The New York herald., 1922-09-17
Commissioner Blair Finds
That Delinquents Often
Betray Others Who Have
Not Made Return on In
come and Even Bootleg
gers Are Made to Pay

immediate rush among fur dealers all
over the country to file amended re-
turns. with additional payments Of
money to the Government.
In Pittsburgh another sample OF how
exposure for the tax evader operates
was cited by officials. Junk dealers
doing an enormous business were ap-
pretended. AS soon as the accused
were taken into court and some OF
them Jailed there was a stampede OF
junk dealers to pay additional taxes
on the plea that their previous returns
contained honest errors" In the
Pittsburgh cases, It was shown, some
dealers who made upward of 100 per
cent. ret profit during a year certified
to the Government that their profits
were less than per cent. Most of
them. in deductions claimed, repre-
sented that they had conducted their
business at a loss. This and similar
frauds are being regularly unearthed.
Each fraud reveals others. officials
said. and thereby is opened up hidden
revenue sources.
plies the rule of common sense and
reasonableness in deciding the thou
sands of knotty problems constantly
confronting the Government, many Of
which do not involve criminal intent
by those failing TO make returns or
who underestimate their liability. In
few typical cases the bureau made
these official explanations in response
to questions submitted by THE New
YORK HERALD.
Must Be Bankrupt
to Escape Collector
Q. Suppose large income is re-
ceived and all is spent in other ways
than by business or speculative losses
so that nothing is left with which to
pay income tax? A. The taxpayer
would have to submit a statement of
his assets and liabilities. Proof ac-
ceptable to the bureau would have to
be shown that the taxpayer is bank
rupt. Proper investigation of the facts
cited by the taxpayer is made by the
bureau to determine II there is an
effort to dodge taxes. The Govern
advisable to try to extract blood from
a turnip" II the bankruptcy of the in
dividual is conclusively shown.
@. How many persons have been
punished for failure to make any re-
turns to the Government showing
their income? A. More than $4,000
persons each year are assessed a
penalty of from s5 TO $40 for failing TO
make a return. although their income
Is not taxable.
q. Does the Government have the
right TO examine bank records in cases
OF those suspected OF avoiding pay
ment of income tax? A. Congress
gives the bureau the right to insist
that all records. banking record or
otherwise, be revealed, II that course
is necessary to establish the taxpay-
ers status.
Q. What happens to an individual
who fails to declare in his return the
profits made upon sales of stocks?
A. Along the line somewhere in stock
transactions there is a record of the
buyer and seller. Brewers records Of
fer reliable information on this point.
Under Supreme Court decision, stock
dividends are not taxable. Profits on
stock sales. however, are taxable, and
are required 10 be shown. There Is
a check on an individual stock sale
through the preceding or subsequent
sales. Very careful watch is kept
upon brokers' records TO, detect wlllful
failure of taxpayers to hide their prof
its from such sources.
Q. II a citizens money Is in many
savings banks does the Government
make a total OF these deposits and find
out whether the total annual interest
calls for a tax? a. II Is difficult for
the Government IN ali cases 10 trace
accurately the liability OF taxpayers
who so distribute their accumulated
funds on deposit. Generally 1t is only
in cases Of fragrant efforts to hood
wink the Government BY that method
does the Government call for private
bank records 10 disclose the taxpayers
status. The bureau regards this as a
very exceptional method and one that
probably does not mean very large loss
to the Governmnt.
A very important part OF the revenue
bureaus machine is the auditing force
Of 1000 men. Auditors subject the re-
turns TO closest scrutiny. and II deduc-
ton or other claim appears on their
face TO be doubtful. investigation
usually is ordered. At different perl
DDS of the year hundreds OF these ex-
perts are in the field checking up on
the books OF concerns whose returns
have been questioned
The Internal Revenue Bureau
has its own corps Of dlplomats--so-
called. because they are top notch
artists In effecting compromises sue
cessfully for the Government In pend
ing litigation. There - always a jam
OF contested tax cases. These grow
out OF efforts Of taxpayers to secure
refunds OF taxes they claim was IL
legally collected, or arise out OF cases
In which II Is found the Government
Is underpald. In single case. the de-
tails OF which are not disclosed. the
collected an extra s10.
900. 900 more in taxes than was paid
by a certain corporation.