Tax cheating

Two more Obama nominees have backed out of their Washington jobs, after getting caught up in the didn’t-pay-taxes crowd. It took former South Dakota senator Tom Daschle a long time to take the hint, but he recognized today the Health and Human Services secretary nomination was going nowhere. Nancy Killefer also withdrew her nomination as President Barack Obama’s deputy White House budget director. She allegedly didn’t pay her nanny tax.

How can these people not pay their taxes? The same way tens of thousands of other Americans don’t.

Did you really make all the charitable contributions you wrote down on Schedule A? Have you occasionally gotten a few dollars and decided not to claim it as income? If some bank interest paperwork showed up the day after you finished your taxes, would you do them over or file an amended return? How many of you are deducting that new iPhone as a business expense when it’s really not?

Nearly one in every 5 of us thinks it’s morally acceptable to cheat on taxes, according to a Pew survey several years ago. Yesterday, an IRS survey said 89 percent of those responding say it’s unacceptable to cheat on taxes. What can we deduce from this? (A) 11 percent of those responding are (fill in your own well-considered adjective here) enough to tell the IRS they cheated and (B) at least a portion of the 89% were smart enough to lie about it.

The New York Times looked at tax cheating in 2006 and found no specific breakdown of who’s likely to cheat on taxes, although it did say that women with college educations are more likely to cheat than those with less education.

Tax cheating is estimated to cost the government about $350 billion a year. That’s almost half of the cost of the controversial economic stimulus package.

  • michele

    Another area of tax cheating that doesn’t currently get much press, but soon will be, are internet purchases. Those are taxable in Minnesota. So how many of us add up all the money we spend online and pay the state sales tax on those purchase?

  • http://www.trailblz.com Brian Hanf

    A side note: this is why many people believe that a consumption based federal tax would bring in more money than current income tax.

    a second side: this is why many people believe that the income tax is too complex.

    I agree with both of my notes, BTW.

  • GregS

    So what happened to the much touted vetting process that Obama’s team put in place? I read there was a 32 page questionnaire.

    Why wasn’t question #!: Do you cheat on your taxes?

  • Jeff

    I am not surprised that the nanny tax is the primary source of this. Having gone through the process of paying appropriate taxes for a nanny, I can say it is a real bear to figure out what needs to be done (employee id #, workers comp, withholding, uggh!)- no one stop shopping for sure. Maybe less people would cheat on taxes if the government simplified the tax codes/process or simpley made easy instructions for common problems.

  • bsimon

    ” it did say that women with college educations are more likely to cheat than those with less education.”

    Perhaps the cause of such a statistic is that women, or people generally, with college educations are more likely to have enough income to make cheating worthwhile, while people with lower income pay less in taxes & thus have both limited incentive and limited options to cheat.

  • bsimon

    “Why wasn’t question #!: Do you cheat on your taxes?”

    What do you do if they say ‘no’ but the answer is ‘yes’?

  • GregS

    Throw them in jail for two years for lying to a federal agent.

  • MR

    Jeff,

    I’m not disputing that simplifying the tax code would be fantastic. To your point about the “nanny tax” though: Everybody has a different “common problem.” I don’t have any interest in the “nanny tax” or any self-employment taxes, but I do want simple instructions about calculating how much student loan interest that I can deduct along with misc. other things that I’m sure you don’t care about.

    Pretty soon, we have so many “common problems” that we’re back to where we started.

    The point is, the tax code should be simplified.

  • Bob Collins

    // So how many of us add up all the money we spend online and pay the state sales tax on those purchase?

    Most of the things I purchased to make the plane I’m building were ordered via the Internet. But no tax is charged. However, at the end of the build process — when it’s actually a plane — I have to go back and get a “bill of sale” for all the parts and then pay a sales tax.

    It’s one of the reasons why I’m slow to finish this thing. I almost can’t afford to.

    It would be a lot easier if I could’ve paid the taxes as I go.

    Does Amazon charge a Minnesota sales tax. I know some companies do (like Symantec) and some don’t. It’s the one area nobody seems to want to touch right now.

  • j

    //…although it did say that women with college educations are more likely to cheat than those with less education. //

    Hmm, I’m an educated woman, and the government really seems to be squandering away taxpayer dollars; maybe I too should start cheating on my taxes.

  • Alison

    If you can afford a nanny can’t you afford an accountant?

  • bsimon

    “If you can afford a nanny can’t you afford an accountant?”

    A friend who’s a CPA says he advises clients what their legal obligations are, but fills out returns as the client wishes.

    Here’s something I didn’t know, which is probably true for most people: if you pay domestic help more than $600 per year in a job where you define how they are to do the job, you are obligated to file a 1099 as though they’re an employee. In other words, if a couple pays a baby sitter $50 once a month for a year, that sitter is considered to be an employee. How many people file 1099s in such a case? If your accountant said “technically you’re supposed to file this paperwork, but there’s really no way for you to get caught” would you file?