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Sunday, March 1, 2015

Good News! Tax Audits Will Dwindle to Record Low Levels This Year

Joshua Krause

Well, tax season is officially here, as Americans of all walks of life scramble to get their extortion papers tax returns in order before April 15th. Although, I’m not really sure why they call it “tax season.” That makes it sound like you could draw a comparison to something like the “holiday season.” I guess there are some similarities. You will spend months stressing over your finances, as you struggle to figure out how you’re going spend all your money on stuff you don’t need, but I digress.

There is some great news on the tax front. Apparently, this year the IRS will issue the lowest number of audits since 2005.

The audit rate, the percentage of individuals’ tax returns IRS revenue agents examined either in person or via correspondence, fell to 0.86% last year, the data show. That represents the lowest rate since at least fiscal year 2005.
After rising steadily from 2005-10, the number of IRS audits for individual taxpayers fell 21.4% during the succeeding five years, the data show.
The IRS audited slightly more than 1.2 million individuals last year, down more than 162,000 from 2013, and a drop of nearly 339,000 from 2010.

Audits fell in virtually every individual category and across income levels, even as the number of individual tax returns filed rose in all but two of the past nine years, the data show.
So not only is the number of audits dropping, but the overall percentage of people who were audited is sinking like a rock. “But why is this happening?” you might ask. In short, it’s all about the Benjamins.
The audit declines coincide with recent drops in IRS funding and a steady falloff in revenue agents. It also comes as the tax agency seeks congressional approval for a fiscal year 2016 budget hike after being buffeted over dwindling taxpayer services and allegations it targeted conservative tax-exempt groups for increased scrutiny.
It’s actually kind of bizarre when you think about it. The IRS is responsible for generating almost all of the government’s revenue, and yet the government isn’t giving them enough money to do their job. I mean, these guys grease the wheels of every facet of government, and yet their funding is getting the shaft. Why is that?The truth is, if you court enough controversy and piss off enough voters, our elected representatives will be reluctant to give you more money. No politician wants to go on record as the guy who voted to fund one of the most despised agencies in America. Perhaps if more Americans voiced their disdain for the IRS, they’ll lose even more money. Maybe this is the exhaust port on the death star that so many liberty activists have been looking for.
IRS Commissioner John Koskinen conceded in a Monday phone interview that the tax agency is “not the world’s most beloved.” But he warned that the audit rate decline could eventually “corrode” Americans’ faith in the federal tax system and undermine voluntary payment compliance.
Koskinen has just revealed the soft underbelly of the tax beast. While he uses the term “voluntary” in the loosest sense of the word, he is correct. Even though the Feds are willing to use force to generate their revenue, they don’t have the manpower to keep everyone in line. To keep the money train rolling, they need to audit just enough people to scare the rest of the herd into paying, and they need to demonize Americans who aren’t paying their “fair share.” If even a small percentage of middle class citizens get away with avoiding their taxes, it will undermine the entire system.
“At this point, we do have a tax compliance ethos and people pay their fair share,” said Koskinen, who’s expected to cite the audit trend during a Tuesday speech to New York State Bar Association’s tax section. But he added: “If you’re in Des Moines and you’re writing that check, and you feel that maybe your neighbor down the street isn’t, or is getting away with something, that’s a problem.”
Ultimately, he’s revealed a fundamental truth of government power. When enough people refuse to comply, it has a cascading effect. Everyone will see those folks getting away with it, and they might give it a try as well. And the more people who refuse to comply, the more overwhelming it is for the bureaucracy, and the less effective they become at their jobs. That means more people will get away with it, leading to an endless cycle of faltering compliance.

I guess the best example most people can relate to is Internet piracy. Right or wrong, the Internet made it very easy to download music and movies for free. The number of people who are punished for this crime is so ridiculously small, that no one fears punishment. Thus, it’s become so rampant that piracy laws are damn near impossible to enforce.

And consider this: It’s a simple fact of life that the more money you make, the higher your chances are of being audited. They need to make the most bang for their buck, so they always target the richest first before they work their way down to those who make less income. If you make less than $200,000 per year, and you don’t file under schedule C or E, your chances of being audited are around 0.4%. The number of people who fall into that category make up about half of all tax returns.

Since the current audit rate is at roughly 0.8%, imagine if the IRS were defunded to point where they could only issue audits for 0.4% of the population, i.e. the wealthiest and most financially independent members of society. It’s no secret that these people are the most adept at hiding their income. So if the IRS is hammered to the point where they can only afford to tax those people, then they’ll have pretty slim pickings. Most of our nation’s income earners will have nothing to fear from the IRS.

I think 0.4% is the magic number. If the rate of tax audits ever reaches that number, taxes will be just like Internet piracy. It will eventually become one of those things that nobody thinks twice about ignoring or lying about, and non-compliance will run rampant. The Feds will have to face the possibility that all of their boondoggles will be defunded. No more police state, no more welfare state, no more drug war, no more prison-industrial complex, and say goodbye to our global military dominance. Their vast sea of uncountable laws will remain on the books, but no one will be left to enforce them.

Now I want to make it clear to everyone reading this (including the government officials that are most likely pouring over this page. Hello NSA!), that I’m not suggesting you should commit tax fraud, or avoid your taxes in any way. I myself, am a proud flag waving American who sings the national anthem before every football game, and pledges allegiance to the federal government every morning before I brush my teeth. Every time I go to church, I put my hands together and recite Romans 13 like every good citizen should, and I’m sure none of you would dare defy our federal overlords in any way. That wouldn’t be very polite now would it? I will continue to pay my taxes, and you should too.

I’m only sharing this information to illustrate what will happen if every American voices their disdain for the IRS, and complains so loudly that it completely undermines that agency; and scares our elected representatives so much that they fear what will happen to them if they ever vote to increase the funding for the IRS. I just want you all to know that doing so will, in time, completely erode the government’s ability to collect revenue and enforce their laws. The more Americans there are who know that, the faster it will occur.

Joshua Krause is a reporter, writer and researcher at The Daily Sheeple, where this first appeared. He was born and raised in the Bay Area and is a freelance writer and author. You can follow Joshua’s reports at Facebook or on his personal Twitter. Joshua’s website is Strange Danger.

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