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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]The Manafort and Cohen types were what came to mind when I read the subject line and opened the thread.  I wonder how common it is for non-W2 folks to omit income from their tax returns or outright lie (i.e. inflate cost basis or other deductions).[/quote]

That's a tough question to answer. Due to the complexity of US Tax law, a lot comes down to "treatment". Things like cost basis, deductions, and etc, often exist on a continuum rather than black/white. A position is often described in terms of conservative or aggressive. A conservative treatment is one that has low audit risk and IRS will almost certainly agree with the treatment if audited. An aggressive position is one that has a higher likelihood of being audited, or higher chance of IRS disagreeing if audited. Higher chance doesn't mean 100% chance, which is why some may choose to take an aggressive position. But is it illegal? Again it depends, because there is a chance that IRS could audit it and decide that it's okay. [/quote]

I'm talking about flat out lying.  For example, brokerage firms used to not track/report the cost basis for securities so one could basically make up their original purchase price.  Another example would be buying new carpet for your house and claiming it as a deduction against a rental property as a repair.[/quote]

I don't know how long ago "used to" you are referring to, but as far as I can recall, you have to either provide transaction records to establish basis, or else the basis is assumed to be zero by IRS. Buying carpet for owner occupied property and expensing it against a rental property is definitely illegal, though I don't know how much this goes on. This type of small-time abuse is unlikely to go on in a larger business. [/quote]

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