Taxes 2011 – Are We a Nation of Cheaters?

Photo (cc) by Alan Cleaver

Every year since 2002, the IRS Oversight Board has conducted a “Taxpayer Attitude Survey” to determine, among other things, how Americans feel about cheating on their taxes. Here’s one of the questions they ask, along with the most recent results.

How much, if any, do you think is an acceptable amount to cheat on your income taxes?

  • A little here and there: 8 percent
  • As much as possible: 4 percent
  • Not at all: 87 percent

These results differed a bit from the 2003 survey, and show that Americans are less likely to cheat today than they were then. Back in 2003, only 81 percent of respondents said cheating was never acceptable, and 12 percent said a little cheating here and there was OK.

But like the authors of other articles who took these results with a grain of salt (see this story at CNNMoney.com and this one at WalletPop) I too wondered whether we’re all as honest as we claim to be. So I took a camera into the field to find out.

Check out the results in the following news story, then meet me on the other side for more.

As I said in the story above, while one division of the IRS suggests that 87 percent of Americans would never cheat on their taxes, another division of the same agency offers evidence that many do with a highly publicized report called “Reducing the Federal Tax Gap.”

The tax gap

The so-called “tax gap” is defined by the IRS as “the difference between the amount of tax that taxpayers should pay and the amount that is paid voluntarily and on time. The tax gap can also be thought of as the sum of non-compliance with the tax law.”

Where specifically does the shortfall originate? According to this 2009 report, 82 percent of 2001’s 345 billion dollar gap (the last year it was reported) comes from a combination of unreported income or overstated deductions.

So, if both of these reports are to be believed, the IRS thinks that the vast majority of us are honest – but that somehow we’re underpaying our taxes by hundreds of millions of dollars.

How the IRS intends to “mind the gap”

If you watched the video above, you saw three people say on camera that they wouldn’t think about reporting the profit they made on something they bought at a yard sale or a small gambling win, because they didn’t know they were supposed to. (The fact is that as far as the law is concerned, you’re supposed to report and pay taxes on any money you make, however you make it: small, large, legal, illegal – all income is taxable.)

The IRS could rely on it’s survey findings that nearly 9 in 10 of us would never cheat, and simply remind us to pay taxes on every dime we made. But studies have also discovered something else: People who’s income is reported for them by those paying it – with forms like W-2s or 1099s – is highly likely to be reported. That’s why the IRS is instituting new ways to increase “information reporting.” Two recent examples:

  • Credit and debit card payments to businesses. Starting in January 2011, organizations that process credit and debit card payments for merchants must annually report the amount of these payments to the IRS.
  • Cost basis reporting. Starting in January 2011, brokerage firms must report the cost and holding period to the IRS, not just the proceeds from securities transactions.

Another way the IRS is keeping us honest? They’re increasing both enforcement actions (translation: audits) and fines for those who don’t comply.

Bottom line? The IRS is proud to report how honest you are, America. But they’re happy to invest a little time and taxpayer money to make sure you stay that way.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next
8 Types of Companies That Check Your Credit Report

Federal law lets these entities peek at your credit — regardless of whether you’re borrowing money.

9 Free Things That Used to Cost Us Money

Not everything is getting more expensive.

3 Ways to Get Paid for Searching the Web

If you’re already doing it anyway, why not get rewarded for it? Here are three great opportunities.

16 Products That Solve Everyday Annoyances

These items put an end to the daily irritations that bug you the most.

5 Reasons You Should Claim Social Security ASAP

Experts often recommend postponing claiming your Social Security retirement benefits. But there are situations in which you should start taking the money sooner.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
7 Kirkland Signature Items to Avoid at Costco

Even if it seems you save a bundle buying Costco’s Kirkland Signature brand products, they may not be the bargain they appear to be.

8 Tips for Retiring Comfortably on Social Security Alone

It’s never too early to start learning how to live well while living on less.

Am I Eligible for My Mother’s Social Security Benefit?

Can an adult daughter tap into her late mother’s benefit?

11 Generic Products You Should Buy at Costco

Not all generics are worthwhile, but these are among the best from Costco’s Kirkland Signature brand.

9 Things You’ll Never See at Costco Again

The warehouse store offers an enormous selection, but these products aren’t coming back.

The Next 5 Groups Who Will Get the COVID-19 Vaccine

The CDC has unveiled a schedule that likely will determine who gets the next doses.

3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

This Surprise Factor Can Raise Your Risk of Dementia

Nearly half of U.S. residents may face this threat.

Organize Your Home With These 10 Thrift Store Finds

Resolve to be clutter-free in 2021 with these secondhand purchases.

This Gas Station Scam Is Victimizing More Drivers

For the second straight year, a growing number of Americans believe they’ve fallen prey to this scam.

11 Laws You Could Be Breaking Without Knowing It

Seriously? Fibbing about the weather is a crime? This and other little-known legal traps await the unwary.

These Are the 3 Best Used Cars You Can Buy

These vehicles boast reliability, safety and long-lasting value.

6 Legal Documents Retirees Need — but Don’t Have

Few retirees have all of these documents that are crucial to their golden years — especially during a pandemic.

13 Things Seniors Can Get for Free — or Almost Free

There are many ways to get cheap or free services and goods after reaching a certain age.

15 Amazon Purchases That We Are Loving Right Now

These practical products make everyday life a little easier.

Internet Providers Can’t Charge You for This Anymore

Starting this month, your ISP no longer can bill you for this fee.

Can a Divorced Widow Claim Her First Husband’s Social Security Benefits?

The rules are complicated when it comes to eligibility for survivors benefits.

9 Small Expenses That Are Bleeding Your Budget Dry

Keep more of future paychecks by eliminating these budget-busting unnecessary expenses.

15 Painless Ways You Can Cut Costs in 2021

Follow these tips to save, so you’ll have money for things that really matter.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.