what is under reporting 
under reporting is a term describing the crime of intentionally reporting less income or revenue than was actually received companies and individuals chiefly under report their incomings in an effort to avoid or reduce their respective tax liabilities under reporting is not a victimless crime in fact the billions of dollars of tax loss revenue caused by under reporting reduces the funds the federal government relies on to finance social security medicare and a host of other programs understanding under reportingif a struggling public company experiences a sharp drop in its share price it may report even lower revenues for a fiscal quarter than it actually earned during that time period this is done merely for optical purposes the trick is to hide revenues and then subsequently lump those hidden figures with the revenues in the following quarter s earnings statement so that onlookers are led to believe that the company has rebounded and is now in much better shape the appearance of a more successful quarter can inspire investors and ultimately boost a company s stock price naturally this form of under reporting is also an illegal practice companies listed on stock exchanges aren t the only culprits in fact in most cases it s usually self employed filers and those who earn cash income that are most likely to under report their incomes the primary goal here is to reduce tax liabilities and pocket a higher percentage of any money made wage and salary employees typically do not under report their incomes because their earnings are usually directly reported to the irs by third parties namely their employers during the 1990s the internal revenue service irs estimated that as much as 84 of cash tips worth hundreds of millions of dollars each year were going unreported and in 2019 the u s tax authority revealed that under reporting accounted for about 352 billion of the united states 441 billion tax gap the difference between taxes owed and taxes actually paid in the 2011 2013 tax years under reporting accounted for approximately 80 of the u s tax gap in the 2011 2013 tax years consequences of under reportingindividuals and companies that are caught under reporting may be subject to fiscal penalties and in extreme cases might even face criminal charges however it s important to remember that under reporting is only a crime if offenders willfully disregard the tax code if this action occurs due to negligence or calculation errors the irs could penalize the under reporting company or individual without initiating criminal action against those parties for example if a waitress one night distractedly back pockets a few bills rather than consolidating them with the rest of her take this act of negligence won t likely result in criminal punishment only if investigators determine that willful tax evasion or fraud has occurred will that waitress be at risk of a felony conviction 