Too Big To Audit? Large Partnerships Escape IRS Scrutiny, GAO ReportsBarbara HollingsworthCNS NewsMay 5, 2014

In 2011, while the Internal Revenue Service (IRS) was busy scrutinizing the tax-exempt status of 100 percent of Tea Party groups and other conservative non-profits, the tax agency did not audit a single high-value electing large partnership (ELP) with more than $100 million in assets.

That's according to a preliminary report released to Congress by the Government Accountability Office (GAO) April 17th. (See GAO.pdf)

An ELP is a business entity with more than 100 partners and more than $100 million in assets that is required to file a 1065-B tax return every year. They include large private equity firms, hedge funds andoil and gas partnerships.

“No partnerships that filed a Form 1065-B from tax years 2002 to 2011 had their tax return audited and closed by IRS from fiscal years 2007 to 2013,” a footnote on page 14 of the GAO report stated.

Jim White, a spokesman for GAO, confirmed that no ELPs were audited by the IRS between 2007 and 2013, the last year statistics are available. However, he pointed out that there were only 15 ELPs out of 105 filing 1065-B returns nationwide in 2011 that met the $100 million asset threshold.

Another 2,211 partnerships filed under IRS Form 1065 in 2011, “but only 20 audits (or less than one percent) were closed that year,” White told CNSNews.com, acknowledging that “this is a very low audit rate.”

White noted that GAO is doing a follow-up and “will be asking the IRS a number of questions to try to better understand” the tax agency’s audit decisions.

“These are the big guys,” said Amy Elliott, legal editor at the non-profit Tax Analysts, who pointed out that some ELPs have up to $20 billion in assets. “The IRS should be looking at them more.”

Tax Analysts put a video up on You Tube explaining why the IRS treats these large partnerships as essentially too big to audit.

“So, were you the one that said at Tax Analysts that these are basically unaudited entities at this point, or ‘audit proof’ I guess was the word used?" CNSNews.com asked Elliott.

“Right, I mean, I think there is a sense among partnership practitioners that these entities are essentiallyaudit-proof,” she replied.

“You know, it’s interesting, when I read the GAO report, I actually took issue a little bit with their $100million asset threshold,” she continued. “I mean, yes it is the case that the larger the entity, the more you should argue that the IRS should look at it, because even if all it finds is a one percent adjustment, one percent on big ends up being a lot of money, as opposed to one percent on small.

“But really, I mean, the audit statistics are so poor in this area that, you know, if they can only – and it takes a lot of resources for the IRS to audit a partnership – so if they can only audit, you know, five of them, of these large partnerships, they should get the really really big ones.”

ELPs - which Elliott says operate under “extraordinarily complicated” tax rules created by Congress in 1997 - were not even subjected to the same kind of scrutiny that the IRS typically focuses on similar-sized corporations.

“The IRS will come in and ask questions, but they do not have to go through the kind of full-on audits that major C-corporations have to go through. A lot of these partnership structures are so complicated to unwind and figure out what’s going on that honestly, IRS agents wouldn’t know the questions to ask,” she told CNSNews.com.

The GAO also reported that the average asset size of ELPs decreased from $2.5 billion in 2002 to $779 million in 2011, while the average number of direct partners decreased from a ten-year high of 973 in 2007 to 297 in 2011.

Elliott agreed with White that the total number of ELPs is very small compared to other tax filers.

“The caveat is that the number of electing large partnerships that the GAO looked at in their report, thathad assets over $100 million, is actually tiny. There aren’t a lot of those entities to begin with,” Elliott told CNSNews.com. “The point I was trying to make, though, is that presumably these are entities that the IRS shouldn’t have trouble auditing. And you would think that it would want to audit at least one ofthem.”

CNSNews.com asked her how the agency could determine whether an audit would recover enough additional taxes to make it worthwhile without doing even one.

“That’s a good question,” she replied.

“To ensure compliance, the IRS has to have an audit presence everywhere….And they can’t audit everyone, so they kind of have to pick and choose, and have some coverage everywhere,” Elliott pointed out. “And I think the issue here is that given the size of these entities, the level of audit coverage…is so sparse that it begs the question.”

“If they did an audit that’s as in-depth and as comprehensive as they did in the C-corporation realm, if theydid that kind of audit in the partnership realm, they’re going to find stuff…There are a lot of areas that are unclear or gray, and [tax] practitioners take advantage” of them, Elliott told CNSNews.com.

“I don’t know that these partnerships are playing games. But I do know that it’s gotta be in the back of their heads,” she added. “There’s a lot of positions you can take in partnership tax law. The IRS should be taking the other side and they’re not, and the partnerships are not worried about it.”

