Tax Evasion – Could That Be Me?
Jan 30, 2014
After some strong persuading, a friend of mine made the New Years Resolution to keep track of his 2014 self-employment income and expenses. He runs a freelance photography business and after over a year of not recording or reporting the photography money as self-employment income, I was able to talk him into coming out of the “black market photography business.”
The fact is that many Americans fail to file their taxes every year. The number is estimated as many as 7 million non-filers. My guess is that most of these people are unaware of the penalties they’ll face if they get caught. Maybe they just realize that if they’ve never filed before, it’s highly unlikely that the IRS will recognize the absence of their tax return.
Not everyone will get away with tax evasion, as it is more formally called. If you have an employer, they are required to file forms for each employee. Once this happens the IRS will be expecting a return from each of those employees, and they will be able to tell if one is missing. Another red flag is if you reported earnings in prior years and then all of a sudden decide to try to get away with not reporting this year. The IRS keeps records, and will be able to tell if you decide to suddenly stop filing.
Now unless you’re bringing in some large sums of unreported dollars each year, the IRS will most likely file a return for you (of course with added fees for the trouble) instead of pressing charges. The penalty for an untimely filed tax return is up to 25% of the total tax due. But the penalty begins to accrue interest from the due date of the return.
I will rest assured this year, knowing I helped a friend avoid tax evasion. There is no law that says you must be happy about filing your tax returns, just that you must do it. So be smart this year and make sure you’re not omitting any income that should be reported. Or be even smarter, and let your wonderful accountant friends file your taxes for you. After all, they bring it upon themselves to prepare your returns when they talk you into it.
By: Anthony Mifsud, Staff Accountant