Sunday, March 18, 2001

Tax Time

As a people, we pride ourselves on our humanity, our openness, our sense of fair play. We teach our children that no matter what else, it's the quality of your personal behavior that counts. In fact, we like to think that we are a nation of Boy Scouts, more or less. Sure, there are exceptions, but we all generally try to be brave and clean, thrifty and reverent, courteous and kind, and above all, honest.

But if there's a time when that mindset breaks down, it is the month of March. It's not that the winter doldrums have infected the national psyche. It's not that the long, holiday-less stretch from President's Day in February to Easter in April stresses our lives. It's not even the depressing prospect of all repeats on television means the viewing highlight of the month will turn out to be "Greatest Outtakes You Never Saw." Rather, it's that looming just into the next flyleaf on the calendar is April 15th, tax day.

Forget the intensifying national debate among the President, senators, congressman and pundits over the wisdom and structure of a tax cut. For the majority of us, that's a discussion that's happening at 50,000 feet, up there where the air is so thin you can't even breathe. Tax credits for reinvestment in small business? The deductibility of investments in physical upgrades of energy efficient factories? Pro and con it all you want, but most of us are just hunkered down in the trenches trying to decode the nuances of the latest version of the 1040 form. And that means that, like it or not, it's time to take out the shoeboxes full of receipts and the checkbook register from last year, and write the accounting equivalent of "The Truman Show."

For in this manufactured world, nothing is at it seems to be. The dinner with your golf buddies? A dinner with your best clients. That new CD player for your den? An entertainment system for your office. That trip to Florida to visit your college roommate? A fact-finding trip during which you interviewed for a new job. Or at least that's how it'll read on paper, and damn it, just try and prove it wasn't.

It's gotta be something in the air this time of year. It affects everybody, from housewives to ditch diggers, from school bus drivers to investment bankers, from politicians to lawyers. After all, people who wouldn't dream of robbing a bank or making an illegal right on red, or even trying to sneak on board the plane before their row was called suddenly turn into Al Capone, attempting money laundering on a scale that makes the Cali cartel look like a bunch of Swiss bankers.

The IRS always makes some high profile busts and stings this time of year, as a way of shoring up their position. A few years ago it was Leona Helmsley. This year, they set up sting operations at a bunch of tax shelters that cater to the wealthy. But it's all just posturing. For if truth be told, by their own admission, they have no idea of the size of the "tax compliance gap" that's out there or even how to fix it. The last time they even ventured a guess was in 1998, when the agency estimated that $195 billion went uncollected in corporate and individual taxes in fiscal 1997. That works out to $1625 for each of the millions of income tax returns filed for that year.

Unless they overhaul the system, it'll continue to be a losing battle. That's because the current foundation of voluntary compliance is based on 17,000 pages of rules, regulations, deductions, exemptions and guidelines that even the agency's own people can't follow. Yet, in spite of this, most folks hew to the spirit of the law and send in some money, even if they're off a little bit on the bottom line. It kind of works, especially when you consider the alternative. After all, if each of us had to haul our records into a knowledgeable government accountant who could parse our earnings and expenses to get a truly accurate tally, they'd still be sorting out the 1932 tax year.

Instead, most of us perform a ritual not dissimilar to creating a witches brew. But rather than eye of newt and claw of salamander, we stir together all the receipts we've accumulated over the past year, the substitute 1099 forms we've received in the mail and a few other standard deductions, chant an invocation to the spirits, and emerge with a number that tastes bad but will hopefully keep away the demons. Then we dutifully send it in, and hold our collective breaths, hoping that one of the huge contingent of 23 auditors assigned to examine the 150 million returns filed doesn't hit our number with a dart from his desk.

Knowing that the likelihood of that happening isn't high, however, encourages us to bend the truth a little. Sure, it's not what mamma taught us to do. But the temptation is too great. As song writer Glen Frey wrote in Smuggler's Blues, "The lure of easy money has a very strong appeal."

It's just a matter of degree. For the wealthy few, it's a bank account in the Caymans, a fictitious shell company that buys and sells cell phone licenses at a tax loss, or structuring your compensation to include mostly deferred options payable in reduced capital gains in 20 years. But for most of us, it's more likely claiming that the $25 we spent on Girl Scout cookies was a gift to charity. High crime or misdemeanor? We'll let the courts sort it out, and hopefully, the government will still be able to afford a proper toilet seat for Air Force One.


Marc Wollin of Bedford is trying to decide if the doctrine of "exclusive use" means he can't print vacation photos on his office printer. His column appears regularly in The Record-Review and The Scarsdale Inquirer.

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