link: Not sure how they plan to collect tax from peeps with no gross income. Take blood?

This gets rather complicated, but the short answers is that they estimate your tax, send you a bill, and then allow you to dispute the bill. Then the taxpayer is offered a chance to pay what they owe plus any surcharge, and in the end a settlement is worked out.

Seizing assets, which is the last step in the process, is very expensive for the IRS. Working something, anything, out is the cheapest way to settle these matters.

I think you are not feeling the "no gross income " thing.

I don't think you do, respectfully speaking. From a IRS Code perspective that is. Plenty of returns show lots of income yet at the bottom of the return show zero or negative "total income" or "adjusted gross income".

"Gross income"? Term is nowhere on a 1040. I think the author left out the "adjusted" qualifier.

http://www.irs.gov/pub/irs-soi/14inwinbulincomeprlim12.pdf

Consider this as well. What the IRS calls audits these days aren't what your father's audit was. The IRS IS severely understaffed. Even practitoners have difficulty getting problems resolved. Pity the poor public.
A lot of screening & scoring is done on efiled returns. Most audit notices are generated in this manner. Automatically. Correspondence audits. Send in the documentation. Since more & more returns show up at the IRS as "self-prepared" from home computers, it doesn't surprise me in the least that audits of John & Jane Does have higher audit counts..in sheer numbers. Most of them are probably self inflicted wounds to boot!
CPA's & tax attorneys are hired to prepare bullet proof returns, not to get cleints audited.

I am on board with AGI. The thing that doesn't add up is 'zero'. Even if you showed all sorts of incomes with offsetting losses or whatever complications, if you were out to game the system, why say zero, when you could 'cheat less' and show some nominal gain even if it didn't rise to the level of taxable after page 2. Hell, show just enough to be paid earned income tax credit or to have some very small tax liability. Zero just doesn't make sense if you had income and are cheating. Is it just a stupid criminals thing?



The following is just made up numbers, feel free to make your own up as well, just trying be diagrammatic.

Now suppose fully 10% of the zero AGI group actually had AGI>0 (and I think that would be a stretch since they are only checking 6% and not all of them can be cheaters)

How many of them would actually have AGI large enough to end up with tax liability? I'll go 10% again. So we are left with 1%.

Now, of those who actually start showing up as net tax owed, a single guy would have to have line 43 TI at $9,650 before his Line 44 tax reaches even $1,000. I'd wager this is less than 10% of the group that made it out of the previous paragraph.

After that there are still opportunities to wash that out before you end up with a positive number on line 76 Amount you owe, depending on particulars and those applied AGI and TI could possibly be an even larger number before any tax was actually due.

If the above is anywhere near close, then one in a thousand of the zero AGI filers might actually owe some tax no matter how small it may be. How many of those owe what you would say is a significant amount? 10% of them?

I do not see the reasoning to claim zero AGI if it was part of tax fraud. And looking at 10,000 zero AGI filers to maybe nail some few big tax dodgers seems way less likely to pay off than looking at as many of the peeps with the real money.


But who knows

It is not your income you strive to zero. It is your tax.

My point is that there are a lot of people in this country paying no income taxes and more than just a few of them are quite wealthy. There is nothing wrong with this as long as it is done within IRS regs.

Statements such as 'this many people pay no taxes' are meaningless without context. The question is why and, if so, is this a bad thing? Well, that all depends on the context and the details of the case.

And on the question of money the IRS does not take morals such as right and wrong into account. There is only legal and illegal.

The OP link:

"while it conducted more audits of people with no income." Later is says gross income as noted in earlier post.

If you examine Table 9b. Examination Coverage: Individual Income Tax Returns Examined, by Size of Adjusted Gross Income,
Fiscal Year 2013 in Inte rn a l re v enue Ser v Ice Da t a Book, 2013

They are clear it is AGI and Reuters seems to have been less than diligent since I feel there is an indisputable distinction between no income and zero AGI.

How ever, If you can get to AGI <= 0 by reductions before line 37 you either don't have much income or are utilizing tax strategies which normally come with professional help.

But still, since the likely hood of audit is 5 times the next group which starts at $1 and ten times the next starting at $25K AGI, it seems imprudent to claim zero, especially if it doesn't even result in any tax.

That table reports audits by AGI groups, but that is not necessarily the trigger that resulted in audits, but perhaps the computer algorithm calculated flags consider zero AGI.

Now if you consider the actual numbers of returns audited, more than 5 times as many zero returns were audited than the highest AGI group.

Guess the question is what percent of the zero group really have little income and what percent is the wealthy deducting it away before line 37.

April 15 comeith, adjust your AGI accordingly

Did you read it, should be did you read into it. While they did audit a higher percentage showing zero income they did not say due to those liquidating IRA's or the such. What more than likely is the cause of the audit is someone showing zero income, and banks reporting to the IRS large cash deposits into their personal bank accounts. So how the audit starts is how did you make all of these deposits of over $5,000.00 without any income? There will not be any audits scheduled for those showing zero income without some ammunition.

Well they can't just sit there at the bank teller and grab the cash before it goes in to their account. So they grab it after the audit. I am no cheerleader for the IRS but good for them. Hopefully they snag a few bucks from drug dealers. Note to you car, and parts flippers, make a lot of small cash deposits if you do not report the earnings, those do not get reported to the IRS.

No big argument between us, but the lack of evidence is not proof, and we can make up any story at all, and maybe it is about that ^ some times. But then why would the guy bother to file?

Agreed, I should have looked up on how many IRS audits of those with zero income have produced funds going into the IRS. Again I do not have any thing in print to reference to but an IRS audit is not intended to be a break even or loss issue for the IRS. So when an audit is scheduled they intend to get more back in they expend. Do you think a government agency that has a budget of say 1 million that brings in 1.5 million would see a cut. I doubt it but irrational things happen in our government.

Regarding audits and reviews, the accountant I work with explained that the tax processing computers are programmed to look for significant changes in our tax returns from year to year, especially any changes that result in a big reduction in taxes owing. I've always operated with the principle that it's best to always owe a small amount of tax, rather than no tax at all.

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“Never attempt to teach a pig to sing; it wastes your time and annoys the pig.” ― Robert A. Heinlein

Attacking fellow forum members is bad taste. It's also against the TOU.

quite true, but at least it clearly identifies the trolls and master baiters, with their endless posting of hardly anything but one line inflammatory quips, and thus makes it easier to ignore anything they post.

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“Never attempt to teach a pig to sing; it wastes your time and annoys the pig.” ― Robert A. Heinlein

I smell skunk