How to turn in your tax-cheating neighbor

http://professional.wsj.com/article/SB10001424053111903352704576540840395329676.html?mod=WSJ_hp_editorsPicks_1

by kevinrpope • 15 years ago

31 38 15 years ago

professional.wsj.com

mchusma• 15 years ago

This might be the most terrifying program I have ever heard of. I am struggling to think of anything other than the potential consequences of this.

jfruh• 15 years ago

Despite the sensationalistic leded about ratting out your brother in law, if you read the details of the article, this is program really about getting accounting professionals to report large-scale tax evasion by businesses they work for or with. The IRS doesn't want your vague reports that someone you know brags about not paying his taxes; they want details and specifics, and they won't pursue it unless the numbers are very large.

bradleyland2• 15 years ago

Terrifying? Even if you're anti-tax, those to fail to pay taxes are a big part of the problem. What's the motivation to fight over-taxation if those who wish to opt-out can simply do so with little chance of consequence.

I know of at least two business owners who are flat out stealing from the IRS and their employees. Both of them are more than three years behind on federal withholding tax payments. It's not even their money! This is their employees' withholding tax. I know this because of public filings against them. I can only imagine their personal tax situation.

Everyone I talk to says the same thing: "Ooooooh boy, they've really got it coming." When? When do they have it coming, exactly? Because as far as I can see, they're both still driving cars that are more expensive than mine, live in houses that are bigger than mine, and spend money like it's going out of style.

I have no desire to skip on my taxes, and I'm perfectly happy with the life I live, but it flat out pisses me off to see these people cheat the system and get away with it. It makes me feel like the "big bad IRS" is just some children's fairy tale meant to scare normal people in to compliance. Meanwhile, a whole pack of miscreants run amok with other peoples' money. It's just not right. Frankly, I'd rather see these people in jail than the pot head down the street that is spending 90 days in jail for the joint he had in his pocket while walking home from work. True story.

knowtheory• 15 years ago

I really don't understand why OP has his knickers in a twist. What're the potential consequences of falsely reporting someone? They get audited? The IRS already does random (but infrequent audits).

Given the fact that the IRS would indeed have to investigate and then prosecute whatever fraud may be present, they would have to have a fairly solid and material understanding of the circumstances leading to tax dodging. People who are filing false claims can and probably should be prosecuted for misleading the government officials.

The IRS isn't some inhuman soul sucking beast. It is a bureaucracy, but when you get down to the level of dealing with individuals who have discretion to make decisions, every experience I've had with them so far has been friendly and understanding. As far as i can tell they really do try to err on the side of not screwing individuals at the very least.

feydr2• 15 years ago

whooooahhh buddy -- did you just seriously have the audacity to use the phrase "other people's money" wrt to collecting taxes?? Seriously??

Astrohacker3• 15 years ago

Agreed. I find it disturbing that other commenters in this thread would evidently use this program if they had a chance.

I can sense the downvotes already... but let me explain why this program is terrible. If I charged everyone a tax, and threatened people with violence if they didn't pay up, then everyone would recognize it was wrong. When government does it, the brainwashed masses think it's a good thing. But it is bad when the government taxes people just like it would be bad if I taxed people. It doesn't matter what the government does with the money (which is mostly wasted, but that's beside the point). It is still wrong.

To rat someone out who opts not to pay for the protection racket that is taxes is to participate in the crime of stealing their wealth. That is why this program is terrible. It converts ordinary citizens into criminals.

Government has one tool that legitimate organizations don't have: force. Because it is wrong to force people to do stuff, government is immoral. Government is therefore a criminal organization, like a scaled up version of the mafia. If these ideas appeal to you, I recommend reading the works of Murray Rothbard, in particular "For a New Liberty", but his books on economics will also set you on the right path.

robryan• 15 years ago

How do you propose public services are paid for and law and order is maintained?

georgieporgie2• 15 years ago

government is immoral. Government is therefore a criminal organization

Well, the simplest of the logic errors there is that one. Immoral does not equal illegal. I'm not even going to get into the fact that it's not always wrong to force people to do things.

waffle_ss• 15 years ago

Tax laws need to be much, much simpler. The more complicated they are, the easier it will be for people to sneak by without paying and for loopholes to exist. It's the same thing that happens when a program drifts away from triviality - the probability of bugs increases greatly. Make tax laws trivial, and most of these problems - and most of the need for the IRS - would go away.

tzs• 15 years ago

Tax laws generally start out simple, then get complex patching holes. My favorite example.

