I came across this interesting study done on the behalf of the IRS Oversight Board. The study asked participants if they felt it was okay to cheat on their taxes. The study itself has been done since 2002 and over the years, the range of people who feel that it is completely unacceptable to cheat on their taxes usually fluctuates between 84% and 86%. In 2009, 84% of respondents said it was unacceptable to cheat on their taxes.
What I find interesting is that in 2003, only 81% said it was unacceptable to cheat on taxes and in 2008, 89% said it was unacceptable to cheat on taxes.
Along with the answer of “completely unacceptable” (the orange bars in the graphic below), somewhere between 6% and 12% believe that it is okay to cheat a little here or there (the light blue bars, below). And 3% to 5% of respondents believe that you should cheat as much as possible.
You can read the rest of the article at the New York Times.
So I went and dug up the number of tax returns filed to see what this meant in real numbers. Let’s use 2008, because we have all the data we need from that year:
In 2008, according to a report by the IRS, 155 million tax returns were filed. So here’s what it meant for 2008 tax returns:
89% of respondents, or 137,950,000 tax returns were completely honest.
6% of respondents, or 9,300,000 tax returns had a few cheats here or there in the return.
3% of respondents, or 4,650,000 tax returns were as dishonest as possible.
Those are interesting numbers. Here’s my take on them: I believe in paying less tax, but I believe in doing so legally. The IRS needs to be more understanding with people who are having difficulty paying their taxes, and they need to offer them real options to help them with their tax debt.
Most people with IRS problems want to want to pay their tax debt, but if money is tight, they need the IRS to be more willing to work out an arrangement. Whether that’s a payment plan or an Offer in Compromise settlement offer.
And just as importantly, the IRS needs to create ways to reduce the number of income tax cheaters (13,950,000 tax returns have some form of dishonest response).
By being so tough on honest people who are having trouble paying their tax debt, instead of going after the cheaters, the IRS is not doing its job as well as it sould.
What you need to know about dependents and exemptions to prepare your income taxes. Proper organization and categorization of tax dependents can save you a lot of money on April 15.
1. Dependents may be required to file their own tax return. Even though you are a dependent on someone else’s tax return, you may still have to file your own tax return. Whether or not you must file a return depends on several factors, including: the amount of your unearned, earned or gross income, your marital status, any special taxes you owe and any advance Earned Income Credit payments you received.
2. Exemptions reduce your taxable income. There are two types of exemptions: personal exemptions and exemptions for dependents. For each exemption you can deduct $3,500 on your 2008 tax return. Exemptions amounts are reduced for taxpayers whose adjusted gross income is above certain levels, which is determined by your filing status.
3. Dependents may not claim an exemption. If you claim someone as a dependent, such as your child, that dependent may not claim a personal exemption on their own tax return.
4. Your spouse is never considered your dependent. On a joint return, you may claim one exemption for yourself and one for your spouse. If you’re filing a separate return, you may claim the exemption for your spouse only if they had no gross income, are not filing a joint return and were not the dependent of another taxpayer.
5. Some people cannot be claimed as your dependent. Generally, you may not claim a married person as a dependent if they file a joint return with their spouse. Also, to claim someone as a dependent, that person must be a U.S. citizen, U.S. resident alien, U.S. national or resident of Canada or Mexico for some part of the year. There is an exception to this rule for certain adopted children.
For more information on dependents and exemptions, including whether or not you or your dependent needs to file a tax return, see IRS Publication 501, Exemptions, Standard Deduction, and Filing Information.
A classic IRS “best practice” seems to be to give everyone way too much information. At times, their purposes are suspect (do we really need a bazillion forms to do our income taxes?). Other times, their purposes might be noble but their delivery is just plain overwhelming.
Case in point: The article entitled “Tax Return Preparer Fraud”, published at http://www.irs.gov/newsroom/article/0,,id=167391,00.html. The article is actually helpful. Unfortunately, its helpfulness is buried under a pile of other information that doesn’t need to be there.
So, I’ll break out my decoder ring and help you to approach this article and gain the usefulness you need from it.
My first complaint with this article is the title – “Tax Return Preparer Fraud” seems to cover some of the information. The problem is that the article is much, much longer than it needs to be.
Next, we read four paragraphs that describe what tax return preparer fraud is and who is responsible. Not surprisingly, tax return preparers might be subject to criminal charges but the taxpayers are the ones who have to pay if their tax preparers are fraudulent. (While I admit that makes sense, one wonders if there would be fewer fraudulent tax preparers if they were expected to ALSO pay for any shortfall if their actions were deemed criminal).
Then, we read what turns out to be the best part of the article: Helpful hints when choosing a return preparer. Good work, IRS, at keeping your taxpayers informed. But why did you bury this helpful information deep within your site so that only a certified mining engineer could uncover this gold from this quarry of data?
The next section is entitled “Criminal Investigation Statistical Information on Return Preparer Fraud”. Just when we were thinking to ourselves “wow, this is a document from the IRS and it doesn’t contain any numbers”, along comes the statistical chart. In class IRS form, it tells us a lot without telling us anything. In Between 2004 and 2005, there was in increase in investigations initiated. Wow, an increase of nearly 25%! At first we might wonder if people were more criminally inclined in that year. Then we see that, between the 3 years stated, that year also had the lowest number of prosecution recommendations and sentences! I don’t know what that tells you, but it tells me that someone (hint: someone at the IRS!) wanted to LOOK busy because the boss was probably around. Hey, I’m all for honesty and full legal compliance. I’m against what appears to be excessive spending when it’s not necessary. Oh, and I’m also a little disturbed that these criminals get 18 months of electronic monitoring while their victims are likely spending years trying to repay and financially recover from their preparer’s fraud.
Lastly, we have a list of criminal and civil actions that the IRS has taken. Some might call this the “dirty laundry” list… I like to call it the “Look busy! The taxpayers are watching” list. It’s interesting reading, certainly, but not really helpful to taxpayers.
If I were writing this article, what would I do? I would break the content into 2 articles and put the actual helpful information into its own article because people should read it.
