IRS Targets Single Mother Because of Her Low Income

This is absurd. Via Raven’s Eye, Danny Westneat at the Seattle Times has uncovered a case in which the IRS audited a single mother with two kids, who earns $10 an hour at Supercuts and lives with her parents. What was their reason for doing so? Random selection? An incorrectly completed return? No, they just thought that she was too poor to be telling the truth:

“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.”

Seriously? An estimated 60,000 people in Seattle live below the poverty line — meaning they make $11,000 or less for an individual or $22,000 for a family of four. Does the IRS red-flag them for scrutiny, simply because they’re poor?

The IRS must either think that the United States is just filled to the brim with liars, or that they receive an awful lot of tax returns for people who don’t exist. A whole lot of people in this country, not just in Seattle, live under the poverty line — even though the poverty line is actually placed ridiculously low. And more still live above the official poverty line while still being poor. It’s usually not pretty. It’s sure as hell not just. And often, those people need the help of friends and family to get by. But as they will tell you, it can be done — because, simply, it has to.

As Westneat points out, it’s not as though low-income people can’t commit tax fraud. But choosing them as audit subjects specifically because of their low income is incredibly classist, and far from cost effective. It can also be just plain cruel and vindictive, as it turned in Porcaro’s case:

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.

So, according to the IRS, parents living in intergenerational housing aren’t caring for their children. Further, while I don’t personally know anyone for whom $16,000 is not a huge sum, it’s an impossible and mind-boggling one for someone who earns $18,000 a year.

When Porcaro’s father’s accountant informed the IRS that they had been interpreting their own tax law wrong, they didn’t exactly back down — they instead launched an investigation against Porcaro’s parents. As one can imagine from the fact that such an investigation was conducted at all, that, too, got ugly:

They racked up $10,000 in accountant bills — $8,000 of which Driver is trying to recover from the IRS.

In the end, the parents were cleared. The IRS also backed off trying to reclaim Rachel’s earned income tax credit.

But the agency insisted Rachel couldn’t prove she was supporting her children — she didn’t have enough receipts — so she had to stop claiming them as dependents. A few weeks ago she paid back $1,438 (plus penalties and interest!) on that issue.

Way to go, IRS. You did an investigation likely costing tens of thousands of dollars (counting both sides). To squeeze a grand out of a single mom who did nothing wrong.

Now, for tax purposes, Porcaro’s children just don’t plain exist. She’s not supporting them. Her parents aren’t supporting them. Apparently these children don’t eat, wear clothes, incur medical bills, or sleep anywhere — except that they do, and the IRS just doesn’t give a shit.

There was no fraud here. Porcaro was and is supporting her children. She just so happened to be doing it under a very common living arrangement that the IRS doesn’t seem to like. No one was breaking the law by claiming her children as dependents twice. She filed her taxes honestly, and indeed probably paid extra money she didn’t have to ensure that they were done right. And after that she is still being penalized, both now and in the future.

And she’s hardly alone in her struggle:

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.

So, while upper middle class and rich people are being handed actual tax breaks out the ass, poor folks are being specifically and disproportionately targeted for audits over tax “breaks” that they need to survive.

The thing is, while I’m sure it doesn’t feel that way to her, Rachel Porcaro’s story probably has a comparably happy ending. A whole lot of single moms making $18,000 a year don’t have parents with accountants, not to mention $10,000 to pay now and try to get back later. And I dread to think of what the IRS does to those women’s lives.

Further, this absolutely is a women’s issue: women are disproportionately represented among the working poor, and single moms are even more over-represented (49% of working poor families are headed by single women). We’ve got a system that is undoubtedly classist, consequently sexist, and, since a greater percentage of people of color live in poverty as compared to whites, racist.

Porcaro’s story isn’t just scary and outrageous because of what was done to her — it’s also scary and outrageous because it reveals that there are a lot of stories like it that aren’t making the news.


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34 comments for “IRS Targets Single Mother Because of Her Low Income

  1. karak
    December 11, 2009 at 7:27 pm

    My rage on this is so intense that it is actually making me sick and making my dinner come up a little bit. I’ve lived with my parents in my grandparents’ house for a year–both maternal and paternal grandparents. It’s really common, especially for single mothers and young mothers.

    And since when does being poor as shit have anything to do with how well you can take care of your children? A clever, desperate person learns to do with whatever they have.

