Local News

State Turns Up Heat On Alleged Tax Cheats

Posted December 29, 2003

— Five years ago, the Internal Revenue Service took a public beating for hassling taxpayers. Since the "kinder, gentler" IRS came about, the chances of getting audited reduced to slim or none. While a fraudulent federal tax return may slip by, the Department of Revenue is turning up the heat on state returns.

North Carolina revenue leaders estimate 10 percent of those who owe will cheat on their taxes in 2004. National statistics show an even higher percentage of Americans think it is OK to pull a fast one on Uncle Sam.

"That's perilous. We won't have the revenue we need to run the country," said UNC-Chapel Hill Taxation Professor Doug Shackelford.

Shackelford said the slippery slope started when the IRS backed off enforcement because of political pressure. Tax prosecutions dropped from over 1,000 in 1993 to 500 last year. The number of audits for individuals and businesses dropped like a rock. During that time, a series of corporate scandals stung taxpayers.

"Those scandals give us the sense that large corporations or wealthy individuals -- they don't do their fair share. Why should I, as an ordinary citizen, do mine?" Shackelford said.

"Everyone, corporations and individuals alike, should pay what they owe under the law," said Assistant State Revenue Secretary Alan Felton.

Felton warns, unlike the IRS, North Carolina beefed up its number of agents and audits. They go after suspected tax scofflaws by publishing their names online. The tactics pay off, bringing in millions that previously went uncollected.

"We are more aggressive as far as placing attention on those that are deliberately evading the laws of the state," he said.

The IRS contends it is shoring up enforcement on tax cheats. It is hiring more agents and changing its focus on audits. Officials are going after high income non-filers, unreported income and promoted tax schemes.

The IRS also wants you to watch out for some common tax scams called "

the dirty dozen

" -- scams that honest taxpayers are unwittingly sucked into. The schemes offer miracle tax solutions that are too good to be true, which include off-shore transactions, using phony tax payment checks, promises of tax refunds for slave reparations and refunds on social security payments.


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