Under Reporting

AAA

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.

INVESTOPEDIA EXPLAINS '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!

RELATED TERMS
  1. Tax Shelter

    A legal method of minimizing or decreasing an investor's taxable ...
  2. Audit

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

    A tax that governments impose on financial income generated by ...
  4. Internal Revenue Service - IRS

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

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

    The amount of income that is used to calculate an individual's ...
Related Articles
  1. Insurance

    Evaluating The Board Of Directors

    Corporate structure can tell you a lot about a company's potential. Learn more here.
  2. how to read a company's footnotes.
    Fundamental Analysis

    Financial Footnotes: Start Reading The Fine Print

    Find out what could be hidden in this often-overlooked part of the financial statements.
  3. Budgeting

    Managing Income During Retirement

    Learn some sensible strategies for making your hard-earned savings last for as long as you need them.
  4. Taxes

    10 Money-Saving Year-End Tax Tips

    Getting organized well before the deadline will curb your frustration and your tax liability.
  5. Forex Education

    How International Tax Rates Impact Your Investments

    International investors need to be aware of the staggering correlation between tax rates and economic performance.
  6. Options & Futures

    Changing The Face Of Bankruptcy

    A 2005 law attempts to unmask fraudulent debtors and still save those who are struggling. Will it affect you?
  7. Markets

    Introduction To Fundamental Analysis

    Learn this easy-to-understand technique of analyzing a company's financial statements and reports.
  8. The marginal tax rate is based on a progressive tax system.
    Personal Finance

    What's a Marginal Tax Rate?

    The marginal tax rate is based on a progressive tax system, where tax rates for an individual will increase as income rises. This method of taxation aims to fairly tax individuals based upon ...
  9. Even the most enlightened citizen curses taxes, possibly while simultaneously acknowledging that they're the price of a civilized society.
    Taxes

    How The IRS Works: Functions & Audits

    Even the most enlightened citizen curses taxes, possibly while simultaneously acknowledging that they're the price of a civilized society.
  10. Markets

    Tax Dodging Companies Cost You More Than $1,200 Each Year

    Every year that multinational corporations and wealthy individuals lower their U.S. tax bills by stashing profits in off-shore tax havens, you pay more to cover their tab. The same is true for ...

You May Also Like

Hot Definitions
  1. Commodity

    1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often ...
  2. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  3. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  4. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  5. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
  6. Special Administrative Region - SAR

    Unique geographical areas with a high degree of autonomy set up by the People's Republic of China. The Special Administrative ...
Trading Center