  2. yeemo
    December 11, 2009 at 7:47 pm

    this lady got introduced to the perils of working in cash combined with selective enforcement. while there are certainly plenty of honest people who dutifully report every cash tip they receive, it is very low-hanging fruit to scoop up all the people who only report credit card tips paid out to them in cash (something done by at least one member of waitstaff in any restaurant).

    the untraceability of cash means that people are tempted to undercount their earnings for free stuff from the government (it is tempting to keep/spend the cash and then collect benefits/EIC money on top) and it also means the government will be much more likely to go after people working in cash, even if they are disproportionately poor. this is because the government cannot know if the cash-earner reporting 11k earned for the year earned only that or really earned 44k but hid the rest in the mattress.

    there are ways to make working in cash traceable enough to eliminate the temptations to cheat or audit, respectively, but they do increase overhead and do not work equally well for all cash-based industries.

  3. December 11, 2009 at 7:48 pm

    We feel as though we can micromanage the wealth and the lives of the poor and assume they are cheating the system, whereby any corporate entity that is bankrupt can claim it is too big to fail and receive tax payer dollars without needing to provide much in the way of documentation.

    Yay capitalism.

  4. Gerty
    December 11, 2009 at 8:34 pm

    I grew up in an intergenerational household and my grandparents claimed me as a dependent until I went to college. I always assumed it was some sneaky way to maximize returns for everyone involved. Maybe my family was just avoiding something similar.

  5. yeemo
    December 11, 2009 at 8:53 pm

    there is no ‘we’ doing that. the corporation actually has extensive records and the cost of going through those records to find the malfeasance is higher than the cost of going after a bunch of hairdressers and waiters.

    this lady cost a few thousand. most such accused people settle, even if they didn’t cheat. so it is usually a financial win to target cash-wage earners. one can see how this perverse incentive keeps the entire situation going.

    one solution would be to employ an organization to always contest these accusations levelled against people working in cash industries. if the expense of pursuing the matter was 50k/person with no money to the irs rather than a few hundred per person with a frequent resolution of the irs getting money, then the irs might rethink their pursuit of such individuals. but it would require millions in capital and outlays, though it could certainly be a corporation if one liked.

    it would also be a pretty neat way to put money where one’s mouth was.

  6. December 11, 2009 at 10:42 pm

    It does not surprise me that the IRS staffers did not know the law — I was audited once when my ex-wife tried to jam me up with the IRS over the proceeds of her buying out my half of the marital home as part of the divorce.

    I took the IRS examiner going up two levels of supervisor to get a confirmation of what I quoted to him by regulation number — that the proceeds of a division of property or cash pursuant to a divorce or separation are a non-taxable event.

    He just didn’t want to believe it.

  7. Sara
    December 11, 2009 at 11:28 pm

    This fumes me. And I hate the “poverty line” hate hate hate hate hate. It’s a stupid line, it is placed absurdly low. It isn’t adjusted based on location (cause you know rural MN and NYC cost the exact same amount to live in). It allows people to say the most absurd things like “Oh they aren’t really poor!” Because 22,100 is SO much different from 22,050. It lets people soothe themselves because so few people fall below that line and apparently only those people need help. But then those people who can’t even earn that much mustn’t really want to and then at that point I can’t hear anymore cause I had to politely hang up the phone.

    There isn’t a magic line. Life doesn’t become magically good at 22,051 for a family of 4. They can’t automatically get all the shiny baubles like people apparently think. Curve, bell, something but not a line.

    I don’t like AMI either but at least it has a little tiny bit of adjustment but it still sucks.

    (http://aspe.hhs.gov/poverty/09poverty.shtml)

  8. Sara
    December 11, 2009 at 11:35 pm

    Whew sorry I apparently feel strongly about this. Anger not directed here just oozing where it shouldn’t. :( I’ll go drink until I feel less fumey.

  9. Sib6
    December 12, 2009 at 2:33 am

    I read about this elsewhere and the same comment about “working in cash” came up there. The article says nothing about this. This woman was not audited for under-reporting tips. She was audited because the IRS thought she couldn’t possibly be living on what she made in Seattle. I don’t know who is following this story around to all the blogs to post this nonsense about tips, but I’m not happy that this comment hasn’t been moderated yet as it’s completely off topic and offensive in its suggestion that Porcaro was dishonest.

  10. December 12, 2009 at 8:29 am

    Doesn’t surprise me at all – I got audited in the early 90’s when I was making a whopping $5.35 an hour. And defaulting on my student loans.

