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Old 28th March 2021, 11:19 AM   #41
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Originally Posted by acbytesla View Post
This is what accountants are for. There are ways to hide the money and they do.
Nobody is claiming that a new form would solve all problems associated with taxation. The point is that it would be a new tool that would make cheating harder and enforcement more effective. The complexity of the tax code is a different issue.

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Old 28th March 2021, 11:22 AM   #42
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Originally Posted by acbytesla View Post
That is if the IRS does a thorough audit. And never forget that businesses also have business expenses that they can and do deduct. They can over-report those. There are so many ways they can fudge.
The IRS only audits a tiny fraction of all tax returns. Discrepancies revealed by a new banking form would help identify taxpayers who should be audited.

Last edited by Bob001; 28th March 2021 at 11:24 AM.
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Old 28th March 2021, 11:51 AM   #43
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Originally Posted by newyorkguy View Post
...As an example of how this could work, the Times cited legislation passed by Congress in 1986. It required taxpayers list a Social Security number for each person claimed as a dependent. That requirement "caused a sharp drop in fraud. The next year, seven million children abruptly disappeared from tax returns."
Seven million dependents disappeared from tax returns after IRS simply required filers to record SSN numbers for all dependents. Charles Rossotti, the former head of the IRS, implies his idea -- providing the IRS with third party verification on individual incomes filed without W-2s -- would work the same way. Once enacted, the following year would see a major increase in reported income among the top percentile filers.
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Old 28th March 2021, 02:09 PM   #44
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Originally Posted by newyorkguy View Post
Seven million dependents disappeared from tax returns after IRS simply required filers to record SSN numbers for all dependents. Charles Rossotti, the former head of the IRS, implies his idea -- providing the IRS with third party verification on individual incomes filed without W-2s -- would work the same way. Once enacted, the following year would see a major increase in reported income among the top percentile filers.
Things are different today. At least I think they are. I didn't get a SSN until I applied for my first job. This was in the 70s. So I'm guessing kids get it earlier today?
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Old 28th March 2021, 02:30 PM   #45
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Originally Posted by acbytesla View Post
Things are different today. At least I think they are. I didn't get a SSN until I applied for my first job. This was in the 70s. So I'm guessing kids get it earlier today?
You can apply for it before your baby leaves the hospital.
https://www.ssa.gov/pubs/EN-05-10023.pdf
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Old 28th March 2021, 02:35 PM   #46
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Originally Posted by Bob001 View Post
You can apply for it before your baby leaves the hospital.
https://www.ssa.gov/pubs/EN-05-10023.pdf
Is it required?
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Old 28th March 2021, 03:29 PM   #47
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Originally Posted by acbytesla View Post
Is it required?
You quoted Bob001's message but without opening the link he provided to a Social Security document. Yes, it's required.

Quote:
Why should I get a Social Security number for my child?

You need a Social Security number to claim your child as a dependent on your income tax return.
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Old 28th March 2021, 03:41 PM   #48
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Originally Posted by newyorkguy View Post
You quoted Bob001's message but without opening the link he provided to a Social Security document. Yes, it's required.
For that reason it's a good idea. But I was curious if it is required by law to get one by a certain age.

OK, I read the document. So no.

Thanks NY. and Bob.
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Old 29th March 2021, 01:44 PM   #49
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Originally Posted by acbytesla View Post
For that reason it's a good idea. But I was curious if it is required by law to get one by a certain age.

OK, I read the document. So no.

Thanks NY. and Bob.
It really depends on what you mean by "required." Nobody's going to arrest you if you just don't have an SS card. But, as noted, you have to have it to take a tax deduction for your kid. Many school and medical records are linked to SS numbers. The kid almost certainly needs an SS number to go to a doctor -- especially he's covered by insurance -- or register for school. You certainly need it to take a job or hold a bank account. Not having an SSN would imposed big restrictions on your life.
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Old 30th March 2021, 06:56 AM   #50
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We were discussing ways to enforce people to more accurately report their income on tax returns. The discussion wasn't about social security. In 1986 when the IRS began 'requiring' children have SSN accounts in order to be be claimed as dependents on an income tax return, the following year there were 7 million FEWER dependents claimed. The suggestion is, 'requiring' people filing personal income tax returns -- not corporations, people -- who are not wage earners and don't receive W-2s, have third party verification, would quite possibly lead to the same kind of gain in tax revenue without the need for IRS to do full-scale audits.

