Evening star., 1926-03-11
REATINC THE INCOME TAX
Uncle Sam Says 1t Can't Be Done.
BY WALTER II. ATKINS
BY WALTER II. ATKINS

ernment, not only of the back taxes
due, but possibly heavy penalties il
the nature of the taxpayers trlck il
fragrant and deliberately planned.
Many Depreciation Claims
deductions for real estate depre,I.
alton are d frequent cause for searching
inquiry by revenue experts especially
well qualified as realty appraisers. lu
some such cases claims for deduction
are excessive. especially in the case of
taxpayers with large real estate hold
ingS. Investigation of a single cas-
sometimes carries a corps of auditors
and appraisers into dozen or more
States. in on-the ground studies uf
records and properties. From this
source also there come into III"
Treasury large sums in additiUnai
levies found To he due after taXpay-
ers' returns have been filed and SUI
veyed.
The right Of real estate owners Ia
make all reasonable claims for de
probation Of real property invest
ments is not questioned but experts
go very thoroughly into these claims.
and if theif suspicion is aroused they
go behind the tax return, To- ferret
out the lost Government revenue.
of cases. Some notable cases have
been uncovered. showing taxpayers
had been successful by defrauding the
Government over a period Of many
years by systematic false representa-
tions as to losses from depreciation, or
damage for varied causes.
individuals and business firms as
well find many methods to pad" the
expense side of their Iedgers. to re
duce income, for tax computation pur-
poses. Some were detected padding
their books with expenditures on the
''pay roll account" which was grossly
fraudulent. One man claimed he had
thirty employees when he had only
ten in his employ. Fake receipts for
alleged salaries paid We're produced.
but examination revealed them to be
fraudulent. Business men now seldom
resort to this trick, for they have
been shown it isn't workable. Mer-
chants sometimes charge off a varied
list of items for overhead expense,
that on general principles are allow.
able, but which may be greatly exag-
gerated and enlarged. TO be able to
gauge such matters. the revenue
services personnel includes experts;
capable of knowing the fine points i'm
the different trades and professions.
They are trained to see at a glance
the genuinenesS of taxpayer's
claim. 1nstinctively they can scent
fraud if it exists. Hard business
sense and insight from experience
into the many tricks played give
these experts a handicap over the tax.
payer in the average effort to defraud
the Government.
Secret Accounts Common.
Secret bank accounts to hide income
tax is also favOrite method employed
by individuals and merchants as welIas
corporate enterprises. Usually the
secretion of funds in large sums is
done under assumed names, and the
purpose may or may not be known
to the bank officials. Since il is legal
for d depositor to put money into a
bank under any name he may select.
the bank officers cannot be questioned.
There are ways open to the Internal
Revenue Bureau, however, for detect
ing such instances. and it is especially
easy if the taxpayer is hiding money
in large totals. An effort to hide
S500,000, out of business income, by
use of fictitious names in banks, is
almost surely to be detected. How the
revenue service finds out about these
secret bank accounts is not divulged
but their sources of information along
this line are numerous, and they are
usually dependable.
The odd tricks used to dodge income
taxes, in the majority of cases. involve
relatively small sums. Frequently
taxpayers employing them become
conscience stricken and send back to
the Treasury conscience fund.- vary
ing amounts that may have been thus
withheld from the Government In
the Treasury Department q few weeks
ago, a clerk opened a letter and found
four 500 bills. The four bills were
inclOsed in a brief message. but the
name of the sender was missing The
postmark on the envelope, however.
showed the city of origin. The bills
were brand-new. were numbered con
secutively and apparently had Just
come fresh from the bank. Intelli-
gence Unit agents went to the bank
within 48 hours from the hour the
money reached the Treasury. and
learned the identity of the sender.
The sender of the money was "a
respectable business man in the com
munity. He had defrauded the Gov
ernment out of income tax. Additional
check-up was made on his tax return
and he was requested to pay an addi.
tional $500 tax.
The conscience fund" was further
fattened by $2,500 sent by another in
come tax evader, who repented. The
money was sent to the Treasury by
express from q city some distance
from the town where he resided But
the intelligence agents found him
without trouble. Thousands of dol.
lars thus have come into the Treasurv
from taxpayers who try in that man
ner TO atone for past mistakes.
Copyright 1926