MauledAgain

No one enjoys paying taxes. But without taxes civilization is impossible. So just as people who need root canals pull themselves together and undergo the procedure because they know the alternative is even more unpleasant, people who understand why taxes are necessary pull themselves together, file their returns, and pay their taxes. Many, perhaps most, people do so while truthfully reporting their income, deductions, and credits.

In a recent press release, the Department of Justice announced that a pizza shop owner pleaded guilty to one count of tax evasion. What did the pizza shop owner do? He deposited some of the business receipts into a bank account and took the rest in cash. He used the cash to pay himself and to pay most of his employees "off the books."

When it came time to file tax returns, the pizza shop owner gave his accountant access to the shop's bank account records, knowing that those records did not reveal the cash receipts that had been funneled to the owner and the employees without passing through the bank account. The owner lied to the accountant, claiming that the business employed the owner and three other individuals when in fact there were about 25 employees. As a result, the income tax returns for the business and for the owner that were prepared by the accountant were false. In addition, the employment tax returns were false. Both income and employment taxes were underpaid. Note that this is an instance where a tax return preparer was not the creator of the tax fraud.

According to the Department of Justice, the owner faces a maximum possible term of five years in prison. Nothing was mentioned about restitution to the government, or doing something so that the employees are given appropriate credit for purposes of qualifying for Social Security and Medicare. If that situation is not fixed, on whom falls the burden when those employees eventually end up with fewer retirement and health benefits than what they otherwise would have received?

It's one thing to lie about something that is private and difficult, if not impossible, for others to ascertain. It's another thing to lie about the number of employees at a pizza shop when it isn't that difficult for anyone to notice or figure out that there are more than the owner and three employees working there.

The lies brought about a short-term financial benefit. They also will cause a long-term price that is much higher than the short-term benefit.