/They’re easiest to step on’ The real reason why families in the Delta, one of the nation’s poorest regions, are also the most audited by the IRS

They’re easiest to step on’ The real reason why families in the Delta, one of the nation’s poorest regions, are also the most audited by the IRS

William Ayers received a mail letter last summer. It was registered and required a signature to indicate its contents. Ayers, who is 58 years old, recalls thinking, “Ah, that’s it the IRS.” “Here we are again.” Ayers, 58, works in a Leland furniture plant where he upholsters hospitals furniture. He earns approximately $27,000 per year. In the United States, less than 1% of taxpayers (or 0.77%) are subject to an income tax audit each year. He said that this was the fourth time the Internal Revenue Service has audited Ayers tax return in the past 20 years. They asked for a variety of documents that many families don’t keep. Ayers stated that his experience was partly the reason why the Mississippi Delta, which is one of the poorest areas in the nation, has one of the highest rates for IRS income tax audits. According to a ProPublica report, Humphreys County is the most audited county in the country. It’s home to Belzoni (pronounced Bel-ZO-nuh), which is also known as the “Catfish Capital” or “Heart of the Delta”. This town of 2,200 people has been called both the “Catfish Capital”, and the “Heart of the Delta”. Ayers is a Greenville father with five children and many foster children. He claims the Earned income tax credit, which is a federal financial aid for working-class families. It was created in 1970 as an alternative to welfare. According to ProPublica’s analysis of IRS data, Ayers is twice as likely to be audited if he has this benefit. The amount of the benefit varies depending on his family size. It doesn’t make sense. It’s not fair. It doesn’t seem efficient for the government,” stated Ben Wilkerson, an attorney at North Mississippi Rural Legal Services. Rankin County is the only Mississippi county where people are audited less often than the national average. It is the second-wealthiest county in the state and where many of the state’s top leaders live, including a congressman and the governor. Nearly 12 of every 1,000 taxpayers of Humphreys County receive audits, compared with less than 8 of 1,000 in Rankin County. Washington County is just west of Humphreys, where Greenville can be found. It has a higher audit rate than 10 out 1,000. There are many of the same problems, low incomes, and very few job opportunities as the Delta. Both Washington and Humphreys have a population that is over 70% African American. In a written statement, the IRS stated that it enforces tax laws with integrity and fairness to everyone. The IRS’s intensive examination of working families applying for the earned income credit — which is designed to reward hard work — mirrors the experiences of low-income individuals applying for other benefits such as cash assistance and child care vouchers. Latoya Skinner, Tax Genie’s Belzoni tax preparation service, said that it’s almost like they’re giving credit and want it back. “You designed it to be used by low-income people, now you want them to examine them because they’re receiving it.” However, there are deeper reasons that poor rural communities might face more questions and have a harder time answering them. Skinner said that the Delta has “old school landlords” who don’t prepare leases and take rent payments in cash. Many people work odd jobs in cash-based enterprises, which are not supported by official income documentation, in an area without any industry or employers. People who move often may find that their addresses are not recorded with schools, employers, or medical providers. This makes it difficult to prove that a child is a resident. It’s easy for mistakes to happen when you consider the complex tax laws and low-wage workers who rely on lump sum tax returns to cover their needs all year. Ayers lives with Dycia, his wife and three foster children, Kayden Jaterrica and Jamaine in a clean, modest home. The walls of Ayers’ living room are adorned with computerized drawings of his children. He also built the furniture from old wooden pallets. Ayers was awarded a nearly $9,000 tax refund this year. He plans to keep it and use it to pay for unexpected expenses or visits to his Dallas-area children. Ayers stated that his family is virtually living paycheck to paycheck. More than 9 million people are lifted above poverty every year by the Earned Income tax credit, half of which are children. One in six Mississippi taxpayers that qualify for the credit don’t apply. Mississippi is consistently one of the most poor states in the country. Ayers used black reading glasses to inspect a stack of papers he had generated during his last audit. The IRS sent Ayers a first letter in July last year. It stated that it had found a deficit on his 2016 taxes, and that he owed $9,791. It said that he must either pay the debt or file a court petition if he disagrees with its findings. Ayers claimed it was as if he were guilty until proven innocent. “That’s an intimidation tactic.” Ayers asked for the assistance of the IRS-sponsored Low Income Taxpayer Clinic. This clinic provides legal services free to low-income workers who have been audited. The only clinic of its kind in Mississippi is run by Wilkerson, a tax attorney whose Oxford office is located. A relative incorrectly labeled Ayers as “head of household” in 2017. This is reserved for married people who have dependents. Ayers claimed he didn’t know why. His entire file, including his dependents’ legitimacy, was likely to have been questioned by the audit due to a simple error. The records collection process was tedious, as is the case with all audits. Ayers asked for a Child Protection Services letter to show his