How Do People Cheat on their Taxes?

Although people really do hate to pay their taxes, do many of them cheat? According to one IRS report released in 2006 as reported by CNBC, 83 percent of people paid their taxes correctly and on-time. The other 17 percent either underreported their income or did not file a tax return at all. In fact, 90 percent of people do believe that paying taxes is part of their civic duty. For 60 percent of taxpayers, the other reason why they paid their taxes on time is because a fear of getting caught.

 

According to the IRS’s website, penalties for tax evasion depend on the level of the crime and how many times the person has been charged with the crime. For example, for a first time offense, tax evaders could spend as much as five years in prison and be forced to pay up to $250,000. Corporations would have to pay as much as $500,000. Still, the number of people who get charged with tax evasion is low. Only about 1% of people and corporations are audited each year and about 1,000 people go to jail each year with sentences ranging from a few months to 15 months in most cases.

 

In regard to how people can cheat on their taxes, underreporting income is far and away the most popular reason why people are charged with tax evasion. Falsifying income or receipts and not reporting income at all are far less common. And then there’s the question of whether there was intent. Tax avoidance is perfectly legal and can sometimes get mixed with tax evasion. It really can be a question of interpretation.

 

Still, it’s never fun to have your name associated with tax evasion. David Stewart of Bowling Green, KY found his name and tax evasion going together a few years back, and it can produce a negative stigma. Therefore, it’s always smart to really take a look at your records and make sure you are paying the full amount on your taxes.

 

Have you ever been audited? Tell us your stories in the comment section below.

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