Robert J. Fedor, Esq., L.L.C.

Advice for individuals who fail to report income

When dealing with tax matters, there are times when an individual or business owner may intentionally take steps to avoid paying taxes. Tax professionals and accountants may provide advice related to tax-avoidence tactics. In other cases, an individual may take matters into their own hands to avoid paying taxes on all earned income. In any case, a taxpayer who has knowledge that his or her tax returns do not accurately report all earned income may be subject to fines, penalties and even criminal charges.

One case in which the Internal Revenue Service successfully prosecuted a business owner for tax evasion originated from a tip by a disgruntled employee. In an effort to avoid paying taxes, the business owner maintained two separate bank accounts. IRS agents were tipped off about the existence of both accounts and were able to subpoena bank statements which eventually lead to criminal charges being filed.

When facing charges related to tax crimes, individuals would be wise to immediately hire a defense attorney who has experience handling criminal tax matters. A criminal tax attorney can advise a client about their rights when it comes to dealing with the IRS and other state and federal investigators.

Many cases involving tax crimes originate when the taxpayer talks to federal or IRS agents. It's wise, therefore, to avoid talking to or answering questions posed by such agents if they appear at a taxpayer's home or place of business. Taxpayers have the right to request that all communication related to any tax matters be addressed via retained counsel. 

Lastly, in some cases a taxpayer may decide to voluntarily disclose the underreporting of income and taxes. However, such voluntary disclosures are only beneficial and accepted provided an IRS investigation hasn't been officially opened. In cases involving voluntary disclosure, an individual's defense attorney communicates with the IRS about those terms that must be fulfilled to avoid prosecution.

Source: Forbes, "Fraudulent Tax Returns?," Stephen J. Dunn, Aug. 20, 2013