in this case, the "audit" consists of an automated letter sent to their mailbox requesting additional information. It's not an IRS attorney opening their books and going line by line.
I have heard that the IRS doesn't have the resources to go after people who can afford good lawyers
Though I was referring more generally to things like known pedophiles getting slaps on the wrist by the feds, the spouses of politicians making millions insider trading, politicians not facing consequences for deleting public records, ect
How is it different in this case? Any Etsy shop can also configure into an LLC and do the necessary accounting to reduce their tax burden. If you don’t want to do that an Etsy shop is just a weird job, and you pay income tax on jobs.
I think a comment below addresses this, but the usual counterpoint is that a) the "necessary accounting" can become an undue burden itself and b) creating additional audit risks small may not be able to mitigate
The idea is that it is a structure that effectively prefers larger scale businesses who have the means to mitigate both of those
I’m not sure I follow. If you don’t want to set up an LLC you can just treat your Etsy dollars as plain-old personal income like you would as an Uber driver or any other side hustle. It’s just income. Why is a person paying income tax on their income controversial?
The argument is that all of the bookkeeping and accounting required to adequately deduct expenses creates an undue burden on small businesses, especially when it comes to mandatory accounting paradigms like depreciation. This is effectively demonstrated by the conventional wisdom of "just hire an accountant", which will run you at least $500, in addition to needing to get up to speed on how to track expenses and what to track.
A single member LLC defaults to a "disregarded entity" for income tax purposes, meaning it has no bearing on taxation or this discussion. And opting into being taxed as an S-corp (or partnership) creates even more paperwork.
Having said that, one of the great inequalities of our tax code is that individuals are not allowed to take most deductions that business take. It's patently ridiculous that a W-2 employee driving their car to work every day cannot deduct that necessary expense to have worked. But really the whole filing process needs to be simplified, the IRS needs to release tax forms as executable programs (eg python) rather than this archaic "add the lesser of line 25 or line 27 to line 3 from form 1138", and the formulas need to be set and published ahead of the tax year as to stop being ex post-facto laws.
Oh, sorry. I think I misunderstood your comment. I was comparing pre-2022 to 2022 rules for other business structures; I didn't realize you were implying they settle taxes as a non-business.
In my state forming an LLC is an online filing that takes 5 minutes and costs almost nothing. Getting an IRS EIN is similar.
Now, to structure it properly with all the proper recordkeeping and documentation to ensure you really get the protection of an LLC when it matters, is another matter.
One action (insider trading) is done to make money in stocks with an illegitimate advantage, and the other (sleeping under a bridge) is done to...survive.
Should insider trading be legal if it is done to survive?
At least in my region, the ACLU has sued and won a ruling saying that cops can't ticket people sleeping rough if the shelters are full/not accepting people.
The sociology of this counter-narrative is super interesting though.
For whatever reason, we just don't want to take on power laws directly.
We live in this deluded world that power law distributions are something not "natural". Nature gives everything at a normal distribution. Obviously, that has nothing to do with nature. If anything it is the opposite.
Personally, I think this is the power of narrative and the way Francis Galton poisoned statistics that we haven't recovered from.