IRS Audits Single Mom Because She Is 'Too Poor'

Bluegrass Pundit ^ | Thursday, December 10, 2009 | Bluegrass Pundit

[Askwhy5times]

A single mom in Seattle made $18,992 in the previous year cutting hair at Supercuts. The IRS audited her because they claimed she was too poor to live in Seattle. She lived with her parents and has two children. The IRS claimed she owed the government more than $16,000 in back taxes. It took two years and $10,000 in accountant bills to get the IRS to admit she was just being honest. They still won't let her claim her children because they can't determine who is really supporting them. If we could only get the IRS to be as tough on tax cheat Charlie Rangel.

[Raycpa]

In a landmark case Louis Kovel, a former IRS agent and accountant, had been hired by a law firm to help advise its clients. Kovel met with and received information from a client under IRS investigation for tax fraud. When subpoenaed by a grand jury, Kovel refused to answer questions about the client and was sentenced to a year in prison for contempt of court. The Second Circuit Court of Appeals reversed the contempt citation. It ruled there was no reason in the case to exclude accountants from the list of those who assist lawyers in providing legal services ( United States v. Kovel ).

http://www.journalofaccountancy.com/Issues/2004/Apr/AttorneyClientPrivilegeCpasAndTheEFrontier.htm

[Tainan]

Two items:
#1st - Thanks for posting that information. It is the first I have read of such a decision being rendered.
2nd - I would have a suspicion that this might have been extended because Mr. Kovel was working under the "umbrella of color" due to his being hired by the law firm for this specific case. I do know that this "umbrella of color" does, on occasion, extend to so-called 'Expert Witnesses' if the need arises.
I'm just hazarding a guess - maybe wrong, maybe right.
I have been advised by my main tax advisor of this technicality as recently as year 2008.
I might forward this info to him and see what his comments might be on this.
Thanks.

p.s. - that 'umbrella of color' is a term I have made-up to illustrate a legal status that I cannot remember what the actual name is. I hope you understand what I'm trying to describe in using this term.

[x_plus_one]

Economist Rubenstein presented these and other jarring findings in “The Earned Income Tax Credit and Illegal Immigration: A Study in Fraud, Abuse, and Liberal Activism” at a news conference at the National Press Club in Washington, D.C. on April 14.

Rubenstein described the EITC scams as “common, well-organized, and massive.” According to the General Accounting Office, “one-quarter to one-third of all EITC claims are ‘improperly paid.” That amounts to at least 6 million households receiving at least $12 billion fraudulently (2007 numbers).

Rubenstein blames this gaming of the system, not so much on the illegal immigrants, but on their enablers: the IRS (which does not verify Social Security numbers or eligibility criteria and which publishes Spanish-language materials about the EITC); tax preparation and filing services, such as H & R Block; and advocacy groups, such as the left-wing Center on Budget and Policy Priorities. The latter, for example, offers outreach programs designed to hook immigrants into the EITC entitlement culture.

[muawiyah]

Rubenstein is providing cover for people like Rangel, etc. who have millions of dollars in assets and very high incomes.

If IRS kept the auditors and dispensed with the audits of the EITC filings, these additional resources could be thrown against the high dollar value earners and income tax proceeds would skyrocket.

Audits of EITC waste $100 for every $1 earned.

[x_plus_one]

EITC is the cash cow that supports ACORN.

[muawiyah]

You are free to believe that if you want. Frankly, it’s far more likely ACORN is financed by FHA/VA.