Another thing about taxes is that every year I get really paranoid about getting audited. I suppose that fear stems from the fact that I owe the government money every year, so it seems like they’ll just come after me for more.
I never cheat on my taxes, but I’m just scared that they’ll pull out my returns from a decade ago and note that I didn’t carry a 1 somewhere, or misplaced a decimal point, and with interest compounded hourly I now owe the government a cool $10M. The prosecution will coyly point out that I was a Mathematics major, so just couldn’t have made such an elementary arithmetic mistake. As the bailiff drags me away in handcuffs, I will protest loudly that calculus and arithmetic use different parts of the brain.
However, I’m sleeping a little better this year reading that only 0.19% of filers get audited. The statistician in me evidently trumps the paranoid anti-government nut. This statistic comes from the authors of Freakonomics, one of the most interesting books I’ve read this year (do you like how that implied that I read a lot of books?). Yes, I’m now the annoying guy who jumps into a conversation with, “do you know they did a study and found that most people….”
The first chapter in the book talks about the economics of cheating, and notes how seven million American children disappeared on April 15, 1987 because the IRS started requiring filers to provide Social Security numbers for each dependent. The authors recently wrote a follow-up article on taxes in the NY Times that’s also very interesting. It talks more about cheating, especially as it relates to self-employed workers.
Hmm, I wonder if this means my self-employment status will now bump up my audit probability.
5 responses so far ↓
1 brock // Apr 20, 2006 at 4:00 pm
First, one wonders who would have turned you on to a page-turner of both interest and intelect as ‘Freakonomics.” Perhaps a subject for another post.
Secondly, the ‘Freakonomics’ blog is some of the most interesting reading on the web. Their case for why we should want more enforcement from the IRS, not less, convinced me. (I of course am easily swayed).
2 ade // Apr 20, 2006 at 4:07 pm
One wonders indeed. Jon Stewart?
3 Ed Illig // Apr 20, 2006 at 8:19 pm
Freaky.
I’ve been audited 4 out of the 10 years I’ve been self-employed. However, I’ve never been prosecuted or fined. Thankfully, my returns, like Hiroki’s code, are impeccably prepared. Statistically speaking, I’m an anomolous enigma on all fronts.
But look, if I were you, I would take heed of that small conspiratorial voice of yours. Believe me the IRS are fully briefed about you.
How do I know? They asked me. They asked me about you and all my other small business owner friends. Standard stuff like, “Citizen Ed, does this person participate in any illicit activities like, say, poker?” followed by questions like, “Citizen Ed, do you value life as a free man?”
And then I answer them. And then they stamp my return:
“Impeccable.”
4 ade // Apr 20, 2006 at 9:18 pm
LOL. Thanks for the … umm … referral.
5 Ian // Apr 21, 2006 at 7:57 am
I have done my homework on this, becase like you, I am paranoid. I am also mostly honest
Where I fail in honesty is claiming small amounts from here and there - $100 projects that move to fast for invoices or work agreements.
I’ve learned that self-employed individuals are more likely to get audited. Also, moreso if you 1) claim business lunches as deductions and 2) claim an office space as a deduction.
So, I don’t do those things.
If Ed has been audited 4 out of 10, then I’m due for one by those statistics…
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