Tuesday, April 15, 2008

More Evidence: IRS Bullies Pick On Little Folks, Let Fatcats Skate

By Manifesto Joe

OK, it's April 15, so a skewering of the IRS is de rigueur. And The New York Times has furnished just the skewer for the job.

NYT reports that, according to a new study, big corporations have less to fear from the IRS than at any time in the past 20 years. The study was released Sunday by Transactional Records Access Clearinghouse (TRAC), a research group affiliated with Syracuse University.

The study cited "a historic collapse in audits" of Corporate America. And it wouldn't surprise me if there are some unofficial Bush administration policies lurking in the woodpile.

According to The Times:

It found that major corporations -- defined as those with assets of at least $250 million -- have about a 1-in-4 chance of being audited, down from about 3 in 4 in 1990.

In contrast, audits of smaller businesses, defined as those with between $10 million and $50 million in assets, increased from 12.3% in 2005 to 15% in 2007. The comparable figures for increasingly larger corporations went like this:

-- $50 million to $100 million in assets, 16.4% in 2005, 11.4% in 2007.
-- $100 million to $250 million, 17.5% in 2005, 12.1% in 2007.

Detect a pattern here? Some in the tax profession do. Again from The Times:

The IRS focus on smaller companies upset some tax professionals. "I'm still trying to find my jaw on the ground from the finding that audit rates for the big boys are plummeting," said Dean Zerbe, managing director of Alliant Group, a tax planning company.

What does the IRS have to say about this, considering all their tough talk about enforcement in recent years? The Times, again:

... IRS officials ... said Friday that TRAC had misinterpreted a basic shift in corporate America in recent years, saying that companies of all sizes -- and some wealthy individuals -- have embraced the use of partnerships and other opaque entities in an effort to minimize taxes.

I just checked, and my wallet is still in my back pocket.

If you've had the experience of dealing with the IRS as a little fish, you know that the fillet knife is usually wielded to scale. The big fish are much harder to handle, and the trend seems to reflect this.

And, given the Gilded Age, robber-baron sensibilities that our executive branch of government has exhibited for seven-plus years, perhaps it shouldn't be surprising that the IRS has changed its focus in this way.

Congress investigates a lot of things, and the IRS has been called on the carpet in the past over other abuses. Maybe it's time for our intrepid reps to find out why, when audit time comes, the tax Gestapo now tends to bully smaller companies while turning a blind eye to Cayman Islands tax dodgers. Inquiring minds should want to know.

For more on the subject, here's a link to my post from last April.

Manifesto Joe Is An Underground Writer Living In Texas.


Marc McDonald said...

Pulitzer Prize-winning journalist David Cay Johnston pointed out in 2000 that the rich are less likely to be audited than the poor. (I would suspect the problem has grown worse in the Bush era).

Johnson wrote:
"The IRS audited 1.36 percent of all tax returns filed by people making less than $25,000 last year, compared with 1.15 percent of returns filed by those making $100,000 or more. Since 1988, audit rates for the poor have increased by a third, from 1.03 percent, while falling 90 percent for the wealthiest Americans, from 11.4 percent."

Anonymous said...

And so it goes...
Insightful post Manifesto. Can't say that it surprises me. I think you nailed it on the head when you said, "And it wouldn't surprise me if there are some unofficial Bush administration policies lurking in the woodpile." In fact, if Cheney is ever invited back to a DC Correspondants Dinner you can bet he will make some sick joke about it.