FollowThe recent college entrance exam and selection process cheating scandal raises questions beyond the prosecution of perpetrators to include an essential inquiry into whether the IRS will audit the individuals discovered to have colluded in the scheme. The answer to that question rests with the particulars of the case. Tax evasion is a crime that requires a thorough audit by IRS experts for proof of the act and an intent to defraud the government.
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What is Tax Evasion?
The act of tax evasion is the willful underreporting of income or overreporting of deductions to avoid paying the full responsibility of income taxes to the government. The IRS Criminal Division is the department responsible for investigating and prosecuting tax evasion cases. Tax evasion is not restricted to individuals; businesses and organizations are also subject to tax laws. An organization or business that resorts to tax evasion is brought up on racketeering charges where individuals are brought up on charges of tax evasion. The intent, in both cases, of the perpetrator, is the same—avoid paying income taxes and thus the law.
The Allegations in the Cheating Scandal
Cheating involves two different means of successfully entering chosen colleges or universities. In either case, the cheating not only involves payments toward better SAT or ACT scores but also toward established coaches to accept fraudulent credentials of students as sports athletes. CNN.Com reports that over 50 individuals have been charged with involvement in the scheme. In many of the cases, the payments were disguised as donations to Singer’s—the central organizer of the cheating plan—fraudulent charity. Singer then passed on bribes to NCAA division 1 coaches for as much as $50,000 to look the other way and accept the validity of false sports credentials to add students to their list of prospective athletes. Adding unqualified students to a “wish” list of sports coaches moves those students to the front of the line during the application process. Singer also paid proctors to cheat for students during their college entrance exams. The result, at times, was an increase of as much as 400 points on scores.
Does the Scheme Call for Tax Auditing?
Given the definition of tax evasion as the willful underreporting of income or overreporting of deductions, the likelihood of the auditing of tax returns presented by the perpetrators is a near certainty. The reporting on tax returns of a bribe payment, as in this case, as a charitable deduction is an example of voluntary overreporting of deductions. Singer’s fake charity will, of course, be audited as a criminal enterprise. The government, during its announcement of the allegations, already itemized at least two cases where the payments were noted as charitable donations. Taking the willingness to cheat on taxes once leads to the speculation that more income tax cheating exists. Knowing that evidence exists that some of the participants knowingly used the fake charity as a deduction leads to speculation that others di so as well.
Will an Audit Take Place?
The cheating scandal is a symptom of corruption that permeates from the ability of the wealthy to cheat without regard to others. The crimes call for an examination of motives and social forces that create an environment where such actions are considered acceptable. Due to the criminal intent demonstrated by the perpetrators, the likelihood of a tax audit moves from a possibility to a certainty.
