THE DINING ROOM TABLE – Papers and more papers. Receipts, scrawled reminders and crumpled Post-it Notes. This debris is because, like 165,624,000 (in 2019) other Americans, I am wrestling with my federal income taxes. Actually, my wife, the daughter of a CPA, is doing most of the work, undeterred by my expert advice: “Can’t we still deduct our kids even though they’re gone?” “I’m a military veteran. Do we have to say on which side?” No, I’m not going to cheat on my federal income taxes, but a lot do. For about every 30 taxpayers who file their tax returns each year, there’s one business or household that doesn’t. Unreported income is the single largest reason that unpaid federal income taxes may amount to more than $600 billion this year and more than $7.5 trillion over the next decade. That would cover more than half the projected federal deficit over that time. And, of course, for every dollar they don’t pay, you and I have to make up the difference.
The number of tax deadbeats has skyrocketed. Since 2002, Americans who owed unpaid money to the IRS has tripled, and so has the amount of unpaid taxes. How do they get away with it? Because Congress continues to cut the IRS’s budget. Today the IRS employs fewer people to track down tax evaders than any time since the 1950s. So, while the amount of unpaid taxes is going up, tax crime investigations have been falling. The share of all tax returns that were audited declined by almost half, 46 percent, from 2010 to2018. Want to avoid an audit? Make a lot money. Really. The risk of audits for people earning more than $1 million per year plunged by 61 percent from 2011 to 2019. The really rich have it even better. In 2018, the IRS audited only 0.03 percent those making more than $10 million. By one estimate, the failure of wealthy Americans to pay their fair share forces everyone else to pay an extra 15 percent in taxes.
One reason Congress keeps cutting the tax inspectors’ budgets is because no one likes a tax collector. Even in the Bible, tax collectors were evil, greedy, and corrupt, deceitful and unpopular, who charged far more than what was owed and pocketed the rest. One of my favorite IRS stories: several years ago a businessman testified before a Congressional committee. Between sobs he told about a friend who was so harassed by the IRS that he committed suicide. The Congressional committee voted to cut the tax collectors’ budget. Turns out there was no dead friend and the testifier owed $30 million in back taxes. Here’s the dumb part about this: Each additional dollar spent on enforcement brings in about $24.
Still, before we start cheating on Uncle Sam, let’s consider some high profile cases who were caught. “I’m from Texas, and one of the reasons I like Texas is because there’s no one in control.” -- Willie Nelson. Alas, Willie found out that others control what he owes in taxes. In 1990, Nelson was forced to pay $16 million in fines and back taxes for using an illegal tax shelter. It turns out that his accountant was also to blame, using Nelson’s money for taxes to invest in other areas. Who can forget Leona Helmsley’s famous quote: “We don’t pay taxes. Only the little people pay taxes.” Helmsley, nicknamed the “Queen of Mean” by employees, became a little person. In 1989, Helmsley began a 16-year prison sentence for tax evasion. Al Capone got away with murder and mayhem. An army of law enforcement agencies couldn’t nail him, but the tax man did, ultimately convicting Capone of tax evasion, tossing him in Alcatraz for 11 months and fining him $50,000 (the harshest tax fraud sentence in history to that point).
The biggest tax evader in recent times seems to be none other than former President Donald Trump. Example: He may have illegitimately claimed a $72.9 million refund that the IRS is now trying to recover. He had claimed $70,000 in highly dubious tax deductions for hair styling for his television show. Hair styling is not a deductible expense and, in any case, Trump’s hair expenses for his “Apprentice” TV shows should have been reimbursed by NBC -- in which case Trump may have committed criminal tax fraud. Trump paid no income taxes in 10 of the last 17 years while raking in as much as $153 million in a single year. The year he ran for president he paid just $750. He paid the same sum during his first year in the Oval Office. An undocumented immigrant housekeeper who had worked for the Trump Organization posted tax statements on Twitter showing that she had paid more federal income taxes than Trump himself had in many years. No wonder he doesn’t want us to see his tax returns.
Now let’s pop the bubble that “half of Americans don’t pay taxes.” You hear that a lot on right-wing radio. Everyone pays taxes – sales tax (8.25 percent in Texas), gas tax (38.4 cents a gallon), school taxes, property taxes, etc. The State of Texas has no income tax, but will spend $216.8 billion over the next two years. That’s $7,781for every Texas resident. Call it what you will, those are taxes and everyone pays them.
We end with some good news. Make big bucks being a snitch. Tell the IRS Whistleblower Office that your boss or spouse or maybe the discount dentist who’s driving a Lamborghini is cheating on his or her taxes. The feds can award a snitch between 15 percent and 30 percent of the total proceeds that the IRS collects in a case, up to $5 million. As we have seen from the above figures, there are bunches of Americans not paying their taxes. It’s your patriotic duty to turn them in.
Now back to my taxes. Under “losses” can I list 2020?
Ashby is taxed at firstname.lastname@example.org