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Don't think you can fool the IRS

Aaron Lee holds a sign advertising income tax services for Liberty Tax Service on April 14, 2014 in San Francisco, California.  | Getty

The IRS is cash-strapped and audit rates are down, but that doesn’t mean the average Jane or Joe can hide the ball from the tax man.

The tax-collecting agency devotes more resources to chasing big fish like convicted tax cheat Wesley Snipes than the average middle-class taxpayer, that’s true. But the IRS is now using sophisticated software and data analysis that puts it in touch with taxpayers before the official audit process begins.

 “Now with automation and the electronic submission of W-2s and 1099s, the IRS just matches the information,” said David Kautter, managing director of the Kogod Tax Center at American University. “If you don’t report something, it is almost automatic that you’ll get a letter from the IRS.”

The agency reported it reviewed less than 1 percent of all tax returns in 2013, compared with slightly over 1 percent the prior year, continuing a downward trend. The average audit rate in 1996 was about 2 percent.

Individuals with income topping $10 million saw an audit rate of more than 24 percent, while the rates for people who earned between $25,000 and $200,000 never climbed above 0.77 percent.

But the audit rates are somewhat misleading.

The vast majority of taxpayers receive W-2 forms that detail automatically generated earnings from an employer, bank or other institution. All of that information is simultaneously transmitted to the IRS and stored digitally. Agency computers can quickly and easily check to make sure the taxpayer’s figures match those reported by their employer or bank.

If the numbers are off, the computer typically sends the taxpayer a letter telling them to settle up, all before the audit process formally begins.

Most people make an honest effort to pay their taxes — the IRS reported this year that more than 85 percent of taxpayers voluntarily comply with the law, a number that has been consistent.

That’s good news as the IRS has become responsible for carrying out major social programs, from Obamacare to tax credits to support low-income workers — all while Congress has been slashing the agency’s budget.

But the strains have forced tax officials to be more strategic.

“What’s happening over the years is that the IRS has relied more on systems and less on traditional audits so the audit effort can be focused on places where there are real issues,” said Edward Kleinbard, a professor at the University of Southern California Gould School of Law and former chief of staff at the Joint Committee on Taxation. “The IRS has been significantly underfunded relative to the number of burdens placed on it.”

Audits are no longer the backbone of tax enforcement. Instead, they’ve become a strategic tool to target taxpayers who are claiming big deductions — like wealthy people donating to charity and small businesses writing off expenses.

“Wage-earning non-itemizers, for instance, have precious little room for mischief while business owners make a variety of judgment calls that could conceivably be called into question,” said Robert Kerr, senior director of government relations at the National Association of Enrolled Agents, which represents tax agents.

The system has critics, including National Taxpayer Advocate Nina Olson. The agency’s internal watchdog says that the increased reliance on automated letters means that the actual rate of IRS reaching out to taxpayers is actually closer to about 7.5 percent.

Olson has argued that these interactions exist in a middle ground of “unreal audits” that undermine a taxpayer’s right to challenge the assumptions made by the IRS. She also worries that low-income and middle-income taxpayers are most likely to be contacted automatically and the least able to afford representation to navigate the system.

But Kerr and many other observers point out that the IRS has very few options.

“We live in a world that values doing more with less, and you can sometimes do that until you reach the point where all you can do with less is less,” Kerr said. “It is a zero-sum game.”


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Hispanic And Latino Populations Have Grown In Nearly All U.S. Counties; What Does This Mean For Business?


A recent article in the Las Vegas Review Journal reported that Hispanic immigrants have grown to 27.3 percent of the population of Nevada in the last decade, growing to include immigrants from South American countries such as Chile, Colombia, and El Salvador in addition to Mexico.

This growth is led in part by an increase in economic opportunities. While the nation's Hispanic population is still majorly concentrated in the Southwestern United States, it continues to disperse across the United States. Hispanics on the whole tend to be mobile and a revealing statistic from the Pew Research Hispanic Trends Project shows that the percentage of Hispanics who lived in the same counties across a 10-year period decreased. That trend continues as Hispanics spread across the country.

