How big a deal is tax evasion?
 

At what point does a failure to report all taxable income actually start seeming like deliberate tax evasion to you?

How mad does it make you that some politicians avoid penalties on the tax that they owed?

Does it compound your anger if the person in question is a politician who favors more government programs that rely on public tax support?

Oddly, it's not really making me that mad, but the absurdity is interesting.

Anyone know what percentage of the population has this problem? It seems like there's a disproportionate number of people in the political class who get busted for not fully paying taxes, taking advantage of programs they aren't really entitled to, or employing staff that they fail to pay taxes or social security for. Sure, some of it may be a reflection of more public scrutiny, but surely not all of it, particularly when you're talking upper tax brackets. Anyone know the general rate of non-payment or underpayment?

All I know is that that's what the Feds finally caught Capone on. Not his murders, mob crimes, etc., but tax evasion.

I personally don't care about tax evasion as long as people get caught and are required to pay penalties. What pisses me off is when people get caught and only have to pay back the amount they failed to pay...no penalties and no interest required.

That is a load of poo.

I work for an accounting agency. I can't really say details - confidentiality and all that - but I will say that IRS agents can and sometimes do carry guns ... you really don't want to get on their bad side.

Do you have a sense of how common not paying or not paying the full amount is?

Personally, since I've been married we've screwed up in underpayment once and in overpayment once. Neither was deliberate. But we're paying back taxes, interest and penalties for the underpayment which for us are pretty substantial. I love the idea of the "Rangel Rule," but I don't think it works as a systematic way of addressing the issue.

I think a lot more people cheat on their taxes than we realize.

Maybe deliberately cheating is pretty common too.

I just wonder how common it is to get caught or have it addressed.

I'm wondering how common Rangel, Geithner, Daschle kind of stuff is, basically, among the general population.

I think we could still hold politicians to a high standard since their failure to fully pay gives the impression that they are much more interested in spending other people's money than they are their own, but I just wondered if there were in terms of percentage that much worse than the rest of us.

No, not really. I don't think that our clients are at all representative of the general US population.

Apparently its not that big a deal anymore since it is okay for the Secretary of the Treasury to do it! ;)

He paid back though. (But, then again, no penalties that I know of.)

But, would he have paid it back if he hadn't gotten busted for it during the confirmation hearings? Like, out of the goodness of his heart? Somehow I doubt it. Daschle either..

That's a bit much to ask of a politician.

From the standpoint of someone who now pays A LOT of taxes, it's not always so black and white. My taxes are fairly simple since I don't claim lots of deductions or have multiple sources of income. However, I don't receive a W2 anymore. Determining my taxable income is easy since I only have one source, but for others, they often do the best they can. Tax codes are complex. I rely completely on my accountant to keep me in line with regulations. I could easily miss something that I would have no clue was taxable! They don't charge penalties for these "oops" evasions because they give people the benefit of the doubt that an error was not deliberate. If you do your taxes on a 1040EZ, you have no concept of how complicated taxes can be!

We're speaking more of those who intentionally do not pay. I cannot file my taxes on a 1040EZ. I also itemize because the standard deductions are never adequate. I still pay all of my taxes.

They are also talking about people who claim that they didn't intentionally not pay, ie. Daschle and Geithner. People who deliberately evade their taxes clearly wouldn't be up for cabinet positions.

Riiiight. ;)

I just choose not to be so cynical about it. Just because Daschle is a Senator doesn't mean he has the code memorized inside and out. The real problem with tax evasion is at much higher levels than Daschle. Major corporations get away with paying essentially no taxes...and they do it intentionally. Oh my GOD! Daschle forgot to claim a car service....the few thousand the government is owed from that pales in comparison to the millions evaded by corporations!

True, but then again we tax our business within an inch of their lives. It's not surprising that they would seek loopholes or opt out of paying when possible.

I'm afraid I have people like this in my family. They will take tax avoidance to the legal limit and then move into tax evasion if necessary. When you're talking about millions of dollars, it's worth keeping the money a little extra longer to make even more money on it. The penalties (if you have to pay) don't outweigh the benefits.

