By William B. Acker
Any taxpayer who prepares and files a tax return that is past due or which corrects an omission of income may be exposed to additional tax liability and should seek legal counsel. Simply proceeding as if the returns were to be filed timely, by marshaling the necessary information and having the returns prepared without attention to controlling and minimizing the civil and/or criminal risks involved, could exacerbate and compound the taxpayer’s risks. Problems may also arise for taxpayers with arguably illegal income or who are late in paying their taxes.
Taxpayer Protection
The attorney-client privilege can offer protections that are not available from other professionals acting without an attorney, including certified public accountants and other tax preparers. We typically team with certified public accountants and/or other tax preparers and together we develop a plan to protect against severe penalties and minimize taxpayer liability.
Strategies to reduce exposure should be utilized from the outset and should be maintained throughout the preparation process and substantially beyond. Our involvement as attorneys transcends income tax return preparation. It begins with planning tax return reporting positions. Our involvement continues on to review the returns and actually file them. After the returns are filed, it then extends to post-filing dealings with the IRS and state tax authorities, managing the resultant consequences, and in many cases, involves necessary negotiations with the IRS concerning arrangements for payment. For subtle and obvious reasons, these efforts are best handled by professionals who are not the taxpayers themselves.
Protection for Tax Return Preparer
Reporting income on delinquent returns or income that relates to arguably illegal activity can result in serious exposures for not just the taxpayer but also for the tax return preparer. Worse yet, if the tax return preparer and/or tax counsel engage in what might otherwise be viewed as normal planning to report income from illegal activities, various civil and criminal exposures may be triggered or increased.
Remedying a delinquent filing or delinquent payment situation requires that strategies be implemented during all phases of tax return preparation, to preserve the taxpayer’s defenses and to protect the tax return preparer. Subtle problems in reporting and dealing with assets and income when taxes remain unpaid may be traps for the unwary.
Increased IRS Enforcement
As federal budgetary pressures mount, the IRS has been pressed to increase enforcement. The gap between full compliance tax collections and actual collections would, if collected, solve most of our country’s budgetary problems without raising taxes! For these reasons the IRS has stepped up enforcement and has recently increased criminal investigations of referrals. In this climate, it is wise to stay ahead of the IRS by proactively arranging for filing late returns, paying all late payments, and remedying omissions and other income problems before the IRS acts and exacerbates those problems.
We have acted on behalf of numerous taxpayers involved in filing delinquent returns and paying delinquent tax obligations. Our extensive experience suggests that care must be taken from the outset.
For further information regarding these matters, please contact Mr. Acker at 248.740.5665 or
click here to send an email.
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