The report, written by Anna Brown and Mark Hugo Lopez of the Pew Research Center, says that while many counties across the country have experienced a decline in their Hispanic population, the majority of them experienced an increase, meaning that the Hispanic population is becoming more evenly spread across the nation: "Among the nation's 3,143 counties, 3,018 experienced positive growth in their Hispanic population, with the notable exception of NewYork County which has a Hispanic population of 410,681 and experienced a 2% population decline since 2000. Overall, 114 counties saw a decline in their Hispanic population between 2000 and 2011." This demographic shift is likely to continue in the next decade.

Latinos have been in the United States since the very beginning. In a Special to CNN, Ray Suarez explained: "Once upon a time, the Latino presence in the United States was largely a regional phenomenon, and outside the Southwest, a big-city one. Mexicans and Mexican-Americans were concentrated in the border and Western states, with an outpost in the Great Lakes states; Cubans in South Florida and the Northeast; Puerto Ricans in New York and its suburbs. Certainly not exclusively, but the pattern was largely in place by World War II and remained that way for decades." Eventually, changes in immigration laws shifted the focus from Europeans to Latin Americans.

According to the same Pew report, 71 percent of the Hispanic population is currently contained within 100 counties. "Half (52%) of those counties are in three states-California, Texas and Florida. Along with Arizona, New Mexico, New York, New Jersey and Illinois, these eight states contain three-quarters (74%) of the nation's Latino population." Out of the three states that contain over half of the United States Hispanic population, more than one quarter of them live in California, accounting for 14.4 million people. Los Angeles County is the top-ranking county by Hispanic population, accounting for 4.8 million Hispanics or 9 percent of the United States Hispanic population. The next three largest counties by Hispanic population are Harris County, Texas, Miami-Dade County, Fla., and Cook County, Ill.

The report also says that immigrants from Latin American countries are the nation's fastest growing minority group, far outnumbering immigrants from all other countries: "According to the U.S. Census Bureau (2013), the Latino population in 2012 was 53 million, making up 17% of the U.S. population. Latino population growth between 2000 and 2010 accounted for more than half of the nation's population growth." A recent Nielson Company Newswire reported that new immigration gateways have enabled Latinos to form new populations in suburban destinations: "More and more Hispanics are also making the transition to the suburbs -- a contrast from their historical tendency to stay within city centers. Houston, a market where Hispanics make up 36 percent of the population-mostly within the city center-has seen its Hispanic population in the suburban city limits grow by 227 percent over the last decade."

The influence of Hispanics can be seen everywhere. CNN Opinion writer Chiqui Cartagena put it in perspective: "From the grocery aisle where you pick up your Corona beer and your dulce de leche ice cream, to the Billboard charts where Pitbull, Marc Anthony and Jennifer Lopez routinely dominate, to the lunch you order at Chipotle or Panera or, in fact, at the great American fast feeder, McDonald's -- the Latino effect is everywhere. The media and both political parties now readily acknowledge that it was the influence of the Latino vote in the key swing states that got President Barack Obama re-elected last year." She also points out that the Latino baby boom and growing number of retirees will color the American political and economic landscape for the next half century. Hispanics make up nearly half of all millennials, for example.

Mexico and Puerto Rico are the two countries with the largest number of Hispanics in the United States. Mexicans and Puerto Ricans comprise the largest Hispanic origin groups in nine of the most Hispanic States in the United States: California, Texas, New York, Illinois, Arizona, New Jersey, Colorado, New Mexico, and Georgia. Mexicans account for 64.6 percent of the Hispanic population, despite not being the dominant Hispanic group in "Florida, New York, New Jersey, Connecticut, District of Columbia, Hawaii, Maryland, New Hampshire, Pennsylvania, Massachusetts and Rhode Island." After Mexico and Puerto Rico, the most represented countries are El Salvador, Guatemala, Dominican Republic, Honduras, Cuba, Colombia, Nicaragua, and Spain.

Thirteen counties in the United States are already majority Hispanic, with the top two being Laredo, Texas and McAllen-Edinburg-Pharr-Mission, Texas, with Hispanics numbering 95.4 percent and 90.7 percent of their respective populations. The smallest counties by Hispanic population (out of the top 60) tend to be in the Midwest and Central East Coast, with the two smallest Hispanic counties being Detroit, Michigan and Baltimore, Md. in which Hispanics number 4.1 percent and 4.8 percent of their respective populations.

