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Sequester steal: Will IRS budget cuts tempt tax cheats?

The sequestration may cause more disruptions than just delayed refund checks at the Internal Revenue Service. The budget cuts could give an edge to tax evaders and cheats, who already cost the government billions of dollars each year. If workers are furloughed, the IRS would have fewer eyeballs to scour tax returns.

“I can’t recommend that anyone try to get a fraudulent return through, but if you were trying to get one through, this might be the year to do it,” says Dan Hood, editor-in-chief of TaxPro Today magazine. As hard as it might be, Hood suggests, the IRS perhaps deserves an exemption from the public's scorn this year.

“No one has any sympathy for the IRS, but they really do have an incredibly full plate this year,” Hood says.

Even before the newest round of budget cuts, the IRS was already down staff and resources.

Richard Cebula, who teaches finance at Jacksonville University’s Davis College of Business, says the shaky job market could mean more temptation for taxpayers to sequester some of their own income from their tax return.

“What happens is people become more desperate, they worry about their job security, and they try to find ways in cutting corners. Including the corner that turns in the direction of the Internal Revenue Service,” Cebula says. Still, Cebula estimates that about 10 percent of taxable income will go unreported this year, the same as last year.

The IRS has a message for potential tax evaders: It expects to hold off on any furloughs until summer -- after income-tax returns have been processed.

Correction: The original article misstated the full name of the IRS. The text has been corrected.

About the author

Sally Herships is a regular contributor to Marketplace.
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