Wednesday, January 11, 2006

Your Tax Money At Work: Harassing The Poor

Another totally illogical and cruel practice:

Tax refunds sought by hundreds of thousands of poor Americans have been frozen and their returns labeled fraudulent, blocking refunds for years to come, the Internal Revenue Service's taxpayer advocate told Congress today.

The taxpayers, whose average income was $13,000, were not told that they were suspected of fraud, the advocate said in her annual report to Congress. The advocate, Nina Olson, said her staff sampled suspected returns and found that, at most, one in five was questionable.

A computer program selected the returns as part of the questionable refund program run by the criminal investigation division of the Internal Revenue Service. In some cases, the criminal division ordered that taxpayers be given no hint that they were suspected of fraud, the report said.

Most of the poor people whose returns the computer flagged as fraudulent were seeking the earned income tax credit, a benefit for the working poor. The credit can return all of the income taxes and Social Security taxes withheld from the paychecks of poor people. Without the credit, many poor people coming off welfare and going to work would receive less money because of taxes taken out of their paychecks and the loss of health benefits, I.R.S. data and other government documents show.

The average refund sought was $3,500, which under the rules for obtaining the credit means that the vast majority of those suspected of fraud were single parents or married couples with children. The maximum benefit for singles is less than $400.

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.

I am so angry that I can't really write about this. But the practise of harassing the poor in this way is both stupid, for how much money could we ever get that way?, and cruel, because the most powerful nation in the world doesn't even bother telling the poor what has happened to the prayed-for refund, the refund that has probably been used a thousand times in imagination, for things like shoes and car repairs and, yes, perhaps even booze. It's not a fun life, being poor, and the last thing you want is the IRS on your back like that.