The question was asked, "Is it required?" To claim children as dependents? Yes it is required. Only the questioner then wrote they meant, does the government require children have SSN accounts? If you don't want to claim your kids as dependents on your income tax return, then no, it is not required.

For me this whole line of discussion seemed like a mindless sidetrack.
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Old 30th March 2021, 07:35 AM   #51
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Originally Posted by theprestige View Post
It makes sense that most of the unpaid taxes are coming from the same group of people that pay most of the taxes to begin with who fund the politicians writing the tax laws.
Fixed.
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Old 30th March 2021, 07:38 AM   #52
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Originally Posted by theprestige View Post
I think it's a dog bites man story. Of course they cheat. The poor cheat. The middle class cheats. Everybody cheats, proportional to their circumstances.
Speak for yoursel.f I don't cheat.
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Old 30th March 2021, 08:30 AM   #53
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Originally Posted by newyorkguy View Post
The IRS estimates that wealthy business owners underpay their income tax by $175 billion a year. Refusing to go to a third party verification system, allowing the IRS to remain understaffed, amounts to a $175 billion tax break to the wealthy.
And the 'lower' classes end up with the tab.
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Old 30th March 2021, 08:31 AM   #54
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Originally Posted by theprestige View Post
Already addressed. They may not cheat on their taxes, but they do cheat on other things.
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Old 30th March 2021, 08:32 AM   #55
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Originally Posted by newyorkguy View Post
Below are quotes from, and a link to, a New York Times editorial on the subject. It was published one week ago. In the editorial the Times calls the logic for the idea of requiring third party verification on ALL income tax returns to be "overwhelming."


As an example of how this could work, the Times cited legislation passed by Congress in 1986. It required taxpayers list a Social Security number for each person claimed as a dependent. That requirement "caused a sharp drop in fraud. The next year, seven million children abruptly disappeared from tax returns."
In the province of Quebec we have a solution to that: increasingly, businesses -- mainly restaurants right now -- are required to be connected to a software that tallies their sales.
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Old 30th March 2021, 09:26 AM   #56
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Originally Posted by Belz... View Post
In the province of Quebec we have a solution to that: increasingly, businesses -- mainly restaurants right now -- are required to be connected to a software that tallies their sales.
In my USA beach town, a popular pizza joint got popped for tax evasion. Seems they were running two registers, an electronic one doing card and some cash sales, and a DL offline mechanical one for cash only (in my state, you have to present register records to the state for sales tax). They actually stationed tax dudes across the street to count customers for a month, and compared with declared tax revenue. The owner was popped for a seven digit evasion before it was over, and did a prison stretch.
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Old 30th March 2021, 09:48 AM   #57
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Originally Posted by pgwenthold View Post
You figure it goes like this

The IRS could spend its resources chasing down 25000 low-income tax evaders to garner $10mil extra revenue.

Or it could go after 250 high-income cheaters for the same reward.

This is why this is all significant. What's more important? Busting a lot of people? Or getting the revenue?

If you think the priority should be to get the money owed to the government, then take plan b. If you think the priority should be to penalize as many people as possible and teach them a lesson, it's plan a.
I think the complication is that Plan B has less yield because they have better accountants, lawyers, judges, and politicians on staff. The chances of getting even $1 are lower, and all that is net, after years of prosecution and associated cost.

Going for a larger number of smaller players might actually be more bang for the buck because they can't defend themselves as well. Fish in a barrel.
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Old 30th March 2021, 09:56 AM   #58
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Originally Posted by Thermal View Post
In my USA beach town, a popular pizza joint got popped for tax evasion. Seems they were running two registers, an electronic one doing card and some cash sales, and a DL offline mechanical one for cash only (in my state, you have to present register records to the state for sales tax). They actually stationed tax dudes across the street to count customers for a month, and compared with declared tax revenue. The owner was popped for a seven digit evasion before it was over, and did a prison stretch.
I learned my lesson in the 70s when a neighbour was prosecuted for tax evasion, using an earlier version of that scheme: carbon copy invoice pads.