With Hispanics being such a driving force in the United States population today, this has ramifications for both the country's business and politics. Forbes contributor Glenn Llopis recently wrote that "Most U.S.-based firms have a significant corporate imperative to attract Hispanic consumers, given their tremendous demographic and economic importance. Some companies, such as McDonald's, Budweiser, and AT&T, are spending significant resources to gain market share with Hispanics and are making inroads." How can companies do this? According to Monica Gill, the Senior Vice President of Public Affairs and Government Relations at Nielson Company, "Latinos are emerging as a powerhouse of economic influence, presenting marketers an increasingly influential consumer group that can translate into business impact.  The key is to recognize that today's modern Latino is 'ambicultural' with the ability to seamlessly pivot between English and Spanish languages and to embrace two distinct cultures. Understanding how to connect with this unique consumer profile will be key to successful engagement." The Hispanic population is the only area of growth that remains for domestic industries such as beverage, auto, and telecom, which have all maximized their market penetration.




J.Lo To Rita Moreno: You Made Me Feel 'Anything Was Possible' For Latinas

"Love is love" is the only thing Jennifer Lopez wanted to convey at the 25th annual GLAAD Media Awards this Saturday.

The Puerto Rican star received the Vanguard Award, the night's highest honor, for her LGBT activism and her series "The Fosters." During her acceptance speech, J.Lo opened up about how as a child she was inspired by Rita Moreno, the Latina legend who presented her with the award, and about why she decided to produce a series on a "controversial" topic.

The Vanguard Award recognizes those who increase the visibility and understanding of the LGBT community through their work. Lopez, 44, is known as an outspoken supporter of gay rights. She is an executive producer of the ABC Family series "The Fosters," which follows an interracial lesbian couple and their struggles to raise their children.

After Moreno introduced J.Lo to the stage, the two shared a kiss before Lopez took a moment to thank the "West Side Story" actress for having inspired her as a child.

"I can't tell you what it means to have this award presented to me by the one and only Rita Moreno," Lopez said. "Anyone who has ever heard me talk about my influences knows that 'West Side Story,' and specifically her performance in it, had more impact on me than anything else when I was young -- on my artistic life, my career path and ultimately my confidence."

"She changed my life," Lopez went on. "Watching this beautiful, strong Puerto Rican woman command a screen with her talent in a time when Latina women did not have every door in this industry open to them made me feel as a little girl, watching in her living room in the Bronx, that anything was possible. Anything. Thank you for that."

Lopez also said it was that experience that made her realize how influential media can be, adding that her dream was to empower children through her own work.

GLAAD not only honored J.Lo for her work but gave "The Fosters" the award for Outstanding Drama Series.

Lopez admitted that at first she wasn't sure about putting her name on a show that was bound to be "controversial." She credited the LGBT community's "tremendous love" for her as one of the reasons she decided to move forward with "The Fosters."

The other reason, Lopez added, was her gay aunt.

"TiTi Marisa was my cool aunt," Lopez said. "She was my mom's older sister. I lived in the Bronx and she lived in Manhattan. Like worlds away. And she wanted to be an actress and I always wanted to be like her ... Marisa grew up gay in a time when it meant life could be very difficult and that her struggles were mostly kept to herself. It wasn't until I got older that I really began to know and appreciate the difficulties she dealt with and the struggles of her community."

Lopez said that her family had also taught her the "quiet lessons" of tolerance and acceptance when it came to the love they showed her aunt Marisa.

"We loved her ... so I wanted to do this [show] because I felt like she would be so proud of me," Lopez said. "I thought about that a lot when I was doing this and as I do it now. I think, 'I bet she loves this.'"




Increasing Opportunities for Latino Boys and Men

Image: Omar Hernandez is a student at TecCentro, a training center which has received funding from the Opportunity Finance Network as part of the My Brother's Keeper Initiative to spur increased education and career opportunities for young men of color.

When President Obama announced his initiative My Brother’s Keeper, one of the main goals was to spur organizations to expand their efforts to focus on resources for young boys and men of color.

Across the country, some community groups working with Latino young men are seeing the opportunity to expand their reach after receiving additional funding.

