Although current economic struggles cause financial stress, most Americans, when directly asked, said it is not OK to cheat on taxes.
A survey conducted last month by the IRS Oversight Board and summarized March 1 by About.com revealed that the overwhelming majority of adults – 87 percent – selected “not at all acceptable” when asked their opinion on swindling the IRS.
Out of the respondents who answered that way, 95 percent feel personal integrity is too important to sacrifice in lieu of filing a fraudulent tax return. An additional 63 percent also cited a fear of audit as a contributing factor that prevents cheating.
“Personal integrity is at the core of our self-assessment tax system,” said Oversight Board Chairman Paul Cherecwich, Jr. “The overwhelming majority of American taxpayers play by the rules and expect everyone else to do the same. They don’t tolerate cheating by taxpayers regardless of income… it’s American’s civic duty to pay his or her fair share of taxes,” he observed.
The poll was done via telephone, with 1,500 random participants chosen. Those surveyed were also asked to rate their tolerance with those who cheat “a little here and there” or “as much as possible.” Only 11 percent cited agreement.
Although most taxpayers agree in principle that cheating is wrong, the reality is that when given an opportunity to cheat, many do.
Omitting and underreporting income accounts for more than half of the dollars lost to the annual tax gap. The tax gap, estimated at half a trillion dollars, is defined by the IRS as the amount of tax liability faced by taxpayers that is not paid on time.
According to 2006 figures – the last year the IRS compiled a tax gap report – $193 billion is lost due to Schedule C underreporting. Schedule C is filed by small business owners and self-employed taxpayers, and the IRS allows individuals to track and write off their own expenses, many of which are inflated in order to reduce taxable income.
Because of this, the IRS has stepped up Schedule-C audits. Based on 2010 IRS figures, Schedule Cs have a 300 percent higher chance of being audited than a corporate tax return.
The survey came shortly before the IRS and other federal agencies fell into automatic spending cuts, known as the sequester, which took effect March 1.
In a letter to Congress, the Treasury Department said the IRS won't be able to review as many tax returns if the sequester takes effect, which "could result in billions of dollars in lost revenue and further complicate deficit reduction efforts."