Basically, he used 4-copy pressure pads, and alternated pairs within a set of four that had the same serial/invoice#. White (customer), and Yellow was reported. Pink (customer), and Blue was shredded. But of course, customers had those pink copies, which is how he was caught.

He had something like 5 franchises (transmission and brake and muffler shops), so contrary to what you were saying about scalability, this did run into the millions of dollars of undeclared revenues.
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Old 30th March 2021, 10:14 AM   #59
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I think people keep missing the point here about setting up a third party verification system for non-W-2 income tax filers. Charles Rossotti, who led the IRS from 1997 to 2002, has proposed Congress create a third-party verification system citing the following example. In 1986 the IRS began requiring children have SSN accounts in order to be claimed as dependents on an income tax return. The following year there were 7 million FEWER dependents claimed. The suggestion is, requiring people filing personal income tax returns to have third party verification, would quite possibly lead to the same kind of gain in tax revenue without the need for IRS to do anything.

Belz seems to get it.
It makes sense that most of the unpaid taxes are owed by the same group of people who fund the politicians writing the tax laws.

Last edited by newyorkguy; 30th March 2021 at 10:15 AM.
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Old 30th March 2021, 10:18 AM   #60
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Originally Posted by Thermal View Post
Small self employed people, OTOH, can make virtuly everything disappear, because the totals fall in the noise range, compared to big biz. A lot of businesses in my little beach town are cash-only, or run two registers to make money disappear. It doesn't scale upward after a point, though. Easy to hide $10,000 in undeclared profit. Tough to account for a mil disappearing.
I disagree - I think it all scales, unfortunately.

Just as an example from a fellow skeptic actually... commingling. I had this skeptical friend who explained his brilliant tax reduction plan using Amway: invite friends over for dinner and go through the motions of trying to recruit them. Even if this is the 100th time we've said 'no thanks'. But hey, now the meal and a portion of the house square footage and utilities are tax deductible as business expenses!

Scale this up and instead of square footage in a condo, it's a whole mansion. Or a space program.



Originally Posted by Thermal View Post
Isn't big biz ducking taxes far more about abusing tax law, ie treating actual profit as business expense, hence deductable?
Sadly my impression is that it's both, and we notice these different strategies not because it's the bulk of the problem, but because the superwealthy just obviously have more options.
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Old 30th March 2021, 10:21 AM   #61
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Originally Posted by Thermal View Post
And accountants assume legal responsibility for signing off. They have to plus or minus stay between the lines or they lose their license right pronto.
Well, and the business owner has the legal responsibility to tell the truth, too. If the business owner can be shady, so can the accountant. They're both making money and neither thinks they can get caught.


Originally Posted by Thermal View Post
Seems to me the Lions share of wiggle room is in classifying what is a legit write-off versus calling a convention in Vegas full of hookers and blow a legit business expense.
I think this is a big part of it yes, but hiding revenue is real even if it's easy to prove. What's hard is getting caught, getting flagged, getting into the audit in the first place. So this is why crippling the audit resources are an important early stage of the oligopoly's roadmap, until blanket exemption is achieved.
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Old 30th March 2021, 10:30 AM   #62
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Slight digression: For people who have lived in the U.S. and other countries, how do the tax codes and enforcement compare? There seems to be broad belief that the U.S. tax laws are more complex and confusing -- and easier to game -- than in many other industrial countries, even while the tax burden is lower.
https://www.taxpolicycenter.org/brie...nternationally

