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IRS wants taxpayers to know that tax crimes do not pay

Heading into the frenzy of tax season, the IRS wants Massachusetts taxpayers to know that filing inaccurate returns or failing to make necessary disclosures may result in prosecution for tax evasion or other tax crimes. In addition to paying any unpaid taxes, penalties and fines, the IRS may aggressively pursue imprisonment of taxpayers that commit tax crimes.

In one case, a wealthy taxpayer pled guilty to tax evasion and was originally sentenced to probation and extensive community service. The taxpayer also paid more than $50 million in fines and penalties. The judge did not sentence the taxpayer to jail time based on the taxpayer's history of making significant charitable donations. Unhappy with the lack of jail time, the federal prosecutors have appealed the judge's sentencing recommendation and are seeking jail time for the taxpayer. A conviction for tax evasion can carry a prison term of up to five years.

The taxpayer in this case failed to fully report income on offshore accounts. The IRS is particularly interested in taxpayers that fail to file annual disclosures with respect to any interest in a foreign account. From time to time, the IRS implements an amnesty program to encourage taxpayers to voluntarily amend prior years' tax returns that did not make the requisite disclosure. This option may not be available to taxpayers that are already in trouble with the IRS.

Mistakes made when filing tax returns, whether intentional or not, can subject taxpayers to significant penalties. In addition to payment of any unpaid taxes, taxpayers may also be subject to fines, penalties and incarceration. Consulting with a tax attorney may be beneficial in helping taxpayers avoid trouble with the IRS and may also be helpful for taxpayers who are in a dispute or disagreement with the IRS.

Source: Forbes, "Feds Push Jail For Tax Crimes: Like Your Cell, Keep Your Cell", Robert W. Wood, February 16, 2014

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