under the table?

[rooster66]

California. What are the penalties for the above and how far back is the IRS willing to go back? Talking about 27k unreported per year for about 7 years. Thanks...

[LdiJ]

Originally Posted by rooster66

California. What are the penalties for the above and how far back is the IRS willing to go back? Talking about 27k unreported per year for about 7 years. Thanks...

The IRS could go all the way back if they wanted to, and CA is REALLY nasty about that sort of thing. Interest and penalties for that amount of time might easily double the amount due on the oldest years, and add anywhere from 25% to 50% on other years.

You really need to prepare the returns to see where you stand.

[tranquility]

One thing is clear in all the cases I see is that the government really, really doesn't like it when income is not reported. They'll slap you on the wrist when deductions are a little....inflated...but income has to be reported.

$27,000 over many years is a lot of income. The facts are important, but I have to disagree with LdiJ's advice. Usually, her recommendation is a good one, get the returns prepared to see where you stand. (And, I admit she said get prepared rather than have someone prepare them.) However, this case is different from the usual poster's. That much money over that much time could very well lead to intent. I suggest you go to a tax professional who can give you legal confidentiality about what you tell him. Even though the law changed on tax preparers regarding confidentiality (at least CPA's and I assume EA's as well) the rules are not total.

This tax prep problem has to start with an attorney. Don't tell anyone what happened and why until you speak with an attorney about the facts.

[LdiJ]

Originally Posted by tranquility

One thing is clear in all the cases I see is that the government really, really doesn't like it when income is not reported. They'll slap you on the wrist when deductions are a little....inflated...but income has to be reported.

$27,000 over many years is a lot of income. The facts are important, but I have to disagree with LdiJ's advice. Usually, her recommendation is a good one, get the returns prepared to see where you stand. (And, I admit she said get prepared rather than have someone prepare them.) However, this case is different from the usual poster's. That much money over that much time could very well lead to intent. I suggest you go to a tax professional who can give you legal confidentiality about what you tell him. Even though the law changed on tax preparers regarding confidentiality (at least CPA's and I assume EA's as well) the rules are not total.

This tax prep problem has to start with an attorney. Don't tell anyone what happened and why until you speak with an attorney about the facts.

Ok...I absolutely do not disagree with consulting with an attorney, because you are right, that many years could very well lead to intent.

I honestly have a real problem with having tax attorneys prepare basically normal returns. Their hourly rates are so high that lots of the retainer gets used up in work that could be done by someone else more cost effectively.

I have often done this work for clients. Sometimes I help them negotiate a payment plan with the IRS, sometimes I immediately send them to a tax attorney with the prepared (not filed) returns in hand. I honestly think that they get better, and more cost effective advice from the tax attorney if the true situation is known at the first consultation.

However, I am also spoiled. I have a boss who gives me great leeway regarding what I charge a client in this kind of circumstance, and work with tax attorneys who appreciate getting a case where I have already done the "ground work".

[tranquility]

It is difficult to know. The only thing I can say is that I've seen people handcuffed in front of me for tax issues. It chills you to the bone, I guarantee. I don't want to scare the OP, but he should be careful to keep this an issue about money.

Better would be for an attorney to hire you for the taxes. That is the best outcome for all. The OP gets attorney-client priviledge (sp?) and gets the most cost-effective fee for preparation.