  11. Athenia
    December 12, 2009 at 10:34 am

    Even if she was under reporting her tips, I’m always surprised at how little $10 an hour is. I have trouble at $15 an hour.

  12. sophiefair
    December 12, 2009 at 10:51 am

    there is no ‘we’ doing that. the corporation actually has extensive records and the cost of going through those records to find the malfeasance is higher than the cost of going after a bunch of hairdressers and waiters.

    umm, yeah. but the potential payoff is much higher too. and a decision is made, at some level, by some “we”, that this is the policy that is going to be pursued.

  13. December 12, 2009 at 12:47 pm

    “We’re an Italian family,” she said. “We’re surviving as a tribe. It seems like we got punished for that.”

    Gee, isn’t that what the conservatives are all blathering on about, how various forms of government assistance shouldn’t exist because people should rely on their families? And here’s a woman doing just that, and both she and her parents are getting screwed for it. And on their own tax dime. They are paying for their own screwing.

    Let this be a warning to anyone who thinks about relying on family or friends to get them through a tight spot. Fuck that shit—you’ll get screwed and so will the person helping you. Go straight for every single form of government assistance you can qualify for: Section 8, food stamps, child care assistance, free or reduced price school lunches, everything. And get everything else from private charities.

    Family values, my ass.

  14. December 12, 2009 at 1:02 pm

    My above comment is waiting in moderation (I may have used too many obscenities; I was really making an effort to keep the cursing to a bare minimum), but wanted to add this:

    I grew up like this, for a time. So did almost all of my cousins. This is what people do. Everywhere. not just us tribal Italians! ;-)

    This is what I’m talking about when I keep hammering on about toxic individualism. It appears that the IRS has a policy that more or less requires people to cost the government more money, because you’ll be labeled a tax cheat if you don’t. Informal arrangements of “trading” housing or childcare that aren’t claimed on taxes as “income” (even though you can’t spend it, and most certainly would not be able to make those arrangements with strangers) are seen as “hiding assets”.

    Toxic. Individualism. Exhibit A.

  15. Manju
    December 12, 2009 at 2:15 pm

    “Gee, isn’t that what the conservatives are all blathering on about, how various forms of government assistance shouldn’t exist because people should rely on their families?”

    If I recall, dung the Clinton years, there were many similar incidents, with the IRS targeting relatively low income people as well as abusing their powers and privileged legal status (separate courts).

    It was those conservative blatherers who took the IRS on and passed a reform bill.

  16. William
    December 12, 2009 at 2:47 pm

    I hate to be the classical liberal in the room, but this is what powerful, unaccountable, highly incentivized government entities do. Why would they target a poor woman? Because its easy and they might squeeze a few bucks out of her. Why wouldn’t they target a large business? Because it will cost them a lot and theres a very good chance the business will win either through being right (no fraud took place) or being well funded (hiding fraud effectively).

    Take a bureaucrat, give them a job that they can’t/won’t lose, invest them with power, put the cost of proving innocence on the people they target, encourage them to maximize profits (and lets not pretend that that isn’t exactly what happened here) and you end up with petty bureaucrats who go after easy targets. Its like predatory lending, except instead of borrowing money the victims earned it and if you resist too hard you end up in jail.

  17. December 13, 2009 at 3:28 pm

    Outrageous. That is the only word for this.

    The scum at the IRS are targeting people who make less than $15,000.00/yr instead of targeting the white rich males that have tax havens in other nations.

    This is exactly what the conservatives and the Augusta Chronicle supported. They just disgust me.

  18. Marksman2000
    December 13, 2009 at 8:25 pm

    Just wait until the Feds take control of your healthcare.

    You ain’t seen nothing yet.

  19. December 13, 2009 at 8:49 pm

    I can’t wait for my mother to be able to see a doctor. It would be nice to know why she can’t turn her head sometimes.

    Nothing is all we have right now, so I’d be keen on seeing something.

  20. yeemo
    December 14, 2009 at 5:42 am

    going after poor people who are literally given money rather than paying tax counts as a political twofer in ‘money saved’. politicians can double-count the money since it wasn’t actually paid by the people receiving it. this is totally fake accounting, but politically, it is what would happen. going after rich people who merely pay less than they could through tax havens does not provide the same opportunity to count dollars twice.

