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Why You Shouldn’t Cheat On Your Taxes

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Taxes!Have you ever been tempted to cheat on your taxes? asks a recent article in the NYT’s You’re the Boss column. Like almost everyone else, I’ve been tempted (everyone has been tempted or thought about it… if you haven’t, then you’re a much better person than the majority!) but I’ve never cheated on my taxes.

Here are just three reasons why:

It’s Illegal

The first reason is the most obvious one, tax evasion is illegal. Remember Wesley Snipes? He’s in jail right now for three years after being convicted for tax evasion.

How much would you pay to avoid being in prison? I don’t know about you but I’d happily pay my taxes to avoid jail.

It’s Not Profitable

Would you steal a dollar if you could keep only thirty five cents? What if you could only keep twenty five cents? Depending on your tax bracket, that’s exactly what you’re doing. When you fail to declare a dollar of income, you basically “get” a fraction of that. Even after you add in FICA and state taxes, you’re still getting only half of what you’re stealing. You take all of the risk but you only get half of the return… it’s simply not profitable.

Let’s say you play the numbers game… how many people evade taxes and aren’t caught? How many hours does it take to try to clear your name? Do the math and tell me whether it’s better for you to spend that time trying to earn more money or whether you should try to evade taxes on what you’ve already earned (let’s not even consider how much prison time you might get!).

It’s Bad for Society

When you don’t pay your taxes because of tax evasion, you’re basically stealing from everyone else who does pay taxes. You aren’t stealing from The Government or some amorphous entity that you can dehumanize. You are stealing from your neighbor. You are stealing from your parents. You are stealing from your children.

The rules are the rules and you pay what you owe. I’m glad to read stories like this where people who fail to pay taxes are punished (Gary Barbera failed to pay $77,675 in taxes). He had to pay $119,744.55 in restitution and interest, a $30,000 fine, and three years of probation that included ankle-bracelet monitoring while on house arrest.

There are plenty of reasons why you shouldn’t cheat on your taxes, these were just three.

(Photo: alancleaver)

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31 Responses to “Why You Shouldn’t Cheat On Your Taxes”

  1. Taxes are what pays for the roads we drive on, public works and other “common” things we take for granted and whine at the government for not taking care of.

    If you can’t afford to cover your taxes, you need to cut back on expenses as a contributing member to society.

    • Bob Horner says:

      Gas taxes pay for the roads. The problem is that government takes the money and says they are going to pay for the things that benefit us all but a trillion a year goes to the worthless leaches that dont raise a finger to earn their own share. They dont even lock up our criminals, clear our roads in storms and threaten to cancel extra ciricular activities when you dont vote to give teachers a raise. If my taxes werent benefiting the worthless third world dregs at billions a pop in countries that I will never visit and never know anyone from then maybe just maybe I wouldnt look to hold onto every penny I can. People who get food stamps ought to be cutting my grass and washing my car so I can work more to carry their sorry @@@es!

  2. The answer is pretty simple: because too many congressmen, Presidential appointees and bureaucrats are cheating on theirs, the rest of the citizens need to be honest to keep the credit ratings of the country from falling to junk status as our elected representatives overspend trying to get themselves reelected.

    • Evan says:

      GOOGLE CHARLES RANGEL – Disgusting

      • zapeta says:

        Please, its not just government figures. They learned how to tax evade from all their CEO friends.

        Anyway, go ahead and cheat on your taxes, its cool. If you just give us your name and address I’ll be happy to turn you in and collect the reward from the IRS.

      • Demi says:

        Censured and wrist slapped? He should be thrown UNDER the jail…not in it…to make an example of a supposed trusted official taking advantage of the system, and abusing that positions power.

        We, as taxpayers, are responsible to pay our share of fees as prescribed by the govt. Is it fairly applied? No. It will never be. That’s life. Paying taxes should apply to EVERYONE. But it does not. And that is the problem. Too many at all levels are taking advantage of the convoluted and poorly designed system…the root of the problem.

    • Jeff Liang says:

      Because they do it so can you? I’m sure that defense will work in court. Good luck dude.

  3. Anthony says:

    Where do the websites claiming people who owed $100,000+ on their taxes and paid only $5,000 come into play here? Would love here how that relates to everyday, working class people like me who pay our taxes on time.

    Just gives you pause as you think that perhaps you could just not pay taxes for years and then settle for minimal costs.

    • Jim says:

      When you owe $100k, you basically go to the IRS and say that you’ll go bankrupt and pay nothing unless they settle. Then the IRS takes $5,000 instead of $0. During that time, your credit is destroyed because you miss payments (to prove you can’t pay). It’s a pretty miserable time, certainly not something you want to go through.

    • freeby50 says:

      Those websites are probably ran by tax lawyers or scammy companies trying to get you to sign up as their client and they will then negotiate with the IRS on your behalf. They cite examples that are like that to make you think you can get a similar deal via their services.

  4. AndrewL says:

    how do you only get half of your undeclared income?

    Lets say I ran a cash only business and didn’t report any of the income. I made 10,000$ cash 1 year, and didn’t report it. at the end of the year I still have 10,000$ how do I only have 5,000$? where did it go?

    • Jeff Liang says:

      It’s not half, it’s it’s less than that. Let’s say that if you properly report on your 10,000 income you would be taxed 20% of it (you won’t, but let’s just assume). You would owe the IRS 2,000 in April. If you cheat and don’t declare anything, you will keep all of it. Therefore, by breaking the law, risking jail time, and insane restitution, you are get 10,000 instead of 8,000.

