Protecting the Little Guy

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An NBC News consumer reporter busts two tax preparers who helped a part-time waitress who earned $11,000 last year get a tax refund. They told her not to tell the IRS about her $4,000 in cash tips. The waitress was undercover for NBC News, and the tax advice was captured on hidden camera.

Both H&R Block and Jackson Hewitt say what happened to us is a clear violation of their policies and unacceptable. They say they have taken actions against the employees involved. (On the video, the preparers look like recent college grads.)

Ok, cheating on your taxes is wrong. But what kind of investigative reporting is this? Does the IRS really need network news to help it enforce tax laws against low-income filers?

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  1. Cut ’em some slack, it’s easier than investigative reporting on mosques with questionable extra-prayer activities.

  2. Yeah, tracking tip money is a fool’s game, unless you’re going to have an accountant with each server.

    I’ve worked in some pretty nice restaurants, and it’s amazing what cheap bastards there are from all walks of life. In a good restaurant, 15% average is a high estimate, depending on what shifts you work. In a waffle house, forget about it!

  3. Before the “cheating on your taxes is a moral imperative” crowd arrives, Mike, I’ll just point out that if we don’t nail the $11,000 a year crowd, then the higher earners will have to pay more taxes, and we can’t let those lucky $11,000 a year duckies get away with that.

  4. Phil,

    Yeah, the higher earners, like, the people who make enough money to get super-raped by uncle sam, but not enough money to make it worth it to hide some of your income in the Caymans.

  5. I submit that cheating (“cheating”) on one’s taxes could be seen as more moral than submitting to the IRS.

  6. This has nothing to do with media consolidation.

  7. I’m not big on nailing the “$11,000 a year crowd,” but judging by what I hear from friends who have used H&R Block, advising people to cheat on their taxes is de rigeur over there. I’m no fan of being taxed, but I don’t think licensed tax accountants should be able to just tell people to cheat. Several of my friends were very uncomfortable with the whole idea, but followed the preparer’s advice because “they’re the expert.”

    Cheating on taxes just pisses me off. If you don’t like the tax system (and I don’t), put some effort into changing it.

  8. I’m starting to think there’s a moral duty to cheat the IRS out of every dime you can. It’s like giving a bum a quarter so he can buy another 40.

  9. Actually, I think the problem is kind of the opposite of what Phil says. the idea is that NBC molds public protection so that when people think of cheating on taxes, they think of those waitresses. this gives people mixed feelings about IRS enforcement efforts.

    Realistically, the IRS leaves a lot more rich person money on the table than poor people money. However, when you think of tax cheating you are not supposed to think of those rich people. NBC would prefer that you think of the waitresses. Pre-empts public support for tax crackdowns (which would most rationally be aimed at the rich).

  10. This is why I never tip Reason editors! Anyway, they just spend it on drugs and guns.

  11. A “professional” advisor telling a low-income client to break the law is seriously bad advice. I don’t think the report was intended to help the IRS, but to let customers know what they are getting into with these services.

  12. I’m starting to think there’s a moral duty to cheat the IRS out of every dime you can.
    Now that I don’t pay any significant taxes, I feel oh-so-morally superior to the old self that, due to laziness more than anything, paid a few hundred grand over the years. (Seriously!)

    It’s like giving a bum a quarter so he can buy another 40.
    Heh – that’s a better analogy than mine was.

  13. The assumption that H&R tax preparers are “licensed tax accountants” is generally incorrect. Many of them are seasonal workers with some training, who are picking up some extra income during tax time. I would not rely on their ‘expert’ advice. Go to a real CPA or an ‘enrolled agent’ (great title) if you want advice.

  14. Under a Flat Tax, this person wouldn’t even be paying income taxes.

  15. This is why I never tip Reason editors! Anyway, they just spend it on drugs and guns

    Reminds me of this oldy but goody:

    A bum in the street asked me for a dollar, and i told him no, because i thought ‘he’s just going to spend it on drugs or booze.’ And then i realized: that’s exactly what i’m going to do with it.

  16. but to let customers know what they are getting into with these services

    Nonsense. They didn’t have to catch the preparers ‘red-handed’ to make that point, but rather just report on what commonly given advice isn’t legal so customers can decide for themselves whether to follow it. And actually, if there’s any actual problem with “getting into” this situation, reporting on waitresses who were actually busted for following such advice would make such a warning a whole lot more tangible. But then, maybe such cases are rare enough that, tehcnical legality aside, it’s actually very good advice?

  17. So, does this mean they’ve run out of pedophiles over at NBC?

  18. Them poor ol’ bosses need all the help they can get.

  19. Ok, cheating on your taxes is wrong.

    What?

  20. I strongly encourage you to cheat on your taxes as much as possible. This lady should be shot, she’s in league with the domestic terror- the IRS.

    The IRS itself is such a disgusting and amoral parasite of our government that anybody who shafts them is deserving only of three hearty cheers and many places to lay low while the man is out to get them.

  21. Yeah, if we must have taxes, let’s have a flat tax with something like a $20,000 deductible so the poor people aren’t shafted.

    I still remember the 100 or so years in which our country got along just fine without an income tax. But, dare I say that in public these days?

  22. “Cheating” the IRS is no moral imperative, but it sure as hell is not “wrong.”

  23. “Does the IRS really need network news to help it enforce tax laws against low-income filers?”

    This isn’t a case of network news helping enforce tax lasws against low-income filers. It is a case of network news helping uncover fradulent tax preperation services that might induce high or low income filers to file false returns.

