Don’t tell me if you do, I’m going to assume that all Sweating The Big Stuff readers are trustworthy and report all income and only qualifying expenses to the IRS.
Many other people try to avoid paying their taxes. In fact, in a recent study, DDB WorldWide Communications group found that 15% of Americans admitted to fudging their taxes. I assume that the actual number is a bit higher, because not everyone admits their mistakes, especially if they’re on purpose.
In the same survey, it’s clear that there’s a certain portion of society that is more likely to cheat. Here are a few quick stats:
- 64% of cheaters were men
- 47% of cheaters were single (including divorced or widowed)
- 55% of cheaters were under the age of 45
- These percentages were all significantly higher for the self-proclaimed cheaters than for non-cheaters
What Are Possible Outcomes?
On average, the IRS audits just over 1% of all taxpayers. However, they audit 12% of taxpayers who make over $5 million and a whopping 18% of taxpayers who make over $10 million. Clearly they’re targeting the rich!
If you think about it, this makes a lot of sense. Assuming that they have to spend the same amount of resources auditing someone who makes $10 million and someone who makes $100,000, the IRS is probably going to recoup more money from the person making $10 million. For the same amount of work, why not go after the ones that will net a higher return?
And guess what? It’s working! The IRS collected $57.6 billion from auditing last year, a jump of 18%!
Similarly, if these results hold up and the percentages mentioned above are significantly higher, then it makes sense for them to target single men under the age of 45. After all, they’re more likely to catch a single man under the age of 45 than anyone else.
I would not at all be surprised if the percentages of tax returns of single men under 45 that were audited increased in the coming years. While it may not have the impact of auditing high income earners, it does make sense to divert some attention away from those less likely to cheat to those who are more likely to cheat.
Readers, do you think targeting single men under 45 is a slippery slope? Should the IRS use more resources on those more statistically likely to cheat?
Isn’t that profiling??? :)
Makes sense to me. I don’t look for testicular cancer in women, why look for tax cheats in the 90 year old widows on Social Security group…
Profiling tax cheats, what an interesting idea? Easy for me to say, married and over 45 yrs old. Interesting percent on high income tax filers! I would think they would push the envelope, but with the help of the best CPA and Tax Attorney.
It’s probably much easier for them these days too with all of the information available electronically… at least up here in Canada for people making a salary through employment (which is most people) filing your tax return basically consists of the government matching what you’re telling them with what they already know, anyways. Things start to get a lot more gray when you have more control over the chain of money, like in restaurants in Chinatown.
I dont cheat on my taxes. My dad always says “the wheels of the government turn slow, but they grind just fine” meaning that they’ll always catch up to you at some point.
I personally do think they should target the people with the highest incomes taht are most likely to cheat – I think they’d be wasting their time otherwise. I earned slightly less than 50k last year. It would be a waste of their time to audit me, they may get another 100 out of me, at the most.
I think I tried to cheat on my taxes when I was like 15, but I probably didn’t know the rules and sent them more money than I should have. I don’t know.
Now, I do everything I can to try to pay the right amount. No sense in cheating when I expect to be making $10 million in a few years ;)
I agree with Jeff. It makes more sense to profile and audit based on that. It isn’t fair but neither is life. Honestly I wish that we would do away with the whole tax system and move to a fixed sales tax but that is a discussion for another time. Personally I don’t cheat on my taxes nor do I have an incentive to. I barely pay any to begin with.
-Ravi Gupta