equal to a 5.9 percent of income while the compliance cost incurred by taxpayers with AGI over $200,000 amounts to just 0.5 percent of income".

This comes on the heals of the IRS announcing last year that they will be closing a large percentage of the 400 Taxpayer Assistance Centers (TACS) that provide walk-in service for taxpayers.

The kicker was the report issued by the IRS's own internal tax payer advocate earlier in the week. According to the New York Times, "[t]he advocate, Nina Olson, said the IRS devoted vastly more resources to pursuing questionable refunds sought by the poor - which under the highest estimate is $9billion - than to the $100 billion in taxes not paid each year by people who work for cash and either fail to file tax returns or underestimate their income."

Apparently thousands of low-income tax payers, three quarters of whom were the working poor who applied for the earned-income tax credit, had their returns frozen for months, sometimes years. The average reported income was $13,300.

Posted at 10:24 AM, Jan 13, 2006 in Economic Oppertunity | Permalink | Comments (0) | TrackBack (0)