Dear Dick

I am a journeyman finish carpenter.

I spent the whole week sorting through my lumber supply invoices and pay records for my construction helper.

But….I am relieved.  I managed to file my income tax returns by the April 15 tax deadline this year.

At the same time, I am worried that the IRS is going to audit me again.

I’m being audited for last year.  When I went to my mailbox, I noticed a thick letter with the IRS logo printed on the envelope.

The IRS tax notice was 8 pages long. The IRS language was technical and confusing. 

When I finally read through the IRS tax notice, the amount of the tax assessment was a big surprise.

The IRS said that I had unreported interest income of $9,200 and a tax bill for $2,400.

My bank account balance is under $4,000.  The bank pays me interest at a mere 0.02% interest rate.  I don’t have $9,200 of interest income.  It’s impossible.

What can I do?

“Dazed and Confused”

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Dear “Dazed and Confused”

Call us at the AACA LITC (Asian American Civic Association Low Income Taxpayer Clinic).

Our Qualified Tax Experts provide representation, education and advocacy for individual taxpayers who are low-income or speak English as a second language (ESL).

As announced by the Internal Revenue Service (IRS), The AACA LITC Program is a federal grant program administered by the Taxpayer Advocate Service (TAS), led by National Taxpayer Advocate (NTA)Erin M. Collins. LITCs represent individuals whose incomes are generally at or below 250% of the federal poverty guideline and who are seeking to resolve tax problems with the IRS, such as audits, appeals and tax collection disputes.

LITCs can represent taxpayers in tax court as well as before the IRS. They also can provide information about taxpayer rights and responsibilities in different languages for English as a Second Language (ESL) taxpayers.

LITCs provide services for free or a small fee. They receive IRS grants but work independently to assist and advocate for taxpayers.

Thousands of taxpayers assisted
Last year, LITCs represented nearly 20,000 taxpayers dealing with an IRS tax controversy

During 2020, LITCs represented nearly 20,000 taxpayers dealing with an IRS tax controversy and provided consultations or advice to another 18,000 taxpayers.

LITCs helped taxpayers secure more than $5.8 million in tax refunds and reduced or corrected taxpayers’ liabilities by over $116 million. They also brought more than 2,900 taxpayers back into payment compliance with the IRS.

Through outreach and education activities, LITCs strive to ensure individuals understood their rights as U.S. taxpayers by conducting more than 1,000 educational activities that were attended by nearly 134,000 individuals.

Some 1,500 volunteers contributed to the success of LITCs by volunteering over 42,000 hours of their time. Nearly 65% of the volunteers were attorneys, certified public accountants, or enrolled agents.

LITCs use a variety of approaches to successfully advocate for taxpayers. LITCs can help you use collection alternatives to resolve payment issues with the IRS.

If necessary, LITCs can litigate your case all the way up to the United States Tax Court and other federal courts.

IRS audits the poor more than others

The Internal Revenue Service has been auditing the poorest wage earners more than higher-earning taxpayers, according to an updated report from Syracuse University’s Transactional Records Access Clearinghouse (TRAC),

TRAC found that low-income workers earning less than $25,000 in total gross receipts were being audited at a rate five times higher than everybody else in fiscal year 2021. The latest report examined IRS tax audits and found the IRS completed 132,922 audits of low-income wage earners with less than $25,000 in total gross receipts, up from 105,978 audits completed by the IRS a year ago at the end of February 2021.

The report notes that if the IRS continues at this same pace for the rest of this fiscal year, audit rates would inch up higher than the phenomenally high rates last year.

TRAC found that not only are total correspondence audits up so far this year, but the IRS seems to be increasingly targeting them against the poorest families. “Last year at this same time, 51.6% of all correspondence were targeted at this lowest income group which represents only a small proportion of all taxpayers,” said the report. “The concentration of correspondence audits on this single small group of taxpayers during this filing season has increased to 58.1%. Field audits, although relatively small in number, are also up for these lowest wage earners.”

In comparison, so far in fiscal year 2022 both the number and percentage of correspondence audits as well as field audits dipped for all other taxpayers.

The Professional Managers Association (PMA), a group representing IRS management officials, separately issued a statement that seemed to confirm that the IRS is auditing low-income taxpayers at a higher rate than others.

“In the absence of robust enforcement funding, the IRS disproportionately audits low-income Americans, often people of color, with the simplest tax returns to review,” said PMA executive director Chad Hooper in a statement. “These taxpayers are also the least likely to receive taxpayer assistance services. Meanwhile, the IRS infrequently audits high-income earners with complex tax returns due to a lack of time and resources. Our members do not have access to the tools and resources necessary to ensure high-wealth taxpayers are complying with our Tax Code.”

One success story among many
As reported by the IRS, here is one example of how an LITC assisted a taxpayer in need:

A low-income taxpayer was working in a local grocery store making minimum wage. She was the sole breadwinner for her family of four and had never filed a federal income tax return.

The IRS sent her Statutory Notices of Deficiency for four tax years, asserting that she owed several thousands of dollars based on unreported income. Unsure what she could do to resolve the issue, the taxpayer sought help from an LITC.

The LITC evaluated the case and explained that she needed to contest the tax notices with the IRS auditor, the Independent Office of Appeals, and possibly up to the U.S. Tax Court in Washington DC.

The LITC argued that the taxpayer did not owe tax but instead was due refunds, as she was eligible for the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC).

The LITC’s advocacy on the taxpayer’s behalf was a success. She ultimately received over $16,000 in refunds.  The LITC provided the taxpayer not only with relief from the tax audit but also a valuable financial lifeline of annual tax credits and refunds.

In addition, the LITC educated the taxpayer about tax administration and the tax law, including how to have future tax returns prepared and filed for free at a local Volunteer Income Tax Assistance site, and the availability of anti-poverty tax benefits such as the EITC and the CTC.

We can help you with your tax problems. 

Please contact AACA Low Income Taxpayer Clinic (AACA LITC) for an appointment at

(617) 426-9492 Ext. 285 or litc@aaca-boston.org

Dick

Richard Soo Hoo CPA, AACA LITC

SAMPAN, published by the nonprofit Asian American Civic Association, is the only bilingual Chinese-English newspaper in New England, acting as a bridge between Asian American community organizations and individuals in the Greater Boston area. It is published biweekly and distributed free-of-charge throughout metro Boston; it is also delivered to as far away as Hawaii.