IRS takes single mother of two down for being too poor

Rachel Porcaro, 32, a single mother of two, spent more than a year fighting off an Internal Revenue Service demand that she pay the government $16,000 for failing to report sources of taxable income outside her hair dresser's salary on her 2006 and 2007 tax returns. What drove the IRS to that conclusion? The fact that, according to their statistics, Porcaro, who earned just under $19,000 in 2006, couldn't possibly afford to raise her children in Seattle on her salary alone.

"The tax compliance officer pulled out an Excel spreadsheet printout and said something to the effect of … (that) IRS data showed that it takes $36,000 to support a family of three in Seattle," said tax manager Dante J. Driver, an accountant who worked with Porcaro to appeal the IRS's claim. "It looked and smelled like she was getting audited for being too poor."

In August the two sides agreed that Porcaro would pay just $1,600 to the IRS instead of $16,000. Driver said she could have fought that $1,600 debt too -- a charge the agency levied because it alleged Porcaro wrongly filed as head of household on her taxes and should not have claimed tax deductions for supporting her sons. But the time and money it would have cost to keep the battle going, Driver said, wasn't worth it.

The agency, meanwhile, didn't stop with Porcaro. The same month Porcaro agreed to pay $1,600, the agency audited her parents. The IRS auditor pursuing Porcaro's case "flat out said she was looking into them because of me," Porcaro said. "It was just a vicious cycle." Among the records Robert Porcaro and his wife were asked to provide: blueprints of his Seattle home showing where his granchildren, Rachel Porcaro's children, live.

"It's just been a real nightmare," he said. "I got the sense that they had somebody in their grips that they were going to make an example of."

The 59-year-old said that, fortunately for him, the IRS's audit ultimately found that he didn't owe anything more. In fact, it was just the opposite: The audit determined that government owed Porcaro some $200. That was cold comfort to the Seattle man, however: His accounting fees totaled $2,000. Rachel Porcaro's accounting bill is even higher -- $8,000.