  24. The more people who are willing to “cheat” the IRS, the less likely it is that the income tax can survive, so I encourage all the cheating that anyone can get away with. There are so many reasons why this makes sense that I’m not even going to try to cover them. I assume that people in this particular crowd already know them.

  25. The ESTONIANS have a more rational tax code than we do, for crying out loud. And the IRISH.

  26. However, when you think of tax cheating you are not supposed to think of those rich people. NBC would prefer that you think of the waitresses.

    NBC has a long way to go to make people not think “Willie Nelson”, “Leona Helmsley”, or “Al Capone” when it comes to tax evasion.

  27. Anon: In South Africa the ANC actively encouraged all kinds of law-breaking, including not paying taxes, as part of their resistance to white minority rule. After the ANC came to power, they were shocked that their constituents saw no need to comply with the laws going forward.

  28. NBC has a long way to go to make people not think “Willie Nelson”, “Leona Helmsley”, or “Al Capone” when it comes to tax evasion.

    Yeah, isn’t weird how infrequently these big cases pop up. You would think that tax evasion prosecutions would be a huge revenue source, especially with the lack of procedural protections for the tax payer. Rich peoples must be a lot more honest than poor peoples.

    NBC might argue that they used waitresses because that is a very simple kind of tax evasion that people understand and even have occasion to muse over everytime they leave a tip on the table. Even so, the “sting” involving the waitresses should probably have merely been a hook for a much bigger sting involving a less familiar portion of the tax code. Then the viewers would understand how many waitresses equal one rich person from a revenue standpoint. However, that is exactly what NBC doesn’t want you thinking about.

  29. {o.o}
    |)___)
    -“-“-
    o rly?

  30. After the ANC came to power, they were shocked that their constituents saw no need to comply with the laws going forward.

    Wouldn’t have been a problem if the ANC was made up of anarchists…

  31. Nose: Anarchists’ political philosophy (like everyone else’s) seldom survives an ascension to power.

  32. Ron – There was the “Republic of Fiume”, which had a constitution stating that music was the central principle of the state. The government’s main activities revolved around wine and poetry. It only lasted about 18 months until the Italian navy got tired of tolerating it. Not exactly as “anarchist” as some authors would have it, but it was an interesting experiment.

    Anyway, as for the IRS – I feel no compunction about cheating them, but how do you know? As (I think) Will Rogers said, every year I’m either a martyr or a crook; I just wish I knew which one it was.

  33. Rich people are just too savy, and have too many lawyers, political connections, friends in the media, whatever to be worth going after.

    Who are you talking about, billionaires? Because you must not consider “rich” the hundreds of lawyers, executives, doctors and accountants that get busted every year for failing to pay 6 and 7 figure tax debts. People with net worths in the $ 2-7 million range. Not rich enough for ya?

    A better idea would be to incarcerate public officials — from legislators to purchasing agents — for wasting tax dollars. There’d be less need to collect taxes that way, less need to pay them, and less incentive to cheat.

  34. Because you must not consider “rich” the hundreds of lawyers, executives, doctors and accountants that get busted every year for failing to pay 6 and 7 figure tax debts.

    Hundreds? woooooo

    If tax evasion carried anything proportional the penalties for shoplifting on a dollar for dollar basis then there would be a lot less prison rape.

    Really, tho, who cares? It is mostly tip money that is the problem. Cause that is what NBC decided to cover. Certainly wouldn’t want to cover a story about some crooked doctor and his negotiated settlement. That would bore NBC viewers if they covered that. Hidden cameras and photogenic young women rock!

  35. I expect the next episode of “Dateline” to feature an 8-year-old kid busted for failing to pay FICA on the $5 bill his aunt gave him for Christmas.

    (And, yes, I know gifts are exempt to a threshold, but the very idea of paying taxes on any form of cash “income” is ludicrous whether it’s tips, garage sale proceeds, etc.)

  36. Cheating is wrong.
    When you submit a return, you sign attesting to the validity of your return.
    If you oppose paying taxes, then refuse to pay.

  37. Uncle Sam – Yeah, but you basically sign under duress, since not paying tends to lead to a bunch of bad things. (Actually, that’s part of why things are set up so that most people get refunds: it means the IRS cares less if you file, since you were probably going to get money back anyway.) Attestations done under duress usually don’t count for much.

  38. Find me a person who is paid in tips who pays their taxes honestly, and I will eat my underpants. Whether you agree with the law or not, cheating should not be tolerated.

    The tip system is stupid anyway. We should just do away with it.

  39. Damn. I waited tables for seven years and never once claimed tips on my tax returns. I never even gave it a thought except when I got my first restaurant job. I asked the crusty but benign Greek guy who owned the place what I was supposed to do about claiming my tips and he said “honey, you don’t.” And truly, the idea that I should have been paying taxes on those tips, particularly in a state in which wait staff were paid $2.01 an hour (a rate which did not change in accordance with changes in the minimum wage) is absurd.

  40. Under a Flat Tax, this person wouldn’t even be paying income taxes.

    In a libertarian society that would also be true.

    I am suprised at how many libertarians writing about this issue side with the government. If it were dope they wouldn’t be.

    Whose money is it anyway?

  41. First of all the Jackson Hewitt preparer is full of crap. You can’t invent a kid for someone’s tax return because the social security numbers are checked by IRS before any refund gets kicked out.

  42. Cheating on your taxes is wrong, not because it screws the goverment, which is good, but because it screws other taxpayers.

  43. van: Why is it absurd? All the bus boys, cooks, and staff are paying taxes. So are the store clerks at Wal-Mart and the burger flippers and McD’s. Of course, someone actually trying to live on that money probably gets it all back in EITC anyway.

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