Tax evasion in the United States

Al Capone, an infamous Prohibition-era crime boss, conducted all of his financial transactions in cash, never having a record of having a bank account.

Having said this, the government put a great deal of effort toward collecting evidence of Capone neglecting to pay taxes on his income.

Following Capone's sentencing, Meyer Lansky, often called "The Mob's Accountant", worked to find a better way to get out of paying taxes.

Moving forward, Lansky discovered the benefits of Swiss Bank accounts and would become a significant figure for money laundering by using foreign tax havens.

Small business and sole proprietorship employees contribute to the tax gap because there are few ways for the government to know about the skimming or non-reporting of income without mounting more significant investigations.

Similarly, those self-employed persons (or those who run small businesses) evade the assessment or payment of taxes if they intentionally fail to report income.

One study suggested that the fact that sharing economy firms like Airbnb, Lyft, and Etsy do not file 1099-K forms when participants earn less than $20,000 and have fewer than 200 transactions, results in significant unreported income.

[13] A recent survey found that the amount of unreported income for 2016 in the United States numbered at US $214.6 billion, with one in four Americans not reporting the money made on side-jobs.

People can utilize tax havens because many other foreign financial institutions are not held to the same disclosure requirements as those in the United States.

Suspected lawbreakers, most famously Al Capone, have been successfully prosecuted for tax evasion when there was insufficient evidence to try them for their non-tax-related crimes.

A person who does not view the correct representation of income and proper filing of taxes as an ethical decision is more likely to be influenced by factors surrounding them.

Whether it be for education, law enforcement, or public parks, each situation shares in the relation of the government receiving money, so-called "property" from the taxpayer.

[21] A few positive uses for taxation seen by many may include a contribution to law enforcement or education as these organizations produce a benefit to most members of society.

This difference truly embeds the climax of ethics for, as noted, "it is impossible to determine which types of public goods are necessary, in which quantity, and which unsatisfied needs of one individual imply the duty of another".

[21] It is additionally noted that "one may resort to coercion in order to force other people to share in the costs of the satisfaction of any need one thinks should be satisfied (cite)".

143–155)" As a whole, the major issue that comes along with the ethics of tax evasion stem from whether taxpayer money really serves the payers that make the contributions.

In 2001, a modified random-sampling initiative called the National Research Program was used to sample 46,000 individual taxpayers, and the IRS released updated estimates of the tax gap in 2005 and 2006.

The whistleblower program seeks information based on evidence and analysis, which can provide a solid basis for further investigation rather than speculation and hearsay.

[42] Individuals must meet qualifications to be eligible to receive the reward and must submit Form 211 with supporting documentation to the Internal Revenue Service Office in Ogden, Utah.

To claim the reward, the IRS must move ahead based on the information provided, and the amount identified, including taxes, penalties, and interests, must be worth more than $2 million.

The legislation's main goal was to improve taxpayer service and ensure that law enforcement was done fairly and impartially, ultimately supporting the nation's continued success.

While these incorrect filings can be due to neglect or lack of knowledge of the tax code, the IRS will take these matters seriously.

If it is determined that the error was unintentional, the IRS will apply two common Accuracy-Related Penalties to individuals: Negligence or Disregard of the Rules or Regulations or Substantial Understatement of Income Tax.

The date that interest is charged varies by the penalty but will increase the amount owed until the balance is paid back.

If the filer acts in good faith and shows reasonable cause for not meeting the obligation, the IRS can remove the penalty.

The IRS offers a toll-free number at the top right corner of the notice letter for the filer to call and dispute.

The government dropped EY from being criminally prosecuted, but the firm needed to abide by strict controls over its tax practice.

[56] KPMG ex-employee David Rivkin lost his job as a partner when a tax evasion scandal led him to plead guilty.

David Rivkin was the only KPMG employee convicted and punished for the crimes committed and was one of the lesser individuals involved in the whole scandal.

[57][58][59] Walter Anderson was involved in the biggest tax evasion case by a single individual that amounted to $365,000,000 in unreported income.