The Transactional Records Clearinghouse releases this news just in time to make you stragglers write cuss words in the margins of your 1040s: in 2008, the IRS audited just 15% of large financial service companies—you know, the Ponzi players responsible for destroying our economy? Yeah, those folks. The IRS audited 64% of all corporations of similar size (assets greater than $250M).
15% to 64%—I'm pretty sure that's a statistically significant, non-random difference.
TRAC also finds the audits of Big Finance were also less thorough than the goings-over other companies get. This discrepancy is costing the IRS—oh, wait, costing us big money: TRAC finds that Big Finance accounts for 72% of the assets and 76% of the tax returns of all industries in that bracket. Audits of Big Finance also find the biggest tax dodges: in 2008, for every hour of audit work on big financial firms, the IRS found $11,739 in tax underpayment, compared to an average $7,085/hour for all other industry groups (see Table 7 here). Big Finance apparently has gotten better at cheating: over the Bush II years, their discovered underpayment increased 413%, compared to an 86% increase in other industries.
In other words, Big Finance is where the money is, and the IRS has been letting them slide. President Obama, it's time for a memo to the IRS: audit every big financial institution this year. Everyone getting TARP, everyone running credit default swaps and hedge funds, every one of the big boys who got us into this mess. Keeping Big Finance's books honest might cut the deficit in half right there.
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