A Dubious Privilege

4/18/2012

The Occupy Wall Street movement argues that we live in an unequal nation. The “1%” enjoying lives of ease and privilege and the “99%” struggling just to survive. According to Nina Olsen, Taxpayer Advocate, the 1% also have another special privilege: being the only group coming face to face with their IRS auditors. Unfortunately, it’s not for the best reasons.  

Here’s some background: The IRS is struggling just like the rest of us to carry out its mission with limited resources. Back in 2003, they audited just one out of every 203 returns. By 2010, that number was up to one out of 90. To stretch that audit budget even further, they’re auditing more and more taxpayers by mail.  

Last month, Olson delivered a presentation to the Federal Bar Association on how “the 99%” experience the tax system. And the picture she painted wasn’t pretty. One study shows that 10% of IRS mail never gets where it’s supposed to go, and 27% of those who do get their mail don’t even realize they’re actually being audited! One in three taxpayers who call the Service don’t get an answer, and only half of those who write hear back within six weeks. And, Olsen explained, the IRS is relying on computers instead of people to audit all but the highest–income taxpayers. She states, “We’re getting to a situation where the only people who get face–to–face audits are the 1%!” Obviously Olsen’s point is not that the 1% are getting special treatment – we can assure you that when it comes to getting audited, even the 1% have to settle for the same government–issue linoleum floors, metal chairs, and battleship gray desks as everyone else. Olsen’s point is the IRS’s lack of resources to provide everyday taxpayers quality customer service and the communication nightmares that ensue when the government relies on computers and automation to audit tax returns.  

Whether in person or by mail, audits are never fun. While no one is ever completely audit–proof, being smart and accurate with your taxes can greatly reduce your chances of earning the “privilege” of facing an auditor. Luckily though, in the unlikely event you are audited, we probably won’t let you go with us anyway. Trust us – it’s for your own protection.