I did taxes this past weekend - fired up TurboTax, pulled in some numbers, pulled donations and health expenses out of a dark place (since I didn’t get receipts for anything last year) which Turbotax disregarded because my standard deduction is higher, and sent it off.
I can’t figure out how John/Jane Q. Public cheats on taxes. Without some serious, blatant, and obvious lies, that is. Sure I could claim I donated $10,000 to ARC, and probably could fake a receipt, but people don’t seriously think they can get away with something like that. Do they? The IRS watches for stuff like that, don’t they?
I suppose a gagillionare has more opportunity to hide income and make up deductions, but how do regular people with under 6-digit incomes cheat on their taxes? Maybe I’m just not crooked enough and should return my “Evil Genius” certification.
I hear you. I just mailed off a big, fat check to the IRS this morning. I can’t help but wonder where all of the tax cuts that all of the conservative politicians say they’ve given me and where all of the tax loopholes that the more liberal Dopers claim are only available to the “rich”.
I think one has to have more zeroes on their numbers before the loopholes become visable.
A neighbor of mine (a non-gagillionaire) got busted by the IRS for cheating. He set up a non-profit organization, with his wife as a director, and donated significant sums to this worthy charity, taking the deduction. The charity then went and invested the money in mutual funds – for its charitable purposes, of course, and by the way the dividend checks accidentally ended up in their personal account. The charity also bought office furniture for their home office, which consisted of a leather sofa and plasma TV.
The feds were Not Amused.
Taking bogus deductions is another method that a lot of people use to cheat. There’s the old tale about deducting the cost of dog food as “security system maintenance” for your home business. You wouldn’t believe how many people try to get away with stuff like that. (And of course, some of them do.)
There’s also simple under-reporting. For example, if you do contracting work, your employer files a 1099 with the IRS saying how much he paid you, and gives you a copy which you use to calculate your taxes. The IRS should be able to match up what you report with what your payer reported. But, say you kick back a few bucks to your employer’s payroll clerk to tweak the 1099s? Since they’re information returns, they rarely get audited in a lot of companies. The IRS then doesn’t know how much you really got paid unless they go to the trouble of looking at your bank account. Even that won’t help if you’re a mattress-stuffer. Then they’ll have to demand to see all your clients’ payroll receipts to figure out how much you really made. It’s not worth it unless they suspect you of being a big-time cheat. My tax-cheat neighbor also got busted for this; after his fraudulent charity came to light, the IRS investigated all his income and found several hundred thousand dollars in discrepancies between his 1099s and what some of his clients had actually paid him. Those guys ended up getting in trouble, too, for filing false 1099s.)
The reason I know all this is because my neighbor used to go out on his balcony to rant to his accountant and/or lawyer on the phone while all this was going on, and I overheard all the conversations in great detail.
No, I’ve already filed and would rather have the ATF after me than the IRS. I don’t understand why anyone in a normal tax bracket would go through all the effort and risk to save a couple thou.
Can you imagine going through what friedo’s neighbor did, just to save a few bucks? Heck, for all that effort you could probably legally earn that much.
Well, a couple hundred thousand is a different story - I only paid about $5k or so last year. Sure I’d like to have it back, but not that bad.
It’s not that you aren’t smart enough. It’s that you don’t make that much money. It’s kind of hard if you are only earning W2 wages using standard deductions.
If you work as an independent contractor or own your own business, you might try to claim a lot of personal expeditures as “business expenses”.
That’s true enough. Based on what I knew of the guy, I suspect he made no more than $200,000 a year from actual working. He hid about $500,000 in income over seven or eight years, about half of it going to his fake charity. BTW, did I mention that he drew up fake donation receipts to The Salvation Army to “prove” that his charity was disbursing its funds? He spelled “Salvation” wrong.
I think it would also be easy to cheat on capital gains, especially if you invest in the same companies over a long period of time.
For instance, say I buy 1000 shares of XYZ in 2000 at a strike price of $10.00. I buy 1000 shares of XYZ in 2001 at $12.00. I buy 1000 shares of XYZ in 2002 at $15.00, etc.
Now let’s say in 2007, I sell 1000 shares of XYZ at $25.00. In order to determine my profit, or capital gain, I have to report when I bought the shares and what the strike price was. Since I bought thousands of shares over time, the IRS has no wa to know which ones I’m selling. It’s up to me to be honest. Unless they kept a spreadsheet on each individula, it’d be very hard for them to catch a cheat short of an audit which encompassed several years.
Then there’s the crazy guy I’ve mentioned before. He’s convinced that the government definition of “income” is “money paid to businesses by customers in foreign countries” or some damn thing, and the courts don’t have jurisdiction over citizens because the gold tassels around the US flag prove we’re under martial law.
Every year he files his 10w40 filled with zeros. Or did before he fled the state to find shield bedrock. I don’t know what he’s doing now, but someday they’re going to get around to tracking him down, even (or especially) if the Trilateral Commission and Illuminati release the reptilian aliens from their lairs deep below NREL.
Now, however, I’m starting to scare myself. What if, after all this, I screwed up somehow on something and they come after me? The tax demons hate smug people who go around talking about how they do everything right. :eek:
Then there was a doper, recently who was complaining about a friend of his spouse who had been talked into filing for tax credits for one of the other children of her own child’s father. Because splitting that would be his way of “giving” her something for child support.
The anti-tax crazies are the craziest though. See, if you just want to avoid paying taxes, you’ve got to be stealthy. But I honestly can’t understand how the antitax people can on the one hand believe that we’re living in a fascist police state, and on the other hand, if you just point out to the judge that such and such a law is invalid, the judge will be forced to let you go.
No, if you live in a police state the judge doesn’t give a damn what the law says, he can have you dragged out and put a bullet in your brain if you annoy him. So why should the tax protestor imagine that all he has to do is declare that the 16 amendment was never properly ratified and the fascist judge will cower in terror?
As for garden variety tax cheats, if the majority of your income is through a standard W2, there’s not much room for cheating. Oh, a fudged deduction here and a fudged deduction there, but you can’t get around that number your employer sent the IRS. Unless you go to some serious effort, like the fake charity angle. The people who really have an opportunity to cheat on their taxes are the self employed and the small business owners.
“I’m not smart enough to be rich enough to cheat on taxes”?
You’re right, that doesn’t make me feel better
ETA - What Lemur866 said. Last I heard the crazy guy was back in the Puget Sound area. You didn’t live in Colorado 5 years ago, did you?
Naw. He was already under investigation before I ever knew him. I picked up the drama in the middle. By the time I moved out, he was talking with his lawyer about when to arrange his official surrender and go to the pokey. From what I’m told, the amount of tax fraud he committed probably wouldn’t have got him prison time, but the fact that he kept lying to the investigators and committed more fraud to cover up the original fraud did.
I don’t recommend ever filing a 10W40. You’ll just make the wheels of justice spin more smoothly.
