The advent of April 15 each year is hailed, as sure as death, by newspaper accounts of heavy punishment being visited upon miscreant taxpayers. The timing is no accident: the Internal Revenue Service likes to give the impression at filing time that, like the Mounties, it always gets its man. Last week, as some 62.9 million Americans went through their annual throes, they could reflect on the well-publicized tax indictment of J. Truman Bidwell, chairman of the board of governors of the New York Stock Exchange.
Then there was the invasion of Fordyce, Ark., by 30 tax agents who checked the 1961 returns of nearly 1,000 of the 10,522 citizens of Fordyce and surrounding Dallas County—and found that many had not filed any reports at all last year. And the U.S. taxpayer could also contemplate the case of a Brooklyn man arraigned for claiming an exemption for his mother, who had been dead for ten years. His wonderful explanation: "Mother's still alive in my heart." Such items effectively get across the idea to the taxpayer that the odds are heavily against him in his annual duel of wits with the tax collector. And so they are: the Internal Revenue Service, with 58,584 eagle-eyed workers in 1,224 offices, is by far the biggest, most efficient and most successful revenue collection agency in human history. But the U.S. taxpayer is quite a fellow himself. In his heart burns a variety of emotions: deep resentment, hopeless resignation, awful foreboding, dark temptations. His conscience, if it does not always triumph still does pretty well. Unlike the Italian, the Latin American or the Frenchman, for whom tax evasion is a way of life, the U.S. taxpayer turns over anywhere from 20% to 91% of his income, as requested, with uncommon honesty. Like everyone else, he likes to play the game with the tax collector, but usually for small stakes. IRS Commissioner Mortimer Caplin estimates that the U.S. taxpayer is 97% pure.
To help the taxpayer stay pure, the Internal Revenue Service has set up a system of checks and double checks. When a return first lands on the desk of a local collector, it is scanned for proper information and necessary enclosures. Minor errors are corrected, and marginal sarcasm from taxpayers calmly endured. But wait! Less obvious errors, or outright evasions, are searched out after the returns have been routed to three data-processing service centers across the U.S. There returns are translated onto a punch card and checked by machine for arithmetic accuracy. The U.S. taxpayer is pretty punk at adding and subtracting: almost 2,400,000 errors were caught last year. Of them, about 1,500,000 were in the taxpayer's favor, to the tune of $132 million; but 892,000 citizens shortchanged themselves by $66 million.
Dreaded Audit. For most taxpayers, the arithmetic check is the last made on their returns. But the IRS selects about 5% of all the returns for more thorough checking—the dreaded audit. The criteria used for auditing are as closely guarded as the formula for Coca-Cola, vary from year to year to keep the taxpayer off guard. Those who have run into trouble in a previous year almost invariably get a second or third look. Upper bracket incomes get special scrutiny, and if a taxpayer makes more than $25,000 a year, the odds are 1 in 4 that he will be audited.