Where The Tax Cheats Are: Top 5, Bottom 5 Metro Areas

April 16, 2013 -- With tax day behind us now, the IRS is looking for cheats. If you stiffed Uncle Sam, beware: He knows where you live—or at least, the IRS knows the metro areas where cheats most likely live:

Five metros have the highest concentration of tax cheats, according to an analysis of confidential IRS data done by the National Taxpayer Advocate (NTA).

As reported by the Associated Press, the five are Los Angeles, San Francisco, Houston, Atlanta and the District of Columbia.

Some include towns awash in high rollers—Beverly Hills, for example, and Newport Beach, Calif. Others, though, include such middle-class locales as College Park, outside Atlanta.

The NTA found likely cheats to be concentrated in 350 communities in 24 states.

Of the 350, California accounted for about a third, most in communities clustered around L.A. and San Francisco. Other clusters exist around Houston, Atlanta and Washington, D.C.

It's these same metro areas, says the NTA, where a sole proprietor is most likely to be audited.

A survey by the NTA's Taxpayer Advocate Service asked sole proprietors questions to help determine what factors distinguish "high compliance" payers from "low compliance" (i.e., cheaters).

The survey determined that what cheaters have in common is not wealth. It's attitude.

Taxpayers most likely to cheat voiced the lowest trust in government and in the IRS. They were more likely, for example, to believe the IRS treats taxpayers unfairly, and more likely to describe the IRS as behaving disrespectfully.

Sole proprietors in construction and in real estate rental were more likely to cheat than those owning other kinds of businesses. Cheaters were more apt to belong to local organizations, such as civic leagues, fraternal societies and clubs. They were more likely to belong to a trade association or labor union. They were more likely, too, to report that fellow members of such groups viewed the tax system as unfair.

This fraternization of likely cheaters, coupled with their geographic concentration, might someday lead, warns the NTA, to communities where cheating is regarded as socially acceptable.

These five metro areas are also the ones where sole proprietors are most likely to be audited. Where are they least likely to be? Which metros have the highest concentration of "high compliance" payers?

As determined by the TAS (and reported by the A.P.), the five most-honest metros are: the Aleutian Islands, off Alaska; West Somerville, Mass.; Portersville, Ind.; and Mott Haven in New York's South Bronx.

Why Mott Haven?

Bernard Stein, a City University of New York professor who helps edit the Mott Haven Herald, a newspaper run by students at the City University Graduate School of Journalism, describes Mott Haven as very poor and largely Latino, with an unemployment rate of 20 percent or higher.

On the one hand, Stein tells ABC News, Mott Haven is filled with huge, low-income housing projects left over from the 1950s. On the other, it has an historic district filled with "lovely old row houses" and artists' studios carved out of old industrial buildings.

Though local media, says Stein, has been predicting for a decade that Mott Haven will be New York's next hip neighborhood, it hasn't happened.

Local business still consists mostly of bodegas, dry cleaners, beauty shops, and other stores whose owners—recent immigrants to the U.S.—live nearby. Beverly Hills it's not.

What makes Mott Haven's sole proprietors such honest taxpayers?

Stein speculates the reason may be their work ethic and sense of personal morality. Then, too, he notes, recent immigrants tend to view government as their friend, not enemy.