I have some money invested in a sort of term deposit style fund because I am saving for a house. Now, I know the interest I earn in this fund is considered income, but if I leave it off my tax return, what are my chances of being caught?
The fund has my tax file number so they don't deduct tax from it at the highest marginal rate and I assume they will use it to report my interest earnings (income) to the tax office at some point.
But I was going to leave this fund off my tax return completely.
So, what are my chances of getting away scott free and not being audited by the tax office down the track? I'm thinking they would have bigger fish to fry than me so my chances look pretty good?
I pay tax on my work salary which I think is enough. It's not like I see benefit from it within soceity. Why give the Government more to plunder away when it could be used towards a house.
I have no guilt so if it's possible I will do it. Everyman for themselves in this world.
2007-03-11 11:00:29 · 8 answers · asked by Anonymous in Business & Finance ➔ Taxes ➔ Other - Taxes
Assuming that the income is reported to the IRS -- and there's no reason to believe that it won't be -- your chances of getting away without reporting the income are exactly 0%.
The only question is "when" not "if". When they discover that the income was left off of your return(s) they'll recompute your income and tax and send you a bill. Since this will happen sometime after the due date for the return in question -- the IRS doesn't even start matching income with tax returns until after the due date to give taxpayers time to amend returns without being hassled by the IRS -- there will be penalties and interest added to the outstanding tax balance.
The computers that match up income reports (the IRS copies of W-2s and 1099s) and tax returns are lumbering behemouths. They are a bit slow, but they are very thorough and don't give a toss about how big or small of a fish you are. They WILL uncover the missing income eventually and flag it to an agent for review. The agent will take about 30 seconds to review the issue and approve the release of the tax assessment notice.
By the time the penalties and interest are added on, your $200 tax savings could easily baloon to a debt of $600 or more.
2007-03-11 23:40:23 · answer #1 · answered by Bostonian In MO 7 · 1⤊ 0⤋
Your chance of being caught is quite high. The bank or brokerage sends you a 1099-INT so you can report the interest earned. They also report that to the IRS.
The IRS will compare your return to the 1099s that are reported. Oh, it'll take a while, probably months before their computers catch it, but sooner or later you'll get a friendly letter from the IRS saying you forgot to report that income, and oh by the way please pay the tax due along with interest and penalties.
Of course, if we're talking small potatoes, like a couple hundred bucks or less, it might fly under their radar.
There are a lot of gov't programs I don't like either, but that doesn't excuse you from paying your full share of taxes.
2007-03-11 11:04:57 · answer #2 · answered by Uncle Pennybags 7 · 1⤊ 0⤋
Chances of being caught = 100%
Unless it is a really small amount, the bank or brokerage reports the income to the IRS. The IRS computer will kick out a letter telling you to pay the taxes plus penalties and interest. In the long run, you will come out behind.
2007-03-11 12:02:03 · answer #3 · answered by Wayne Z 7 · 2⤊ 0⤋
The amount will be questioned, but the question is when.
Typically, it takes the IRS around two years to start their matching program. They'll take the amounts reported on the 1099s and compare to returns.
Sorry, but your personal feelings on how the federal government (i.e. Congress) spends money isn't going to be a defense in front of the administrative agency of the IRS.
Honestly, it might be a LOT less hassle to pay the tax and be done with it.
2007-03-11 13:33:42 · answer #4 · answered by Molly 6 · 1⤊ 0⤋
from my understanding the IRS matches those almost 100%. I would not leave it off regardless if you think they have bigger fish to fry. You might end up paying not only the original tax owed but also extreme penalties and interest. If I were you I would invest smater if you don't want to pay taxes and find tax friendly investments. The amount of tax is probably minimal Just multiply it roughly by your marginal rate of tax.
2007-03-11 11:05:32 · answer #5 · answered by Lauren1980 3 · 1⤊ 0⤋
Your chances are close to 100% of getting caught on this, since it would be reported. It could take a couple months, or even over a year, but you'd get a letter from the IRS telling you how much additional tax you owe, with interest and probably penalties.
2007-03-11 13:38:05 · answer #6 · answered by Judy 7 · 2⤊ 0⤋
Tax evasion = JAIL
Tax planning = saving on taxes and freedom
2007-03-11 19:01:04 · answer #7 · answered by clu25 2 · 0⤊ 0⤋
I would consult a CPA or tax software and pay the taxes or defer them if possible. See http://mytaxgurus.com for some discounts.
2007-03-12 18:15:35 · answer #8 · answered by Anonymous · 0⤊ 1⤋