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Old 30th March 2021, 10:39 AM   #63
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Originally Posted by Bob001 View Post
Slight digression: For people who have lived in the U.S. and other countries, how do the tax codes and enforcement compare? There seems to be broad belief that the U.S. tax laws are more complex and confusing -- and easier to game -- than in many other industrial countries, even while the tax burden is lower.
https://www.taxpolicycenter.org/brie...nternationally
My examples were from Canada, if that helps.
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Old 30th March 2021, 10:46 AM   #64
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Originally Posted by newyorkguy View Post
I think people keep missing the point here about setting up a third party verification system for non-W-2 income tax filers. Charles Rossotti, who led the IRS from 1997 to 2002, has proposed Congress create a third-party verification system citing the following example. In 1986 the IRS began requiring children have SSN accounts in order to be claimed as dependents on an income tax return. The following year there were 7 million FEWER dependents claimed. The suggestion is, requiring people filing personal income tax returns to have third party verification, would quite possibly lead to the same kind of gain in tax revenue without the need for IRS to do anything.
I support this type of proposal, but am cynical about its effectiveness. A lot of what we're seeing with hidden revenue when it does get revealed is that it was hidden in collaboration with the financial institutions in violation of existing laws anyway. We'd need, like, 5th party verification at least.

This was why I was pushing back against Thermal's belief that accountants are going to be a barrier against fraud because they're required to be honest. Crooks get crooked accountants, and work with crooked bankers. When they get caught, they hire crooked lawyers. Everybody shreds their records, deletes their files, lies and lies and lies, and drags it out until the IRS decides it's going to cost more money than it's worth.

This isn't me saying it's not worth it, but just saying it's still only going to be a partial solution.

I'd also pitch for 'meaningful' penalties. No more of this 16 weeks at Club Fed and $10,000 fines.



Originally Posted by newyorkguy View Post
Belz seems to get it.
It makes sense that most of the unpaid taxes are owed by the same group of people who fund the politicians writing the tax laws.
I'm in agreement, yep.
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Old 30th March 2021, 10:58 AM   #65
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Originally Posted by blutoski View Post
I support this type of proposal, but am cynical about its effectiveness. A lot of what we're seeing with hidden revenue when it does get revealed is that it was hidden in collaboration with the financial institutions in violation of existing laws anyway. We'd need, like, 5th party verification at least.
.....
The proposal is that banks would be required to give the IRS a summary of business account-holders transactions, like W2s for employees and 1099s for investors. Sure, maybe some banks wouldn't comply, just like some employers pay employees in cash under the table. But I suspect most banks would comply in most cases, and violations would be easy to identify ("Hmm, we don't have the bank statement for taxpayer Smith. Either he doesn't use the banking system, or the bank is breaking the law.").
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Old 30th March 2021, 11:04 AM   #66
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Originally Posted by blutoski View Post
My examples were from Canada, if that helps.
Does a red-coated Mountie ride up on his trusty steed and say "Ayaah, I wonder, when you have the time, could you possibly please pay the taxes you appear to owe the Crown?"
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Old 30th March 2021, 11:10 AM   #67
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Originally Posted by blutoski View Post
....
I'd also pitch for 'meaningful' penalties. No more of this 16 weeks at Club Fed and $10,000 fines.
....
For a middle-class (or higher) financial worker, a felony conviction and a few months in prison would be devastating. If penalties like that were handed down more often, that would be enough to encourage compliance. The problem is the lack of enforcement in the first place, not the penalty.
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Old 30th March 2021, 11:10 AM   #68
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Originally Posted by blutoski View Post
I disagree - I think it all scales, unfortunately.

Just as an example from a fellow skeptic actually... commingling. I had this skeptical friend who explained his brilliant tax reduction plan using Amway: invite friends over for dinner and go through the motions of trying to recruit them. Even if this is the 100th time we've said 'no thanks'. But hey, now the meal and a portion of the house square footage and utilities are tax deductible as business expenses!

Scale this up and instead of square footage in a condo, it's a whole mansion. Or a space program.
And that surely works in some tax swindles, but safeguards are often built into the tax code to prevent such abuses. To continue with your example, as a self employed contractor, I can federally deduct use of my home as a business expense, but it is capped at 300 sq ft, or a $1500 max annual deduction, whether I am Joe the Plumber or Elon Musk. Scalability is capped by design.