  21. Tlönista
    December 14, 2009 at 10:09 am

    I work part-time and make less than $10 an hour and this story fills me with rage. They didn’t find it plausible that someone could get by on so little? Did they think anyone below the poverty line just up and disappears? No—people don’t disappear. They rage and take it and make something out of nothing and find every single way to get by and take care of their own.

    Oh, and troll? Healthcare is one of the few things I don’t have to worry about when it comes to money. I can just, you know, go to a doctor—any doctor who’s got time to see me—and never have to think about whether I can afford it. Because it’s free.

    La Lubu: right on.

  22. jpe
    December 14, 2009 at 4:09 pm

    poor folks are being specifically and disproportionately targeted for audits over tax “breaks” that they need to survive.

    Why is “breaks” in quotes there? Are you denying that the EITC is a tax break?

    • December 14, 2009 at 4:16 pm

      Does it legally and technically qualify as a tax break? Yes, of course. Concerning the popular discourse with which we tend to use the phrase “tax break” — generally indicating that it is a bad thing, an unfair thing, and a special privilege — no, in that sense, I do not think it is.

  23. jpe
    December 14, 2009 at 4:19 pm

    I think there are facts under which the IRS audit is completely reasonable. If the parents are wealthy and do, in fact, support both their daughter and their grandkids, then it would be outrageous if the daughter not only claimed the kids as deductions but got money back from the US Treasury. (I think it goes w/o saying that a trust fund kid shouldn’t be claiming EITC refunds when his/her needs are being more-than-adequately taken care of by)

    It’s fun and all to be outrage, but the facts here are pretty thin.

  24. catfood
    December 14, 2009 at 6:47 pm

    It’s obviously wrong for the IRS to target someone making $18,000 a year.

    I’m not so sure it’s wrong from them to investigate someone claiming to make $18,000 a year. It really wouldn’t shock me to find that a lot of people running relatively successful cash businesses claim extremely low incomes.

    But it should have been pretty obvious, once the IRS checked out Ms. Porcaro’s living situation, that they should leave her alone. I don’t really object to the selection for audit, because I’m sure this kind of fraud is reasonably common, but it should have been cleared up quickly and quite cheaply.

  25. William
    December 15, 2009 at 1:03 am

    It’s fun and all to be outrage, but the facts here are pretty thin.

    Maybe some of us are just offended by the very concept of publicans with guns harassing the working poor on the off chance that they’re keeping a bit more of the money they earned to support their family. Perhaps the idea that a government which is wasting huge amounts of money on failed wars, both foreign and domestic, is so presumptuous as to believe that it ought to use the power it has to squeeze every last penny it believes it is owed from citizens makes some of us physically ill. Maybe the strategy of going after low hanging fruit because a poor person is more likely to just roll over, especially if they’re cheating a little, than going after bigger fish because they fight back seems both morally and pragmatically wrong. Who knows, maybe theres even one or two people here who see tax evasion as just, given the horrors our government visits upon it’s citizens.

  26. Marksman2000
    December 16, 2009 at 2:26 am

    Tonsilista:

    Can you recall any instance when the Federal government has accomplished something on the scale of national healthcare and it turn out correctly? I can’t.

    But you can keep brainstorming.

  27. December 16, 2009 at 8:20 am

    Can you recall any instance when the Federal government has accomplished something on the scale of national healthcare and it turn out correctly?

    You’re just not thinking hard enough Mark. The interstate highway system, national parks, USPS….I’m sure you probably know a few old folks who depend on their Social Security checks and Medicare (or are you one of those lucky few that earn enough money to support yourself and possibly your own family, and enough to support your parents and grandparents? If so, just count your blessings…most of us don’t have that kind of wherewithal). Personally, I’m fond of the changes that came from that great piece of Federal legislation known as the Civil Rights Act……but being a white man, your mileage obviously varies on the ability to overlook that one. Apparently, you’re also able-bodied, because you don’t seem to appreciate the Americans with Disabilities Act or the Family and Medical Leave Act. Must have a real cush job too, because you don’t seem to appreciate the Department of Labor, OSHA, or NIOSH.

    I will say this: most of what we take for granted in terms of national programs are legacies of the New Deal. I live in Illinois, and just about all the lodges in various State parks were built by the Civilian Conservation Corps. The reason rural people have electricity is due to the Rural Electrification Administration—private industry did not and would not have done that. But frankly, it has been since my grandmother’s era that we had political representation with the courage to pursue initiatives that provide for the populace, rather than for-profit entities.

