Under Reporting


DEFINITION of 'Under Reporting'

The deliberate act of reporting less income or revenue than was actually received, usually for income tax purposes. Under-reporting income in order to avoid taxes is an illegal practice.

When people under report their incomes, the federal government loses tax revenue that could go towards social security, Medicare and other federal projects. Corporations are especially watched by auditors because of the large tax bills at stake each tax year.

BREAKING DOWN 'Under Reporting'

If caught under reporting, individuals and companies will be subject to penalties and, in extreme cases, criminal charges.

Another element of the term's use sometimes applies to public companies reporting lower revenues in a fiscal quarter than were actually recorded. If the company has already been reporting bad news and the stock is down, executives may try to take some revenue from the current quarter and push it into the next quarter. This way, the bad news can be "flushed out", and the company can report an upside surprise in the coming quarter, potentially boosting the stock price. This practice is also illegal!

  1. Audit

    An unbiased examination and evaluation of the financial statements ...
  2. Income Tax

    A tax that governments impose on financial income generated by ...
  3. Tax Evasion

    An illegal practice where a person, organization or corporation ...
  4. Internal Revenue Service - IRS

    A United States government agency that is responsible for the ...
  5. Taxable Income

    The amount of income that is used to calculate an individual's ...
  6. Loophole

    A technicality that allows a person or business to avoid the ...
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