Between piercing the Swiss banking veil and deploying an algorithm to identify possible tax cheats, it’s never been a worse idea to be cheating on your taxes.
By Steven N. Klitzner
$2.2 billion.
That’s how much the Internal Revenue Service has collected from people who participated in a 2009 program that offered amnesty to those who came forward and disclosed money held in foreign banks.
This dollar figure will grow in the months ahead,†IRS Commissioner Doug Shulman said in a statement. But just as importantly, we have changed the risk calculus. Americans now understand that if they try to hide assets overseas, the chances of being caught continue to increase.
As you may have read in recent headlines, the U.S. Department of Justice and the IRS pierced the once impenetrable Swiss banking veil, causing thousands of U.S. taxpayers who were keeping money overseas to come clean and tell the government what they had stashed away.
But it’s not just wealthy Americans with fancy Swiss bank accounts who are at risk of being investigated by the IRS.
Far from it, in fact.
Some in the United States believe there is a so-called “audit lottery” – that those who are audited by the IRS are audited only because they were unlucky.
In truth, well, there’s no truth to that. Just as Google employs a computer algorhythm to deliver search results best suited for you, the IRS uses an algorhythm to flag tax returns most likely to contain errors or fraudulent activity. That is to say, highly sophisticated computers are combing through returns to figure out which ones would be the best to have IRS agents audit.
Turns your stomach a little, doesn’t it?
But that’s not all.
Beginning in 2012, electronic payment processors will give the IRS more and more access to information about how businesses spend money and where. Keeping that one contract off the books, for example? Bad idea today. But a worse idea in 2012.
At the same time, just as the IRS is becoming more efficient in selecting which returns should be examined by IRS investigators, the tax-collecting agency has dramatically increased its enforcement efforts.
In 2010, for example, the IRS filed 1 million tax liens – nearly double the amount it filed in 2007.
Last year, the IRS audited nearly 2 of every 10 tax returns reporting more than $10 million in income.
Overall, the audit rate was 1.11 percent – meaning about 1 of every 100 U.S. taxpayers was audited.
Those are great Vegas odds. But winning a small jackpot and avoiding a painful, life-changing audit are two very different winnings.
If you’re cheating, make sure you’re comfortable with those odds, especially when computer algorithms are ensuring that the 1 of 100 selected comes from a likely tax cheat.
Steven N. Klitzner is a Certified Tax Resolution Specialist, a member of the American Society of IRS Problem Solvers, and an Aventura attorney. You can contact him at 305-682-1118 to obtain a free subscription to his newsletter titled The IRS Times & Inquirer.