    Then again, in her era, people were politically active and out in the streets more often, and in large numbers. Apathy breeds political corruption.

  28. Alara Rogers
    December 16, 2009 at 8:59 am

    Can you recall any instance when the Federal government has accomplished something on the scale of national healthcare and it turn out correctly? I can’t.

    Medicare and Social Security are both doing pretty well so far. So’s the Interstate Highway System.

  29. December 16, 2009 at 10:19 pm

    Sorry but this isn’t news. It’s just another typical story in the U.S.

  30. December 16, 2009 at 11:29 pm

    @Craig: Why do you get to decide what is and isn’t news?

  31. December 16, 2009 at 11:30 pm

    You know, the national park system is doing pretty good.

  32. December 17, 2009 at 8:37 am

    The trope of “government always sucks” is pretty popular, and I’ve been known to engage in it myself when Something Goes Abysmally Wrong—but compare the track record of say, air traffic controllers (federal employees) doing their jobs everyday with say, the ability of Wall Street heavy hitters doing their jobs…..and tell me about how superior the private sector is again?

    Yes, the federal government can be thuggish. It can also be your ally in a fight where otherwise, you as an individual would have no power. Because I’ve noticed over the years that people with the most consistent keep-government-out-of-my-life perspective tend to be the same folks who can lean heavily on their existing pillars of privilege and power (think: financial capital, social capital, cultural capital, white privilege, class privilege, male privilege, able-bodied privilege, heterosexual privilege, cisgender privilege, etc.).

    I’m not under any illusion that government as an institution is a neutral, unbiased entity. I’m also not under any illusion that the people doing that work are any different from people who work in the private sector. And I’m really not under any illusion that the private sector isn’t any less powerful than the government, either (who do you think controls the government, for crissake? who’s driving the gutting of health care reform?).

    Those times when laws and those who enforce them are your ally are the direct result of grassroots movement by the people. Those laws are the legacy of the New Deal, the Civil Rights movement, feminist movement, labor movement……and as those movements weaken, that allows for abuse by those in power. Sometimes that abuse will come from government, as in this case. More often, it will come from the private sector. But make no doubt—power is power, and it preys on the vulnerable, and that is regardless of its source.

    Meanwhile, I’m really curious Marksman2000, if you happen to be paying for all your parents or grandparents financial and medical needs, since you don’t seem to appreciate the existance of Social Security and Medicare. (and perhaps it’s salient to mention on a feminist blog that those programs are crucial for older women of my grandmothers’ generation who were legally barred from getting the good jobs—so much for that “saving for the future” jazz).

  33. Sheelzebub
    December 17, 2009 at 9:18 am

    Just wait until the Feds take control of your healthcare.

    I lived in two countries that had some form of socialized medicine, and the sky did not fall. It was nice to know that I could get treatment even if I was unemployed or broke. And not for nothing, but for a lot of poor people, or people who don’t have access to other options, a lot of religions have control of their healthcare. Church-owned hospitals are, in many communities, the only game in town, and they really get invasive when it comes to patient choice. Try getting on the pill, getting an abortion, or getting a D&X after a miscarriage. Odd, though, that the control is ONLY bad when it’s the government.

    The next person who starts whining about how the Gummit Can’t Do Anything Right Guldang it is welcome to build their own roads and bridges, renounce the education they got, not call the cops when they need help, not call the fire department if their house is on fire, and not bring a civil case to court if they’ve been harmed by gross negligence. While we’re at it, they are also welcome to forgo the criminal justice system if they are accused of a crime or are the victim of a crime. As well as Medicare and Social Security, and unemployment when they lose their jobs.

    I mean, we’ve seen what happens when private industry runs things–it’s all fucking rainbows and ponies and pots of gold (for the owners of said private companies, at least). We’ve seen how well the prison system is run, and how the human rights of prisoners aren’t violated at all when we outsource it to private companies. Same with companies like Halliburton.

    Here’s a clue: government-run programs tend to falter because a) people have no faith or investment in them, having bought into the Reagan-era rhetorical bullshit and b) we’re all so determined to “starve the beast” that the institution that is supposed to work for us cannot do so effectively (there is no money fairy. FFS). And when the government can’t do it’s job well, people whine that the Gummit Can’t Do Anything Right.

    Shorter me: I second everything La Lubu has said here.

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