One such group is the Spanish American Civic Association (SACA) in Lancaster, Penn. SACA was established in 1971 by community leaders who saw the need to create a civic infrastructure to help struggling families integrate into the social and economic fabric of Lancaster.

“The Latino community in Lancaster faces 18 percent unemployment, 40 percent underemployment, and the community lives at 60 percent below the poverty level,” said Carlos Graupera, SACA's President and CEO.

SACA recently received funding from the Community First Fund, the largest community development financial institution (CDFI) serving central Pennsylvania. It is part of the Opportunity Finance Network (OFN), which announced a $1 billion dollar Youth Opportunity Pledge in support of the President's initiative.

"It is important for us to do what we say we are going to do and to hold ourselves accountable," said OFN's CEO and President Mark Pinsky. "It's the right thing to do." OFN is a national network of community development financial institutions investing in opportunities that benefit low-income and low-wealth communities throughout the U.S.

Several of the SACA programs which have received additional funding work directly with Latino young men.

Among them is Tec Centro, a bilingual technology center that works with out-of-school youth and students who want to pursue a technical career path. The program serves, in part, many young Latino males. In the case of one immigrant who worked in the medical field in his native country, his short-term goal was to work in his field of expertise here in the U.S.

“We feel that, working through these initiatives, young Latino males in our community will find a place to go for a second chance, to regroup, recover, and refocus."

On July 2013, he enrolled in the GED program and received his diploma two months later. He’s now enrolled in the Certified Nursing Assistant (CNA) program and taking intensive language classes at Tec Centro to improve his English. Intent on pursuing the American dream, he hopes to fulfill his dream of starting a career in the medical field.

Another program which has received funding is the La Academia Charter School, a small learning community which serves Latino students in grades 6-12. Currently, it is adding a new wing to serve additional students from the neighborhood.

“We feel that, working through these initiatives, young Latino males in our community will find a place to go for a second chance, to regroup, recover, and refocus,” Graupera said.

The importance of these kinds of programs is echoed by Dr. Pedro Noguera, the Peter L. Agnew Professor of Education at New York University and author of the book, The Trouble With Black Boys…and Other Reflections on Race, Equity and the Future of Public Education.

One of the biggest challenges that Latino males face is enormous pressure to work. “This is a major factor influencing their high dropout rates. This is why we need more career academies and more care and technical training so that they have access to jobs that pay higher salaries,” Noguera said.

Across the country in San Jose, California, the Low Income Investment Fund (LIIF) has provided financing to the ACE Charter School, which serves students in fifth through eighth grade. Over 95 percent of them are low-income Latino students, and over 50 percent are English-language learners. The students enter the school far below grade level but are among the top performers in the state and the region by the time they finish eighth grade, said Executive Director Greg Lippman.

LIIF provided a $3.75 million construction loan to ACE to build a new school, which enabled the school to grow its enrollment from 340 to over 450 students.

“Having our own site in the neighborhood we serve has been absolutely critical to our success, especially around our connection with families.” said Lippman.

“The success of boys of color is contingent upon access to good schools, supportive adult mentors, and access to good jobs," said NYU's Pedro Noguera.

Small programs such as these are increasing opportunities for boys of color in neighborhoods around the country. But education experts say advancing opportunities for Hispanic young men requires extensive commitment from both the private and public sector.

“The success of boys of color is contingent upon access to good schools, supportive adult mentors, and access to good jobs," said NYU's Pedro Noguera.

Dr. Julian Vasquez Heilig, an Associate Professor of Educational Policy and Planning at the University of Texas at Austin, argues that more My Brother’s Keeper resources should go to programs that bolster opportunities for Latino boys and young men in the public schools, as well as on community-based initiatives.

“Our Latino families should be seen as the solution and not the problem,” said Vasquez-Heilig.



A Study On The Changing Racial Makeup Of 'The Next America'


By 2042, so-called racial minority groups will make up the majority of the U.S. population.

That’s according to the U.S. Census Bureau’s latest projection. Building on that, the Pew Research Center recently released an extensive study on the shifting demographics of race in our country, showing that within a century (from 1960 to 2060), white Americans will have gone from making up 85 percent of the population to comprising 43 percent.