The Number Of Working Age Americans Without A Job Has Risen By 27 MILLION Since2000Michael SnyderThe Economic CollapseMay 4, 2014

Did you know that there are nearly 102 million working age Americans that do not have a job right now? And20 percent of all families in the United States do not have a single member that is employed. So how in the world can the government claim that the unemployment rate has “dropped” to “6.3 percent”? Well, it all comes down to how you define who is “unemployed”. For example, last month the government moved another 988,000 Americans into the “not in the labor force” category. According to the government, at this moment there are 9.75 million Americans that are “unemployed” and there are 92.02 million Americans that are “not in the labor force” for a grand total of 101.77 million working age Americans that do not have a job. Back in April 2000, only 5.48 million Americans were unemployed and only 69.27 million Americans were “not in the labor force” for a grand total of 74.75 million Americans without a job. That means that the number of working age Americans without a job has risen by 27 million since the year 2000. Any way that you want to slice that, it is bad news.

Well, what about as a percentage of the population?

Has the percentage of working age Americans that have a job been increasing or decreasing?

As you can see from the chart posted below, the percentage of working age Americans with a job has been in a long-term downward trend. As the year 2000 began, we were sitting at 64.6 percent. By the time the great financial crisis of 2008 struck, we were hovering around 63 percent. During the last recession, we fell dramatically to under 59 percent and we have stayed there ever since…

And the numbers behind this chart also show that employment in America did not increase last month.In March, 58.9 percent of all working age Americans had a job.

In April, 58.9 percent of all working age Americans had a job.

Things are not getting worse (at least for the moment), but things are also definitely not getting better.

The month that Barack Obama entered the White House, we were in the midst of the worst economic downturn since the Great Depression and only 60.6 percent of all working age Americans had a job.

Since only 58.9 percent of all working age Americans have a job now, that means that the employment situation in America is still significantly worse than it was the day Barack Obama took office.

So don’t let anyone fool you with talk of an “employment recovery”. It simply is not happening. The official unemployment rate bears so little relation to economic reality at this point that it has essentially become meaningless.

Look, how in the world can we have an “unemployment rate” of just “6.3 percent” when 20 percent of all American families do n0t have a single member that is working?

Here is how that 20 percent figure was arrived at…

A family, as defined by the BLS, is a group of two or more people who live together and who are related by birth, adoption or marriage. In 2013, there were 80,445,000 families in the United States and in 16,127,000—or 20 percent–no one had a job.

So if one out of every five families is completely unemployed, then why is the official government unemployment rate not up at Great Depression era levels?

Could it be that the government is manipulating the numbers to make them look much better than they actually are?

Why don’t they just go ahead and get it over with? They can just define every American that is not working as “not in the labor force” and then we can have “0.0 percent unemployment”. Then we can allhave a giant party and celebrate how wonderful the U.S. economy is.

And don’t be fooled by the “288,000 jobs” that were added to the U.S. economy last month. For workers under the age of 55, the number of jobs actually dropped by a whopping 259,000.

If we were using honest numbers, the official unemployment rate would look a lot scarier. John Williams of shadowstats.com has calculated that the unemployment rate should be about 23 percent. I don’t think that is too far off.

Meanwhile, the quality of the jobs in our economy continues to go down. The House Ways and Means Committee says that seven out of every eight jobs that have been “added” to the economy under BarackObama have been part-time jobs. But you can’t raise a family or plan a career around a part-time job. To be honest, it is very hard for a single person to even survive on a part-time wage in this economic environment.

As the quality of our jobs goes down, so do our incomes. The median household income has declined for five years in a row, and the middle class is falling apart.

Without middle class incomes, you can’t have a middle class. Considering what we have been watchinghappen, it should be no surprise that the homeownership rate in the United States has dropped to the lowest level in 19 years or that the number of Americans receiving money from the government each month exceeds the number of full-time workers in the private sector by more than 60 million.

For many more statistics like this, please see my previous article entitled “17 Facts To Show To AnyoneThat Believes That The U.S. Economy Is Just Fine“.

At a gut level, most Americans understand that things are much worse than they used to be.

The Pew Research Center recently asked people what “class” they consider themselves to be. The results were shocking.

Back in 2008, only 25 percent of all Americans considered themselves to be “lower middle class” or “poor”.

Earlier this year, an astounding 40 percent of all Americans chose one of those designations.

We are in the midst of a long-term economic decline, and no amount of propaganda is going to change that.

But based on the “happy numbers” being trumpeted by the mainstream media, the Federal Reserve is slowly bringing their quantitative easing program to an end.

When quantitative easing is finally totally cut off, we shall see how the financial markets and the U.S. economy perform without artificial life support.

Personally, I don’t think that it is going to be pretty.

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