As I help folks prepare their 2012 tax returns, the topic of how to minimize tax liability is occasionally broached by my clients. Some clients are more diplomatic than others, but it is clear that a few of them are willing to explore the possibility of aggressively reducing the tax they owe. Obviously, part of my job is to emphasize at all points what is required by the IRS tax regulations. However, we have all heard of folks who stretched tax law beyond the breaking point.
I ran across a fascinating list of the “Top 10 Tax Cheats” last week. I decided it would be worth sharing the list with you... if only for entertainment value. The list is ordered from bottom to top, based on a subjective weighting of boldness. I added one of my own, that I label “1b”, because that tax evader shares at least one surprising characteristic with “Number One”!
![NUMBER 1B: The average U.S. taxpayer might assume that being popularly considered an expert on finance, banking, and governmental policy-making means that such a person is well-organized, thorough, on top of important things. Unfortunately, our tax evader number 1b) could be considered the “poster child” for the following definition: “disorganized, forgetful, easily distracted governmental finance leader.”After serving in the U.S. Treasury Department during the Clinton presidency, this man moved on to serve within the International Monetary Fund (IMF). Although housed in the U.S., this organization is (as its name conveys) international in nature and scope. Foreigners who serve within the IMF are not taxed by the U.S. However, U.S. citizens employed within the IMF are taxed. That inequity is adjusted for by the IMF practice of “grossing up” the wages of the U.S. employees, as a means of effectively covering the cost of the estimated income tax for that salary level. This practice was extremely transparent and well-known by IMF staff!Evidently, our “tax evader” of the moment failed to pay close attention! In 2006, the IRS discovered that he had neglected to pay taxes in 2003 and 2004. He was assessed $17,230 in back taxes and interest, which he paid. The evader claimed that he had assumed the IMF had been withholding his tax liability. Of course, you and I, as “average tax payers” would know that checking our W-2, or (if in doubt) emailing the HR Department, would provide an authoritative answer!In 2008, when this "evader" was named as Barack Obama’s selection to become U.S. Treasury Secretary, it was uncovered that he had an earlier “history” of evasion – failing to pay almost $26,000 in income tax from 2001 and 2002!Once again, you and I might naturally assume that the President would recognize this nominee as a political liability – especially since the Treasury chief also oversees the IRS -- and withdraw the nomination! Or we might assume that Congress would see clearly and vote against his nomination.We would be wrong on both counts. Obama said that Timothy Geithner was “essential” in the position of Treasury Secretary! Congress, for its part, accepted Geithner’s “excuse” that these instances of tax evasion were merely “careless mistakes”! If you or I had gone without paying over $43,000 in taxes, we all know what we would have gotten – a jail sentence rather than the key to the U.S. Treasury!](http://cdn2-b.examiner.com/sites/default/files/styles/profile_large/hash/f9/98/f998687ebcfe9baf52c0d6d0b69d2cec.png?itok=l-GpY8qi "NUMBER 1B: The average U.S. taxpayer might assume that being popularly considered an expert on finance, banking, and governmental policy-making means that such a person is well-organized, thorough, on top of important things. Unfortunately, our tax evader number 1b) could be considered the “poster child” for the following definition: “disorganized, forgetful, easily distracted governmental finance leader.”After serving in the U.S. Treasury Department during the Clinton presidency, this man moved on to serve within the International Monetary Fund (IMF). Although housed in the U.S., this organization is (as its name conveys) international in nature and scope. Foreigners who serve within the IMF are not taxed by the U.S. However, U.S. citizens employed within the IMF are taxed. That inequity is adjusted for by the IMF practice of “grossing up” the wages of the U.S. employees, as a means of effectively covering the cost of the estimated income tax for that salary level. This practice was extremely transparent and well-known by IMF staff!Evidently, our “tax evader” of the moment failed to pay close attention! In 2006, the IRS discovered that he had neglected to pay taxes in 2003 and 2004. He was assessed $17,230 in back taxes and interest, which he paid. The evader claimed that he had assumed the IMF had been withholding his tax liability. Of course, you and I, as “average tax payers” would know that checking our W-2, or (if in doubt) emailing the HR Department, would provide an authoritative answer!In 2008, when this "evader" was named as Barack Obama’s selection to become U.S. Treasury Secretary, it was uncovered that he had an earlier “history” of evasion – failing to pay almost $26,000 in income tax from 2001 and 2002!Once again, you and I might naturally assume that the President would recognize this nominee as a political liability – especially since the Treasury chief also oversees the IRS -- and withdraw the nomination! Or we might assume that Congress would see clearly and vote against his nomination.We would be wrong on both counts. Obama said that Timothy Geithner was “essential” in the position of Treasury Secretary! Congress, for its part, accepted Geithner’s “excuse” that these instances of tax evasion were merely “careless mistakes”! If you or I had gone without paying over $43,000 in taxes, we all know what we would have gotten – a jail sentence rather than the key to the U.S. Treasury!")
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