A unique review: Tax Season. Alcoholism explains tax fraud, and more.
Tax Season
In late 1995 I discovered that alcohol and other-drug addicts seemed to be at the root of most emotional and physical abuse. I wondered if this was true of financial abuse as well. After realizing that a simple reversal of the idea–that abuse might indicate alcoholism–it dawned on me I could easily test the concept.
I did so during the 1996 tax season by suggesting to clients who were victims of financial abuse (a spouse who was way over-spending; a bankruptcy; a partner who absconded with partnership funds) that the culprit might be an alcoholic. My clients invariable exclaimed that was impossible since the abuser was not only too intelligent but also their partner, child, parent or best friend. I explained that addiction didn’t seem to have anything to do with intelligence or relationship and suggested they take another look. Three days or three months later I heard, “You were right. How the heck did you know?”
On occasion, I experimented in unique ways with the idea that abuse in various forms is evidence of an underlying addiction. While most who bring me the necessary papers for completing a tax return after March 31 tell me they expect to be put on extension, one in the early 1990s repeatedly asked that I prepare and complete his return on about April 10. Although I always reminded him that he should begin the process by the middle of March, he invariably had an excuse for not having done so. His attitude was one of panic with a bit of nastiness–but other than figuring he’d be earlier next year I never really gave it much thought. After preparing a joint return for him and his wife for several years, he didn’t return after 1994. Sometime in 1998 his wife called and asked for a copy of the 1994 filing, which she needed for a divorce proceeding. I was in testing mode then and asked, “By the way, was your husband an alcoholic?” (Today I’d more likely ask, “What was your husband’s drug of choice?”) She responded “yes, and he liked his vodka straight up” and, after telling her about my studies on the subject, shared that he had on numerous occasions struck her.
In “Drunks, Drugs & Debits,” I told a story of a client under audit in 1996. After a phone call when I innocently asked him to explain a $10,000 education expense, he calmly responded, “Maybe this is a bit over your head. Why don’t you package up the receipts and return them to me? And by the way,” he suddenly screamed, “f- you, f- you and f- you again!” I knew enough by then not to argue and he hung up. I calmly and silently listened when he called back yelling and cussing before slamming the phone in my ear several times before he finally gave up looking for a response other than the equivalent of “yes, dear.” Within a half hour I had confirmed his alcoholism by asking a mutual friend, “So how long has Larry been drinking?” and hearing, “Too long. It’s becoming a real problem.”
After learning early on in my research that the vast majority of convicts were alcoholics and that alcoholism takes form as a function of personality type, circumstances and environment, I figured white collar convicts were likely no different from their more violent brethren. Extending the logic to those who would be convicted if only they were caught, I realized that tax fraud must also be far more prevalent among alcoholics than others. While I obviously do not prepare tax returns when I suspect fraud and most alcoholics have chosen to leave my tax practice (“he probably thinks I’m an alcoholic, so I won’t see HIM any more!”), those clients who in hindsight I suspect may have slipped into areas beyond the gray were frequently alcoholics. Public evidence for this can be found in the top stories on “Survivor” Richard Hatch (April 2005) and Actor Wesley Snipes (January 2007), which are the two biggest celebrity tax fraud cases tried in the last few years–and there is overwhelming evidence that both are alcoholics.
More relevant for honest taxpayers is avoiding what the IRS calls “unscrupulous” preparers, or those committing fraud. When scrutinizing new clients’ prior year tax returns badges of fraud are often easy to spot. I usually ask whether my client saw the preparer’s bottle of vodka in the desk drawer. While actually seeing a bottle is rare, it often dawns on my client that the preparer may well have had deeper problems, based on a pattern of little lies to the client, failing to complete the return in a timely fashion, an observable inflated sense of self or other hallmarks of hidden alcoholism. You can avoid becoming part of a fraud or victim to one by learning to quickly identify alcoholism. It would also help law enforcers–IRS personnel included–to more efficiently enforce the law by focusing on those who are five or ten times more likely to commit fraud and other crimes but who only comprise 10% of the population: alcoholics.