Actually, if you look at corporate taxes world wide, the US has one of the lowest rates. Many of the corporations pay NO taxes. Actually using all of the deductions that you are allowed is legal and expected. I'm not saying that there aren't a lot of people who push the limits, but this will never be remedied until we simplify the tax code. There are a lot of vague statutes of which people take advantage! I pay my taxes and actually take a lot fewer deductions than my accountant tries to push. I just don't feel comfortable fudging...there is much permissible fudging in tax preparation!

:confused: We're among the top five in terms of high corporate tax rates worldwide. Last year, I believe we were even in the top three!

Corporations aside, I know a few people that didn't even pay taxes for a few years. At least one has been NAILED by the IRS.

I think it's more common than people who pay every year might think.

See, I have no problem with people finding "loopholes." If there are loopholes in the tax code, which there are, more power to the people who can take advantage of them.

I'm no expert on the subject; I've only taken one federal income tax class in law school (albeit with a guy who's a world-renowned expert on taxation), but my view is that I'm willing to cut more slack to the less sophisticated tax payer, or the individual with less income. People with more income can afford to hire more intelligent accountants, and don't really have an excuse for using sketchy tax people or pleading ignorance.

That said; the tax code is a HUGE and complicated piece of information, which is probably part of the problem.

http://en.wikipedia.org/wiki/Tax_rates_around_the_world

I guess we'd have to do more research to be sure how we fit in. Our range is pretty wide, but if you take the top figure with no deductions, we are pretty high. With deductions, however, not so much! I'd be interested to see whether other countries have a flat tax or accept deductions. The info I've read in the past indicated that US taxes were pretty low. I'll have to revise my statement until I can get more info.

As of today, it turns out he didn't claim plane rides to the Bahamas and some other resort place provided by a non-profit that weren't used for non-profit business too. WOOPS!

Here in Texas, we get alot of politicians who get "outed" for not paying social security or employer taxes to maids/gardeners etc. They also get outed for the fact that the maids/gardners are illegal aliens. WOOPS!

In my opinion, if you are going to run for public office, you damn well better have your house in order before you are vetted. I am amazed sometimes at the excuses that come from people who claim ignorance! As far as knowing tax policy - As someone said above - these people hire CPA's to do their taxes, and I doubt very seriously that they are using newbies straight out of business school at HR Block.

What you are describing is different from my experience. I'm definitely paying a penalty for an "oops" evasion.

That's how I see it too. Sometimes I understand things seeming like they might be in a gray area, but these folks are in a position to seek professional advice.

And I'll admit it, if you're a politician who basically supports bigger government and more spending, I fully expect you to pony up everything you possibly could it support of the programs you are compelling other Americans to pay for. No loopholes for you.

I agree completely on this point; if you are one of the people who equate patriotism with paying taxes, and who are looking for taxes to be raised, I have a bit of an issue with your taking advantage of the loopholes, or even accepting any sort of refund.

Well, I'm being totally and completely nailed on my state income taxes this year because of changes in the law this year from last. I inherited some stuff from my mom's estate and some of it was liquidated this year, some of it last year. Last year, for the state, I didn't have to pay income tax on it. This year, I do. I didn't know the tax laws had changed until I did a rough estimate of my taxes a couple weeks ago using Tax Cut. I totally would have had state taxes withheld at the time if I'd known the law was going to change. At the time that I liquidated it, the law hadn't been changed yet. Sure, it stinks having to suddenly come up with $3500 in the next 3 months, but I wouldn't evade taxes by not reporting it. I'm going to owe the state additional penalties for not having more withheld through out the year too, even though I'll be paying it all on time by April 15th. They will bill me for that later. I do wish I'd known about the changes so I could have planned better, but I won't cheat on my taxes. In fact, my ex-husband (an accountant!) tried to lie about some of charitable deductions when we were married and I refused to sign it until he made it right. I'm not taking any chances. I deduct my mortgage interest and charitable deductions as allowed. I don't consider those "loopholes". I did know that Federal was going tax me on everything that was liquidated and planned for that and am even getting a refund from them. It will help pay off the state... It is a little shocking when you realize that you paid more in taxes in one year than your usual taxable income for a typical year!