Once upon a time a long time ago, a company wanted to pay a dividend to shareholders. That would be taxed as ordinary income to the shareholders. The company's accountants had a brilliant idea.

1. Do a stock split. Say, 105 for 100.

2. Do a stock buyback, where the company buys back 1/21 of the outstanding shares.

Net result to shareholders: every 100 shares becomes 105, then the company buys back 5 out of every 105, leaving the shareholder with 100 and some cash. Since the cash came from the sale of stock, it's capital gains.

The tax code was fixed so this would not work, by inserting a new section that gives conditions that a stock buyback must meet to be considered a stock buyback. If it fails to meet the conditions, it is considered to be equivalent to a dividend distribution and taxed as such. The conditions have to take into account a bunch of factors, so as to not penalize legitimate buybacks but not leave holes that allow abuse.

I believe that a large part of the complexity of the tax code comes from this kind of thing.

wisty• 15 years ago

Why should income and capital gains be taxed differently anyway?

If it's to stop Grandma getting hit with a huge marginal tax when she sells her house (despite it being a once-off kind of thing), just introduce some kind of smoothing. If your income is uneven, the tax man can give concessions (if you get a lot of money after a period of low income), and rebates (if you have a low income period after making a lot of money).

Easy, right? No more need for tricky rules about how to move money between the different categories.

orijing• 15 years ago

Exactly. Unfortunately, there are so many special-interests and lobbyists who will fight dollar-for-dollar to keep their special perks. Why else could it be that the most profitable industries (like oil) have some of the biggest allies in Congress?

shawnee_• 15 years ago

Good analogy. Although I've mentioned this before here, it's relevant; the way the tax law was originally put into effect was very smart and not complicated at all. ($4000 in 1893 ~ $100K today)

(1) Zero tax on any person making under $4,000 per annum (2) Begin graduated tax rates on person making $4,000 or more per annum (with special attention paid to trustees and other persons whose income source is derived from estates) (3) All corporations with profit subject to tax

http://books.google.com/books?id=ogUNAAAAYAAJ&pg=PP1#v=o...

Very simple. If the original tax code were dropped into place today, it would be greatly simplified for most people.

However, I disagree that tax laws need to be simpler for high-income, high-volume franchises. Following the original program analogy, it's necessary to be very strict and put many layers of control around processes that have the ability / potential / likelihood to zombie.

I guess that's where we are today with the US tax code: zombie processes' wasting CPU (GDP) pretty much hijacked the whole system.

Canada• 15 years ago

Zombie processes aren't scheduled for execution and therefore don't consume CPU resources.

tptacek• 15 years ago

For those of you who don't want to go through the trouble of tracking down the unredacted full article, here're the nut grafs:

The U.S. has been rewarding people who turn in fellow citizens or companies defrauding government programs since Congress's passage of the False Claims Act in 1863. Whenever there has been an income tax—briefly during the Civil War, and permanently since 1913—the IRS (or its predecessor) has had its own whistleblower program, says tax historian Joseph Thorndike of Tax Analysts, a nonprofit publisher. But payments tended to be small and rare because IRS officials were uncomfortable with "bounty hunting."

The landscape changed in 2006. Heartened by the success of a whistleblower program for nontax issues such as government contracts, Congress overhauled the special tax provisions on whistleblowers and set up the IRS's large-award program.

The IRS does not want your tax-cheating neighbor, but if you work for a company that is cheating the government out of tens of millions of dollars, I think we all want you to act.

ataggart• 15 years ago

>I think we all want you to act.

I'll go on record and state that I am not to be counted in that number.

roel_v2• 15 years ago

Actually, I would hope that they would pursue those cheating for 1000's just as hard as those who cheat for 1000000's, corporation or not.

georgecalm• 15 years ago

Here's a link to the full article: http://online.wsj.com/article/SB1000142405311190335270457654...

statenjason• 15 years ago

Googling "tax fraud" offers links to bounty hunting with this program.

Edit: This wasn't a suggestion, but rather an observation.

How to turn in your tax-cheating neighbor

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