A Taxing Ordeal

It's the end of the year and tax time is right around the corner.  There are millions of working poor families in the US, and they struggle with tax time just like anybody else.  Some have to pay taxes.  Some get refunds.

And some of them get audited for simply being too poor.

It all started a year ago, when Porcaro, a 32-year-old mom with two boys, was summoned to the Seattle office of the Internal Revenue Service (IRS). She had been flagged for an audit.
She couldn't believe it. She made $18,992 the previous year cutting hair at Supercuts. A few hundred of that she spent to have her taxes prepared by H&R Block.

"I asked the IRS lady straight upfront — 'I don't have anything, why are you auditing me?' " Porcaro recalled. "I said, 'Why me, when I don't own a home, a business, a car?' "

The answer stunned both Porcaro and the private tax specialist her dad had gotten to help her.

"They showed us a spreadsheet of incomes in the Seattle area," says Dante Driver, an accountant at Seattle's G.A. Michael and Co. "The auditor said, 'You made eighteen thousand, and our data show a family of three needs at least thirty-six thousand to get by in Seattle."

"They thought she must have unreported income. That she was hiding something. Basically they were auditing her for not making enough money."

They thought Rachel was cheating because how could a mother of two be raising two kids in Seattle on $19K a year?  It must be welfare fraud.
Oh, and it gets worse, after the jump.

She had a yearlong odyssey into the maw of the IRS. After being told she couldn't survive in Seattle on so little, she was notified her returns for both 2006 and 2007 had been found "deficient." She owed the government more than $16,000 — almost an entire year's pay.

She couldn't pay it. Her dad, Rob, has run a local painting business, Porcaro Power Painting, for 30 years. He asked his accountant, Driver, for help.

Rachel's returns weren't all that complicated. At issue, though, was that she and her two sons, ages 10 and 8, were all living at her parents' house in Rainier Beach (she pays $400 a month rent). So the IRS concluded she wasn't providing for her children and therefore couldn't claim them as dependents.

She stood to lose what is called earned income tax credit, a refund targeted to help low-income workers. You qualify only if you're working, as Rachel has been.

Driver quickly determined the IRS was wrong in how it was interpreting the tax laws. He sent in the necessary code citations and hoped that would be the end of it.

Instead, the IRS responded by launching an audit of Rachel's parents.

You really have to love that.  It must be a family fraud.  The IRS, where you are guilty of fraud until proven innocent.  It's long been a problem, but under the Bushies it got worse:

Why did this happen? The IRS won't say, but Congress has been fighting for years about the earned income tax credit for the working poor.

Republicans have called the credits "backdoor welfare" and tried to cancel them. When they controlled Congress, they ordered the IRS to ramp up audits of people who claim the credit.

In 2006, credit recipients such as Rachel were more than twice as likely to get audited as the rest of the 140 million individual tax filers.

The Porcaros say they get that the IRS can't just audit the wealthy. Poor people commit fraud, too. But the intensity and duration of the IRS' "obsession," as Rob called it, as well as that it appears the agency was trolling for the working poor, remains a sore point.

It's why they agreed to talk about their finances in the newspaper.

"I feel they're persecuting the people who are down in the mud making the bricks," Rob says. "I'm sure there are tons who don't have the resources to lawyer up. What a way to go, to have your own government take you down because you're too poor."

Too poor.  It'll only get worse as the middle class continues to vanish in this country.  We have no problem with giving a trillion dollars to financial institutions that gambled and lost. It's unfair to limit CEO pay when they get government money, and in return the system gets rigged even more towards the banks so they can "pay the taxpayer back" while keeping the hundreds of billions under the table.

But we will take a year's pay out of a single mother's hide, and hound her family.  We will declare her children unable to count as dependents for tax reasons, so that this year she can't use that nasty welfare tax cheat.  But we'll give the banks hundreds of billions with no strings attached.

Our priorities as a country are so screwed up, we deserve what happens to us when it comes crumbling down.