Tuesday, January 10, 2006

Nickled and Dimed by the IRS

The Earned Income Tax Credit (EITC) has been called the federal government's single most effective anti-poverty program. But as the New York Times reports, IRS taxpayer advocate Nina Olson has found that those who benefit from the EITC can have their refunds blocked without being accused of fraud or error:
Ms. Olson said the I.R.S. devoted vastly more resources to pursing questionable refunds by the poor, which she said cannot involve more than $9 billion, than to a $100 billion problem with unreported incomes from small businesses that deal only in cash, many of which do not even file tax returns.
So how much are the working poor targeted compared to the middle class and the wealthy? It's hard to say. Times reporter David Cay Johnson also reports today that the IRS has stopped providing the data to a professor as required by a court order:
Records showing how thoroughly the Internal Revenue Service audits big corporations and the rich, and how much it discounts the additional taxes assessed after audits, are being withheld from the public despite a 1976 court order requiring their disclosure, according to a legal motion filed last week in federal court in Seattle.
David Cay Johnson, whose reporting on tax issues is authoritative and damning, is the author of Perfectly Legal -- The Covert Campaign to Rig Our Tax System to Benefit the Super-Rich. He is the go-to-guy on who's getting screwed and who's getting coddled by our tax system.

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