guardianship of his foster children. However, the IRS refused it. It only listed the date that the children were placed in Ayers’ home and did not indicate how long they had been there. A second letter was required by him. Ayers stated that the biggest burden for him was the frustration of not being able do the things you need with your money. He didn’t know what he would have to do with IRS. Wilkerson stated that his case was almost over eight months after he filed it. Ayers is expected to get an additional $800 refund. He no longer owes the IRS. Ayers was not represented by a lawyer and could not produce any documents to prove his answers to his tax return. He also did not have the ability to provide proof of his children’s residency. A monthly payment plan was set up to repay thousands to the federal government. Skinner stated, “They let it go if they can’t prove the audit.” It’s not a lack knowledge. They don’t know they can appeal it. They don’t know they can appeal it. Skinner said that some taxpayers who are audited may feel discouraged and decide not to file taxes in the next years. This means they won’t get the refunds they owe the government. Skinner stated that taxpayers, and even preparers, are often not well-informed about IRS procedures and the documentation required by the agency. Anxiety is high as tax season approaches. There are thousands at stake. Earned Income Credit for this year is $529 for someone without children and $6,557 for taxpayers with three children. A filer must have a minimum annual income of $15,270 to $54,884 depending upon their marital status and the number of children living at home. To prove the taxpayer’s relationship with their dependent, and their residency, the taxpayer must produce a number of records, including birth certificates, school, medical or daycare records, or official letters from these entities. Skinner stated that there are some situations where the IRS may be concerned, including when two adults claim their child as a dependency in two homes, or when a relative, such as an aunt, uncle, or grandparent, is the primary caretaker. Skinner stated that a parent may allow their relative to claim the fourth or fifth child as a dependent, but only up to three children. Skinner stated that while the other adult may have helped with family expenses, Skinner suggested that tax filings feel honest. However, a taxpayer cannot claim a dependent unless they live in the home of the dependent. Technically, a taxpayer who took care of a dependent, and thus earned the benefit, but didn’t have documentation to support it, is ineligible. Poor record-keeping can cause people to lose money that they have earned. “If people knew better, they would have done better. Skinner stated that some people won’t be able to do better. The legitimacy of dependents is not the only reason for tax return errors. People visit Tax Genie every year to file their taxes using the last pay stub they received before receiving a W-2. This document is sent by employers to both the IRS as well as employees and reflects their annual earnings. This can cause discrepancies between taxpayer’s filing and the IRS’s paperwork. Skinner stated that they depend on their taxes so when the IRS opens the gates, they will run to someone who can use a last-check stub. “And if your answer is no, they’ll go to the computer to figure it out for themselves.” Wilkerson stated that some preparers might be tempted to alter client returns in order to maximize earned income credit. This is especially true if they are paid a commission. Carol Ivy, Belzoni Mayor, told Mississippi Today that she attributes the high audit rate in Humphreys County to tax fraud. It’s all around… People aren’t truthful about their income tax. Ivy stated that they are not. Wilkerson disagrees with the mayor’s description. “Fraud” is a strong term, he stated. “I think it’s more optimistic thinking.” However, Ivy stated that it is absurd to expect the poorest taxpayers in the United States to face more audits than those who earn several hundred thousand dollars per year. Ivy stated that everyone should be audited. These scenarios are made worse by the fact that the average household income in the community is $23,000, and the unemployment rate at 10.2 percent is higher than the state average. Skinner estimates that half of the residents in the area are self employed, including the owners of the car wash across the street. Skinner said that low incomes can sometimes lead to suspicion. Skinner stated, “I’ve been told before by an IRS examiner, ‘How is that person head of household with such little money?'” Consider a single parent who has a $5,000 annual income raising their children. Skinner points out that $550 per month in rent is sufficient to cover half of a household’s expenses for one year. This would make Skinner the head household member. Skinner stated that the IRS discriminates against people it doesn’t know. Mississippi Today reached out to the IRS to ask for an interview about how it ensures that its inquiries don’t target low-income and minority communities. The IRS stated in a written statement that its selection process for auditing returns “is designed to select those with the highest probability of noncompliance” by using a “systemic-risk-based scoring criteria.” Ayers examines the IRS audit trend using the lens of his family history. Jake Ayers, his father, was an organizer during the Civil Rights Movement. He even filed the successful suit against Mississippi’s state board of education regarding the segregated public universities system. He said that it’s easier for him to connect the dots. Ayers stated that minorities and low-income people feel like they are always being taken advantage of by the government and government officials. They are the easiest to get on. They are more vulnerable than others.”