On the other hand, the number of Hispanic and Black Americans will have grown substantially over that time period, together making up 45 percent of the 2060 population.

Immigration and intermarriage account for much of this change in our country’s racial makeup, and for many, that’s a good thing, forcing us to embrace diversity and reexamine how we categorize race. However, other research suggests that these shifting demographics may cause fear or a tendency to become more conservative on the part of white Americans.

Pew Research Center Numbers

According to the Pew Research Center study, our racial makeup has changed substantially in just the last 50 years.

For instance, from 1960 to 2010, the percentages of Americans identifying themselves as Black, Hispanic, Asian, or “other” increased from just 15 percent of the population to 36 percent of the population:

  1. Black: Increased from 10 to 12 percent
  2. Hispanic: Increased from 4 to 15 percent
  3. Asian: increased from 1 to 5 percent
  4. “Other”: Increased from 0 to 3 percent

In the next fifteen years, those numbers will jump again, with the Hispanic population in particular increasing to 22 percent; by 2060, Hispanics will comprise 31 percent of the U.S. population.

Immigration and Intermarriage

A significant impetus for these shifting demographics is immigration: since 1965, the U.S. has welcomed 40 million immigrants, with half of those identifying as Hispanic.

Of course, the U.S. has always been a country of newcomers. In the early days of our founding and through the middle of the 20th century, our population consisted of huge numbers of European immigrants.

However, our changing racial makeup is due to a shift in immigrants’ countries of origin: while 88 percent of immigrants in 1900 were from Europe, Europeans only comprise 12 percent of the immigrant population today. Conversely, immigration from Hispanic countries is on the rise, with over 50 percent of all immigrants to the U.S. today hailing from Latin America. So while the Hispanic population in the U.S. has been increasing, the influx of white Americans has been decreasing.

Unsurprisingly, because over a quarter of the entire U.S. population is now made up of immigrants, racial intermarriage is also driving a more diverse population. Just half a century ago, less than three percent of new marriages were between people of different races; today, 15.5 percent of newlyweds come from different racial backgrounds.

That means that not only is our racial makeup changing, but it’s getting more complicated to explain, too.

Adjusting Our Racial Categories

Shifting demographics and intermarriage mean we may need to reexamine how we talk about race.

In the past, the U.S. Census Bureau and other organizations have asked people to define themselves according to checkboxes: “Asian,” “Hispanic,” or “Native American,” for example. However, with the changing faces in the U.S., it’s no longer so easy for many people to simply categorize themselves, nor do they feel they should have to label their race as one thing or another.

Especially for children of racial intermarriage, “identity is a highly nuanced concept, influenced by politics, religion, history, and geography, as well as by how the person believes the answer will be used,” according to National Geographic’s report on increasing racial diversity.

Because there’s no longer a clear divide between black and white in the U.S.—as there was in the 1960s and earlier, for instance—people are beginning to see racial categories as much more fluid and adjustable. Some people have taken to creating new categories altogether: “On playgrounds and college campuses, you’ll find such homespun terms as Blackanese, Filatino, Chicanese, and Korgentinian.”

Possible Racial Divide

So what will those shifting categories mean by 2060, when we have an even more diverse racial makeup in the U.S.?

For some, it’s likely to be a good thing. According to the Pew Research Center’s report, new numbers of racially diverse commercials, celebrities, and terms suggest that “the norms are changing and the stigma [about interracial marriage, in particular] receding.”

On the other hand, researchers from Northwestern University conducted two studies showing that white Americans may feel threatened by the prospect of becoming a racial minority.

According to Slate’s report on the study, psychologists Maureen Craig and Jennifer Richeson gave self-identified politically “independent” white Americans information about the country’s shifting demographics. They then asked a series of questions about national or state-level policies and found that when white Americans were “aware of demographic changes that put them in the minority,” they tended to endorse more conservative political policies.

That has some people worrying that that we’ll see a deepening divide between whites and other racial groups; Slate suggested that the best example of how this demographic fear has (in the past) manifested itself was in slavery and apartheid.

While it’s extreme to think that we would devolve back into policies common to the 19th century, the changing racial makeup will likely test us as a country. But maybe that’s not a bad thing: with more diversity and new challenges, there’s the chance to better ourselves, too.



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