Quote:
Sadly my impression is that it's both, and we notice these different strategies not because it's the bulk of the problem, but because the superwealthy just obviously have more options.
Sadly, agreed. An accountant once told me that the IRS mostly wants a cut, not really the fair and legal cut. They know the full cut would discourage revenue generating work for employees and the like, who they can pound for taxes, as well as the plethora of operating taxes collected on the fly by way of gas taxes and the like.
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Old 30th March 2021, 11:14 AM   #69
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Originally Posted by Thermal View Post
.....
Sadly, agreed. An accountant once told me that the IRS mostly wants a cut, not really the fair and legal cut.
....
It sounds like the accountant is talking about what the IRS will take to settle a case, as opposed to dragging it through the courts for years. The IRS's resources have been deliberately and dramatically cut in recent years. They have to make choices. But it's big stretch to claim that the IRS doesn't want and expect taxpayers to fully comply with the tax laws.
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Old 30th March 2021, 11:18 AM   #70
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Here are some details of how Charles Rossotti's plan would work, from the Americans For Tax Fairness website:

Quote:
Rossotti believes a revamped income-reporting system could close the tax gap by $1.6 trillion over 10 years. His plan would require business owners with over $25,000 of business income to list the account numbers of all their bank accounts on their returns. Banks, for their part, would be required to file a W-2 style form with a summary of deposits and disbursements. The taxpayer would fill out a schedule reconciling these amounts. Link to Americans For Tax Fairness dot org
Would this work? I personally have no idea as I have no experience in this field. Charles Rossotti seems to think it would work and he was in charge of the IRS for five years.
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Old 30th March 2021, 11:28 AM   #71
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Originally Posted by Bob001 View Post
It sounds like the accountant is talking about what the IRS will take to settle a case, as opposed to dragging it through the courts for years. The IRS's resources have been deliberately and dramatically cut in recent years. They have to make choices. But it's big stretch to claim that the IRS doesn't want and expect taxpayers to fully comply with the tax laws.
His context was that the G-men will let certain things ride (like claiming $20/week cash to church, or $1k/yr) as long as they get a little taste along the way, and you don't try to whittle your taxable down to zero. Also, avoid squirrelly looking write-offs, even if they are real.

Good example: when moving modular homes, we sometimes had to hire escort vehicles in certain traffic situations. Blinky amber lights and Wide Load signs and stuff. One of our 100% legit subcontractors for this was named Goldie's Escorts. Accountant said he'd go Lorena Bobbit on me if that name appeared on the expenditure page again.
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Old 30th March 2021, 11:43 AM   #72
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Originally Posted by Thermal View Post
And that surely works in some tax swindles, but safeguards are often built into the tax code to prevent such abuses. To continue with your example, as a self employed contractor, I can federally deduct use of my home as a business expense, but it is capped at 300 sq ft, or a $1500 max annual deduction, whether I am Joe the Plumber or Elon Musk. Scalability is capped by design.
I was just using that as an example of commingling. I do think commingling scales.

Here's the example of a scaled commingling: private corporation, owner/employee uses the waterfront Maui 'guest mansion' to entertain friends, who are also potential customers/suppliers. No cap like for us little people and our principal residences. The fraud involved is to misreport the personal use of the property as business. In reality, the value should be treated as a taxable benefit from the corporation to the employee, and added to the employee's income during the calendar year.
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Old 30th March 2021, 12:29 PM   #73
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Originally Posted by Bob001 View Post
Does a red-coated Mountie ride up on his trusty steed and say "Ayaah, I wonder, when you have the time, could you possibly please pay the taxes you appear to owe the Crown?"
Those horses aren't going to feed themselves.
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Old 30th March 2021, 01:34 PM   #74
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Originally Posted by bruto View Post
I would add that though I'm not a wage earner, as an individual my bank and brokerage accounts all send statements to the IRS. Of course it might be possible to cheat and do stuff under the table, and no taxes are withheld, but I am pretty much obligated to match what the statements say.
The statement they send is the amount of interest you have earned on those accounts, not a summary of the deposits and withdrawals, as is being suggested for those who have in excess of $25k in non-wage income.

