Adam Hose, 844-5741 (


AUBURN -- An Auburn University accounting professor has analyzed how the Internal Revenue Service collects unreported income from Americans who file fraudulent tax returns.

Charles Price, the Taylor professor in the School of Accountancy, says that among the millions of returns filed this tax season, thousands will be fraudulent. However, this doesn't mean that these unreported or under-reported funds will go uncollected.

The IRS has methods for reconstructing income, according to Price. His analysis of the issue, co-authored with Leonard Weld, chair of the Department of Accounting at Troy State University, was published in the August 1998 issue of the CPA Journal.

"You and I pay thousands each year in income taxes, and some people (through fraudulent reporting) pay nothing," said Price. "I wanted to look into how the (IRS) goes back and recovers the missing funds."

Income reconstruction -- an IRS method of computing taxable income -- is used when the agency suspects a taxpayer may have filed a fraudulent return or has not filed one at all.

"Income reconstruction methods are divided into two groups: Direct and indirect," says Price's article. "Direct methods are used to show a specific taxable transaction was either omitted or reported incorrectly. Indirect methods provide circumstantial evidence about cash flow or accumulation of assets rather than a specific transaction."

Price conducted extensive research of existing tax literature and tax regulations in developing his article.

"I mainly researched literature that others have written on the subject," he said. "I also had to study the technical aspects of the law."

Price, a graduate of Auburn where he also received a master's degree in business administration, received his doctorate from the University of Georgia.

His professional experience began with the Touche Ross -- now Deloitt & Touche -- accounting firm in Birmingham, where he worked for three years.

Price taught accounting at the University of Alabama at Huntsville and Georgia before coming to Auburn in 1987.

He is the author of two other accounting articles awaiting publication by the CPA Journal. They include a study on the costs of environmental clean- up and a proposed alternative minimum tax issue for small businesses.

Price also is involved in research that examines the possible institution of a national sales tax.

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CONTACT: Price, 334/844-6206.