Where individual taxpayers are concerned, the abstruseness and complexity of filing one's taxes can have the impact of obfuscating the legal imperatives driving one's filing obligations. This means that an individual may report his or her taxes inaccurately but without the intention to commit fraud. According to Daily, "Although auditors are trained to look for fraud, they do not routinely suspect it. They know the tax law is complex and expect to find a few errors in every tax return. They will give you the benefit of the doubt most of the time and not go after you for tax fraud if you make an honest mistake. A careless mistake on your tax return might tack on a 20% penalty to your tax bill. While not good, this sure beats the cost of tax fraud -- a 75% civil penalty. The line between negligence and fraud is not always clear, however, even to the IRS and the courts." (Daily, p. 1) This distinction aside -- and despite the fact that most tax fraud events occur in the hands of private citizens -- certainly corporate tax fraud accounts for the largest sums of money hidden, incorrectly filed and generally withheld from the federal government. Incidences such as those involving Enron, Worldcom, Tyco and Adelphia, among others, demonstrated beyond a reasonable doubt that without proper oversight and scrutiny, corporations have the capacity to be by far the worst offenders. In their respective cases, these firms employed widespread accounting irregularities in order to hide their earnings from the government or in order to over-report their earnings as a way of falsifying stock values. In these instances, the consequences were substantial, with the companies in question filing for bankruptcy, announcing their closure or seeing their top personnel stand trial for tax crimes. One common way, del Llano reports, that executives for top-flight firms will commit tax fraud is by 'offshoring' their earnings to keep them hidden from the government. According to del Llano, "any highly compensated...
are being solicited to participate in "offshore deferred compensation plans." The U.S. taxpayer is encouraged to sever an existing employment relationship and substitute an arrangement in which the nominal employer is a foreign "employee leasing" company. The supposed result of this abusive arrangement is that the taxation of a large portion of the professional's or business owner's salary is deferred while he/she gains immediate access to the funds through loans or offshore-based credit cards." (del Llano, p. 1)
A tax professional would not face jail time for committing a crime if he or she is not informed of the client's deceit. They may however, have to endure years of auditing to ensure this does not happen again, resulting in a need for charging excessive fees to compensate for time lost during auditing. This is damaging to the tax professional and the person (s) filing their taxes. As Calhoun,
Tax Law Taw Law and Accounting In the United States, 43 states currently impose a personal income tax. New Hampshire and Tennessee tax only "intangible" income, which is composed of interest and dividends. The remaining 41 states have "broad-based" income taxes, with most sources of income subject to tax. In 1932, Washington voters approved an initiative establishing a personal income tax. However, the State Supreme Court ruled this initiative unconstitutional. Since then,
Tax Advise Table of Contents (optional) Louise is aged 50 and single. Since 1994 she has carried on a retail business as a sole trader. Her trading profits as adjusted for tax purposes and after capital allowances, for the year ended 30th April 2009 were $150,000. The business is carried out from a number of valuable retail outlets, all of which are owned by Louise personally. These units have been acquired over a
125). The use of case study examples is a brilliant tool for making the reader believe that white-collar crime is indeed something that needs to be addressed on a macro rather than a micro level, because the people injured by fraudulent accounting and auditing to name a few white-collar crimes, are not just the people that work for a company or the criminals. The people harmed include members of the
Fraud Ethics Fraud in the United States: An overview Fraud has always existed in the United States, but a number of systemic changes in the way that business is handled have caused fraud to become more common than ever before, in both private industry and government. For example, according to the ACFE (Association of Certified Fraud Examiners) magazine Fraud, "the rise in contract management and the outsourcing of goods and services has created
Tax Avoidance vs. Tax Evasion The main objective of a tax advisor is to assist his/her clients avoid taxes as much as possible through within the confines of the law in order to avoid crossing the line into tax evasion. In this case, the tax advisor guides his/her clients based on the law regarding tax avoidance and tax evasion. This paper focuses on comparing the concepts of tax avoidance and tax
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