Paying throughout the year just doesn't make sense to me. Why won't the IRS let us pay once and keep our money during the year? :mad: Heck, they'd get even MORE money from a lot of people if they did that.

For a lot of people, their taxes are so complicated that it takes paying a professional to sort them out and even have a hope of doing them properly. And the professional is relying on their clients giving them the full and accurate information that they need to be able to do so. Many people resist paying for this service in the first place until they are already in trouble. Others do not reveal all they should to their accountants, often through misunderstandings (when you have multiple business partnerships, investments, properties, etc., and mountains of paperwork on all of it, is that really surprising?).

I would imagine that if a random sample of Americans were audited, just to see, the vast majority would have some problem wrong with their taxes - the tax code is ridiculously complicated.

There are people who love getting a huge refund at the end of the year. I guess if I learned anything from my ex-husband accountant, it's that it is better to have as much of your cash as possible throughout the year and try to break even with the IRS at the end of the year. I generally calculate this out very carefully so I get the most take home pay possible without owing at the end of the year. The state just got me this year with the tax law change, which I could not anticipate. Most years, I get an IRS refund of about $30.

WTF is up with all of these politicians getting busted for not paying taxes? Two withdrawls this morning because of it. Not paying unemployment taxes on your two nannies and personal assistant? I guess politicians are the ones we hear getting busted on these things because poor folks sure can't afford in-home "help." But there's no excuse for these people having so many issues with paying their taxes - they can afford supurb accountants that can certainly handle things like taxes for people they employ in their homes.

Exactly - again, I'm no tax or financial expert, but looking at the time value of money, a dollar today is worth more than a dollar at refund time. If you can invest it wisely, you come out ahead of the game.

Absolutely - and too many people don't realize this.

I think a lot of (maybe most) people have a poor concept of the time/money element. In other words, they think they need money now, and are unable to budget or adjust their budget to take advantage of long-term thinking. It's why people put all of their money in their checking account instead of putting some in savings, or investing some of it. They assume that they'll need it all at some point. That's probably just a long way of saying that people don't know how to budget properly, for the short or long-term.

Plus, it's kind of a weird concept; I'll be honest, I didn't know a whole lot about it until I took my Federal Income Tax class.

If you spell it outright for some people, you can get them to understand. Say they are getting a $2000 refund and are going to pay off a credit card that has eeked up to $2000 over the year with that tax money. You can point out that if they had less withheld the whole year, they wouldn't have had to use that credit card at all and wouldn't have had to pay that interest!

I was very fortunate to have grown up with someone (my father) who knew a lot about these matters. I now provide free budgeting sessions to people I know. It's incredible to me how a little knowledge changes things so drastically. I helped a coworker understand credit/credit card companies as well as how her 401k works. Unfortunately, it was too late to save her a lot of money, but she's digging herself out of the hole pretty quickly.

Nancy Killefer withdrew her candidacy to be the first chief performance officer for the federal government on Tuesday, saying she didn't want her bungling of payroll taxes on her household help to become a distraction for the Obama administration.

Killefer was the second major nominee to withdraw. Within hours, former Sen. Tom Daschle also withdrew his nomination to be secretary of health and human services.

http://news.yahoo.com/s/ap/20090203/...obama_killefer

That's too bad for Daschle - guess he'll have to make due with his lobbying gig at Alston & Bird.

This is only true in the abstract.

If the inflationary/investment consequences of having the money are lower than the "other" consequences (i.e. spending more of it instead of actually utilizing the cash flow for positive results) then the marginal difference likely disappears, and may actually go negative.

When you look at the usual rate of spending/saving versus who the people are who luuuurrrve the huge refund, there might just be a massive overlap too.

Back to the OP - look, I'm all for excusing minor imperfections if someone is legitimately the only person for a job. Indeed, this is actually kind of closer to the ideal of the 'citizen legislator' - he's doing what many citizens do. However, this seems very much premeditated, and solved in the most expedient fashion to get nominated. Were the other choices that far behind that credibility could just be pissed away? I can't imagine they were.