Unreported Income Can Trigger an IRS Criminal Tax Investigation

unreported incomeIf you fail to fully report your income to the Internal Revenue Service (IRS), you could be heading for tax troubles ahead.


Most taxpayers are aware that failure to file a tax return could catch up with them. Fictitious business expenses or children invented to obtain a heftier tax return are also pretty obvious tax dodges. Less often considered is the side hustle, like your gig job. While you appropriately pay taxes as a business owner, or employee, you may think what you make on the side is less of a concern. You may earn money at a hobby or a legitimate second job but may figure that is yours to keep—as long as you keep it off the table.


The IRS needs to know about that income too, and it may be easier than you think for the agency to learn about under-the-table payments.


The IRS Automated Underreporter (AUR) and You

There was a time when it took a lot of leg or bookwork for the IRS to figure out that taxpayers were earning more than they reported. Not so much anymore. The IRS Automated Underreporter Program (AUR) is a unit of the IRS in place to catch income that slips off the table.


Using automated software, agents can screen tax returns against notices provided by employers, vendors, and financial entities. The more complex your wealth, the more likely that digital fingerprints of your financial dealings are left behind. Whether it is a carefully quiet foreign bank account or other regular or occasional source of income, there is a chance your return will be flagged as a mismatch if it falls within a compliance survey.


If a return is flagged, an IRS tax examiner may take a closer look for potential tax fraud. This type of review may turn up an unreported revenue stream, hidden bank accounts, and false statements attested to by you on your return—or to the accountant that created your return.


Get help when needed

You may have convinced yourself that the IRS has not noticed discrepancies in your returns so far, so there is no problem. The fact that you have knowledge of your non-compliance means that eventually, the IRS likely will too. As we have said many times, the best time to address any type of issue with the IRS is before you get a letter concerning a civil or criminal tax audit.


An attorney experienced with criminal tax charges can help you work with the IRS to correct the situation before it becomes a prosecution which could destroy your livelihood—and your side hustle altogether. 


Notified of tax litigation? Our knowledgeable tax attorneys can help you nationwide or abroad

With offices in Cleveland and Chicago, Robert J. Fedor, Esq., LLC delivers aggressive legal protection if you are dealing with allegations of tax fraud, a criminal tax charge or problems with foreign bank account. Contact us today or call 800-579-0997.


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