‘Tis the Season for Catching Tax Scofflaws

By CATHERINE RAMPELL

If your fear of getting caught for tax fraud starts to spike in the next few weeks, it’s probably by design. The Internal Revenue Service appears to deliberately ramp up publicity of its tax

Stuart Rohatiner, CPA, JD

 fraud cases just before Tax Day, a new study finds.

The paper, by Joshua D. Blank and Daniel Z. Levin, looked at press releases issued by the Department of Justice’s Tax Division from 2003 to 2009 in which the agency announced a civil or criminal tax enforcement action against a specific taxpayer identified by name. They found that the number of press releases issued by the I.R.S. per week more than doubles in the fortnight preceding April 15 compared to the rest of the year:

The authors suggest that this trend is probably part of the I.R.S.’s fraud deterrence strategy:

By presenting individual taxpayers with vivid examples in which the I.R.S. has detected tax fraud — whether it involves a popular celebrity’s phony business deductions, a high-profile banker’s offshore bank account or a local tire salesman’s underreporting of gross  income — the government may provide an individual taxpayer with available images that showcase the I.R.S.’s detection capabilities. Because the government consistently provides more of these images to individual taxpayers during the weeks leading up to Tax Day than it does during other times of the year, individual taxpayers may draw upon these available images as they teeter on the decision to claim questionable tax positions on their annual individual tax returns. … In reality, a rational individual taxpayer should recognize that the chance that the I.R.S. will detect and challenge a claim of an illegitimate tax position is very low (1.03 percent in 2009).

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