Evening star., 1947-12-14

With its present staff the bureau
can investigate thoroughly only
about per cent of all tax re-
turns. All the larger ones receive
a complete audit. That means that
an investigator not only scans the
return as filed, but almost always
goes back to the taxpayers records
and double checks them against the
return.
Every return gets some form Of
scrutiny and even these casual ex-
aminations sometimes turn up in
formation which calls for more
thorough inquiry.
For instance" a bureau spokes-
man said in describing it's opera
tions. "a return is filed by a store
assumed in its community to be
prospering, but the return shows
that it has done no more than break
even. That calls for investigation.
Sometimes we get tips from
workers that their employer is falsi-
flying his returns. Sometimes the
deductions appear to be out of line.
Sometimes tips come from busy
bodies, who may have a grudge
against the taxpayer.
Instead of the 3 to 5 per
cent of returns on which we make
thorough investigation we ought
to investigate IS TO 20 per cent, but
we don't have the staff to do it.
1--WE have found that when we do
make an investigation, and discover
income understated, word gets
around among friends and ac-
quaintances of that taxpayer, and
often some of them come In VOL
unfairly to amend the returns they
have filed"
Many Can't Cheat
One who submits information Of
false return to the hureau-a
tipster-is entitled to as much as
10 per cent Of the amount recovered
in additional taxes. These payments
are not made when suspicion Of
false return is reported, but only
on the basis of evidence. Surpris-
ingly, few of the tipsters claim pay
ment for their evidence. In the last
10 years the bureau has paid out
as rewards for evidence only about
$4,000. For that $4,000 it was
able to collect $20.000,000.
Most taxpayers are so situated
that they could not even attempt to
cheat on their returns. They are
the salaried workers whose en-
ployers report to the Federal Gov
ernment what has been paid to
them. They are the people whose
income is derived from dividends,
also reported to the Treasury by
the companies which pay them.'
They are the vast majority Of in
corporated companies whose profits
are known to stockholders and many
others.
The self-employed-the farmers.
the doctors, individual retailers,
BARRIERS, plumbers, taxicab drivers,
walters, gamblers, black market op-
orators, promoters-these and host
of others are the people whose in
come is known to themselves alone
or to few others. They are the
people whose opportunities for
cheating, and getting away with 1t,
are best.
They are also the people who pay
through the nose when they get
caught. Many will remember Henry
Lustig. who owned a chain of res
taurants in New York and kept two
sets Of books-one for income tax
purposes, another so that he him.
self could keep track of how much
he was making. 1t took Internal
Revenue Bureau agents several
years to work up the case against
Lustig. When they did, they pre-
sented him with bill for $1,000, 900
and the Federal Court sent him to
prison for four years. To pay the
$1,000 900 he had to sell his business.
Penalties for tax evasion are
severe. Aside from the criminal
punishment-the Inconvenience Of
spending time in prison-there are
civil penalties. On top of the tax
owed there is, as a civil penalty, an
additional levy Of so per cent, plus
interest at the rate of per cent a
year for whatever time the tax has
been due.
Poultry Dealer Caught
One poultry dealer in an Eastern
State has been finding out about
the cost of tax cheating. The bu-
reau came across him in the course
of general investigation of black
markets in poultry.
He had reported total income over
a flve-year period of $4,000. But
agents of the Internal Revenue Bu-
reau say he used two methods to
conceal his actual income.