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What small tax cheats can cost the government

Jennifer Collins Apr 17, 2012

Bob Moon: Not to sound pushy, but you have until midnight to take care of your taxes. I’m guessing there are a few within the sound of my voice who might be thinking about deducting a phony business lunch or maybe padding their mileage.

Jennifer Collins reports on small time tax cheats — and what they cost the government.

Jennifer Collins: In public radio, we love to offer incentives for your generosity — tote bags, coffee mugs, tax write offs.

KPCC promo: Donate your old car to KPCC, and get a tax deduction for yourself.

And it may seem tempting to tell the IRS you’ve given more than you actually have.

Neil Hecht did.

Neil Hecht: I just lied and added an extra $5 to my charitable donations.

Hecht says that brought down his taxes by $14. He says he only did it once or twice, 20 years ago.

Hecht: For me it was $14. Who the hell gives a damn about $14?

In its most recent report, the IRS estimates improper deductions cost around $17 billion a year. That works out to about $55 for everyone in America. Which makes Hecht’s tax dodge laughable.

Richard Schmalbeck: $14?

Richard Schmalbeck is a law professor at Duke.

Schmalbeck: The time it takes you to figure out how much you need to cheat in order to save yourself $14 — you could have mowed your neighbor’s lawn or something and it would have been less work and equally as remunerative.

Kelly Phillips Erb: I think everybody fudges at least once in their lifetime on their taxes.

Tax lawyer Kelly Phillips Erb says the IRS often gives taxpayers the benefit of the doubt. It’s the flagrant disregard for the tax code that gets people in trouble.

Phillips Erb: There’s a saying that we say in the tax world: Pigs get fat and hogs get slaughtered.

And she says shady deductions usually only save pennies. As for Neil Hecht. He says he’s changed his ways.

Collins: Did you feel guilty for doing this?
Hecht: Um. I’m not sure.

Today he’s the chief financial officer of a regional bank. He asked me not to use the name of the bank because, you know, cheating is not the kind of word that you want in the same sentence as CFO — even if it was only $14.

I’m Jennifer Collins for Marketplace.

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