Are taxpayers in some parts of the country more honest than those in others? If you said yes, you'd be right.
A recent nationwide survey of over 3,300 self-employed taxpayers by the IRS Taxpayer Advocate Service found few communities with high levels of tax compliance by sole proprietors. But it found lots of communities with low levels of compliance. The places with the highest levels of noncompliance were towns and neighborhoods in or near San Francisco, Houston, Dallas, Atlanta, and Washington, D.C.
Low compliance communities included some of the wealthiest places in the United States, such as Beverly Hills, California; Newport Beach, California; New Carrollton, Maryland; and College Park, Georgia. In contrast, high compliance communities tended to be poorer. These included the Aleutian Islands; West Somerville, Massachusetts; Portersville, Indiana; and Mott Haven, New York (a neighborhood in the Bronx).
By the way, the IRS says it does not choose which taxpayers to audit based on where they live; so you won't lower your audit risk by moving to the Aleutian Islands.
Does this mean wealthy people are more dishonest than the poor? Maybe. But it could also mean that they have more opportunities to cheat on their taxes.
The Taxpayer Advocate's analysis of the survey results revealed the following key findings:
The Taxpayer Advocate concluded from all this that the best way to ensure higher compliance with the tax laws is to "promote trust in government, the law, and the IRS." The Advocate suggested that means to accomplish this might include tax simplification, an expansion of taxpayer protections and remedies, and taxpayer education about their government.
(Source: Taxpayer Advocate Service, Factors Influencing Voluntary Compliance by Small Busiensses: Preliminary Survey Results.)