I often have clients who offer to pay me in cash, which is stupid. If they pay me via check then they can easily deduct the payment as an expense. I always pay my service providers above board so I can deduct their costs as expenses.

But my business is not complicated. I have worked with people who spend a lot of money to create complex webs of companies to avoid paying taxes.
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Old 30th March 2021, 02:31 PM   #75
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Originally Posted by Dr. Keith View Post
.....
But my business is not complicated. I have worked with people who spend a lot of money to create complex webs of companies to avoid paying taxes.
And if all of those businesses used the same bank accounts, or if each one had separate accounts that were all ultimately owned by one taxpayer, the IRS would get forms that reported all of the transactions for all of the accounts. That web would be easier to pierce.
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Old 30th March 2021, 02:53 PM   #76
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Originally Posted by Thermal View Post
.....
Good example: when moving modular homes, we sometimes had to hire escort vehicles in certain traffic situations. Blinky amber lights and Wide Load signs and stuff. One of our 100% legit subcontractors for this was named Goldie's Escorts. Accountant said he'd go Lorena Bobbit on me if that name appeared on the expenditure page again.
Oh, but wouldn't it be fun to have the IRS guy light up thinking he really landed a big one, and you show up with your paperwork about moving houses?
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Old 6th April 2021, 01:50 PM   #77
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The rich are doing okay:
Quote:
The number of billionaires on Forbes’ 35th annual list of the world’s wealthiest exploded to an unprecedented 2,755--660 more than a year ago. Of those, a record high 493 were new to the list--roughly one every 17 hours, including 210 from China and Hong Kong. Another 250 who’d fallen off in the past came roaring back. A staggering 86% are richer than a year ago.
Jeff Bezos is the world’s richest for the fourth year running, worth $177 billion, while Elon Musk rocketed into the number two spot with $151 billion, as Tesla and Amazon shares surged.
Altogether these billionaires are worth $13.1 trillion, up from $8 trillion in 2020.

2755 people -- individuals, not corporations -- are worth $13.1 trillion, more than 50 percent more than a year ago.
https://www.forbes.com/billionaires/
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Old 6th April 2021, 02:03 PM   #78
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Originally Posted by Bob001 View Post
And if all of those businesses used the same bank accounts, or if each one had separate accounts that were all ultimately owned by one taxpayer, the IRS would get forms that reported all of the transactions for all of the accounts. That web would be easier to pierce.
Yep.
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Old 7th April 2021, 07:52 AM   #79
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Originally Posted by pgwenthold View Post
You figure it goes like this

The IRS could spend its resources chasing down 25000 low-income tax evaders to garner $10mil extra revenue.

Or it could go after 250 high-income cheaters for the same reward.

This is why this is all significant. What's more important? Busting a lot of people? Or getting the revenue?

If you think the priority should be to get the money owed to the government, then take plan b. If you think the priority should be to penalize as many people as possible and teach them a lesson, it's plan a.
You haven't factored in the cost of collecting those taxes. I can track down those 25000 low income, EITC fraudsters with SQL and grade 5-8 employees. For the big boys, I'll need experienced employees, probably with accounting degrees, and they will be grade 11-12 employees at a minimum. Auditors vs. tax compliance employees.

Given the time it takes to train, and the resources available, the 25000 is just easier. I can't assign grade 5 employees to audit one of the big boys. They don't have the training or experience.
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Old 7th April 2021, 09:03 AM   #80
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Originally Posted by newyorkguy View Post
Would this work? I personally have no idea as I have no experience in this field. Charles Rossotti seems to think it would work and he was in charge of the IRS for five years.
It could work, there would need to be a change to the reporting forms, new fields created, new forms, document matching, and do some math. The question is, should it be automated like the under-reporter program or just feed into the "who to audit" math?

25K income would be way too low. Without looking, way too many people in that filter. I'd probably start out at a cool 250K and try to balance between how many people can work those cases, and how many cases I catch.
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