  5. eric says:

    Everyone tries to minimize his or her taxes, but to outright cheat or lie is wrong and much more trouble that is worth.

  6. Scott says:

    Insurance against the eventual audit. I’ve read that ones who make over $100k has a higher likelyhood of being audited, so I just don’t feel like fighting the odds for a small gain.

    Not to mention, I kind of want to keep a good reputation with my daughter and church members. We actually get talked to if we cheat on our taxes by the church. It is a sin not to pay Caesar’s things to C…

    • live green says:

      I agree. An audit is something nobody wants to go through, even if you paid your taxes correctly. It is just too much of a risk to evade taxes without eventually being caught.

  7. mga says:

    Where would one report such cheaters? IRS? FBI?

  8. Suzanna says:

    I think most people cheat a little on their taxes, especially when it comes to charitable donations. I sometimes over-estimate the value of my donations because the IRS allows you to set your own values on donated household goods.

    Many years ago I discovered after the fact that I had made a major typo while doing my own taxes that resulted in my getting back several hundred dollars more on my tax refund than I was owed. I never bothered to send an amended return to correct the discrepancy, figuring the IRS would catch it and send me a notice to pay the taxes owed. To this day I have not heard from the IRS, nor have I ever been audited in 20+ years of doing my own tax returns (mistakes galore, I’m sure!) I am totally convinced that the IRS is bluffing when it says you have approx. a 1% chance of being audited. They never caught my mistakes, and I’ve ever known anyone who has ever been audited.

    Statistics seem to prove that the likelyhood of an IRS audit happening to someone earning less than $100k is virtually unheard of. I read somewhere that small business owners are often targeted by the IRS because they typically under-report their income by an average of 50%. Most of us do not have to worry about the IRS wasting their time and resources going after us small bananas when they have bigger fish to catch.

    • Shckr7 says:

      Believe it or not, I was audited and at the time made significantly less than $100k.

      It was pretty interesting. The IRS came back and stated that I owed around $800 in taxes. I went back thru the math and I did find an error, but it only appeared that we were around $150-$200 off. So, I sent them the corrected tax return and a check for around $200 and stated that if they cashed it, then it would be considered a closed case.

      They responded back that I didn’t owe anything and closed the file. I thought that was kind of strange, but long story short………I did, in fact, get audited and I made less than $100k.

      shckr

    • Don C says:

      For those making under $100k, the IRS will mainly focus on the items it receives records for (e.g. W-2s, 1099s, 1098s, etc.) It’s not cost effective for them to chase after someone to make sure their clothing estimate is accurate. Business owners are targeted more simply because they frequently comingle business and non-business (i.e. personal) expenses together.

      • Liz says:

        Yep. About 2 months ago, got a letter from the IRS stating I owed $2000 in federal taxes (from 2009) and that I claimed mortgage interest where they had no record of a 1098. What boggles me, is that I included a letter with my initial 1040 stating how I was claiming mortgage interest on my tax forms. At the time, I was going through a divorce so husband and I were doing a weird split on mortgage interest. Regardless, I sent them another letter outlining what I did, copies of the 1098 and my divorce decree. Got a letter back stating everything was resolved.

    • freeby50 says:

      “Statistics seem to prove that the likelyhood of an IRS audit happening to someone earning less than $100k is virtually unheard of.”

      Audit rates are lower for lower income people but they still audit about 1% of returns. My uncle was audtited and so was my brother in law. Neither made over $100k.

      Simple tax returns with W2 income have very little to scrutinize. Unless you’re doing things that raise red flags like very large charitable donations of questionable value or running a business that has excessive expenses and oddly low income.

  9. by far the best argument is the illegal/self-interest one, but….. it’s VERY compelling.

  10. Don C says:

    It’s often said in my (CPA) firm that accoutability starts at the top. You can’t expect the staff workers to take full responsibility and act as professionals when the the leaders of the Firm are not held to the same standards.

    When the US Government frequently looks the other way and hires known tax evaders to high profile positions, people take notice. I know using this as an excuse wil never fly in Tax Court, but it sets the tone for the whole country. These people should have been made examples for all to see.

  11. Suzanna says:

    “My uncle was auditited and so was my brother in law. Neither made over $100k.” Kinda makes me wonder if a spiteful family member reported them to the IRS for tax evasion! I agree with Freebie50 based on my own experiences with the IRS: “Simple tax returns with W2 income have very little to scrutinize. Unless you’re doing things that raise red flags..”

    I think everyone makes mistakes on their taxes that are never caught by the IRS, obviously the IRS also makes mistakes in THEIR own favor. I feel sorry for people who are so fearful of the IRS that they just send them a check without challenging the audit. These days I use Turbotax to prepare our tax return and they do an audit check of your return to make sure there are no mistakes or audit “red flags” in your return. I read somewhere that people who use tax preparation software are far less likely to be audited.

    • Shckr7 says:

      BTW, when I was audited and making less than $100k – I too used turbo tax and used the Audit check. Still got audited…….

      Go figure….

      Shckr7

  12. govenar says:

    “Would you steal a dollar if you could keep only thirty five cents?” Maybe not $1, but if you change it to stealing $100,000,000 and keeping $35,000,000, that might still be appealing for some people…

  13. Shirley says:

    In 1962 we were definitely on the low end of the pay scale. We used a tax preparer and claimed the hospital/doctor cost of having a baby because such costs were required, and were, paid before the child was born in March 1963.

    We were audited and the tax preparer found more deductions than we had claimed (shoebox full of receipts) and our refund was increased. We were amazed and happy.


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