Tax Day 2013: Two Palm Beach County communities among nation's highest potential tax cheat areas
7:41 AM, Apr 15, 2013
1:02 PM, Apr 15, 2013
WPTV Web Team contributed to this report
PALM BEACH COUNTY, Fla. -- Belle Glade and South Palm Beach are among the nation's communities with the highest number of potential tax cheats, according to the National Taxpayer Advocate and Internal Revenue Service.
The NTA used confidential data from 2009 tax returns to identify clusters of potential tax cheats in more than 350 communities. The IRS assigns a score to each tax return rating the likelihood agents will collect additional tax money from an audit. The higher the score, the more likely a person from that community will get audited.
The study focused on sole proprietorships, which account for two-thirds of all U.S. businesses. The median scores for sole proprietors in Belle Glade and South Palm Beach were among the highest scores in the country.
The IRS only audits about 1 percent of tax returns each year, so the agency tries to pick returns that are most likely to yield additional tax money.
The IRS will not say much about how agents choose their targets. But as millions of procrastinators scramble to meet today's deadline to file their taxes, the agency is running every tax return through a confidential computer program to determine the chances of collecting more money from an audit.
"If your return is selected because of a high score under the DIF system, the potential is high that an examination of your return will result in a change to your income tax liability," says an IRS publication that explains the auditing process.
How do you get high score? The IRS won't say, but veteran tax preparers and former IRS workers believe they have a pretty good idea.
"If you're reporting $8,000 of charitable contributions when you're only making $50,000, that's a red flag," said Bob Meighan, vice president of TurboTax, an online tax preparation service. "Likewise if you're reporting business or employee expenses that are out of the ordinary for your income range, that would attract the interest of the IRS as well."
The bottom line, according to the experts: People who take unusually large deductions for their income get a high score. Also, business owners who claim unusually large expenses for the size and type of their business get a high score.
"I had a case here where the person made about $40,000 and they claimed $25,000 of employment-related expenses," said Elizabeth Maresca, a former IRS lawyer who now teaches law at Fordham University. "Most people don't spend $25,000 to earn $40,000. That's an unusual number."
Other cities, towns and neighborhoods that received the highest scores in the country were: