IRS estimates $270 billion in revenue lost to unreported income 02:38 T-account analysis: This is the method the IRS used to convict mob boss Al Capone of tax fraud. In this procedure, the IRS compares sources of cash on the left and cash expenditures on the right, which on paper looks a lot like budgeting. What the auditors are trying to determine is if taxpayers have sufficient funds for their personal living expenses. If not, they'll ask you to explain the imbalance. Perhaps you received other sources of nontaxable cash. The trigger here is that when the imbalance is $10,000 or more, and the agents' questions aren't reasonably answered, the IRS will examine your finances more closely.
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Ray Martin has been a practicing financial advisor since 1986, providing financial guidance and advice to individuals. He has appeared regularly as a contributor on the CBS Early Show, CBS NewsPath, as a columnist on CBS Moneywatch.com and on NBC-TV's morning newscast TODAY. He has also appeared on the Oprah Winfrey Show and is the author of two books.
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