Begging Forgiveness

We've all heard the expression- "It's easier to beg forgiveness than to ask permission." How many people do you know live their lives with that expression as their mantra? In fact, I bet we have all followed that advice at one time or another. But behind that glib remark you have to understand that there will be consequences to your choice. If you choose not to follow the rules/procedures, what will the reaction and results be? Can you live with them? I am seeing too many people who expect their apology to be accepted and life to continue as usual.

There is a large tax gap in the US. That is the difference between the tax the IRS projects it should be collecting and the tax reported on the returns it receives. Income is under reported and expenses are over reported. Sometimes it is a mistake but too often the "mistake" was deliberately done to save the taxpayer money. The taxpayer/company weighed the risk to discovery and decided to go the "beg forgiveness" route. Sometimes it works, but increasingly, they are getting caught.

If the IRS "catches you", you need to understand that begging forgiveness with the IRS will get you more than a lecture. You will pay the tax you tried to avoid and you will be hit with interest and penalties on that tax. Those could easily double the tax you wanted to avoid. Most people understand the idea of interest and penalties but they don't realize there could be other consequences. You run the risk of other items on the return being questioned and possibly disallowed. It is then up to you to prove they were legitimate deductions. The IRS may decide to question other returns you have submitted. This could lead to audits of open year returns, other types of returns (payroll for example) or in the case of a business, the individual returns of the principles involved. (If you've cheated once, they will assume you could have cheated other times.) If the IRS finds a pattern of tax cheating, they could start talking criminal charges.

There are other consequence to playing the "beg forgiveness" card. You will be spending time and money to deal with the IRS. And if you used a tax preparer to prepare the return, you may have damaged your working relationship with them. I know that once I have found out that a client has given me false numbers or lied to me, I really don't want them as a client. Even if there was no fraud, they were just tying to play the system, I will be overly cautious and less trusting dealing with them in the future.

It's natural to hear the bragging of friends and co-workers and want to "fudge" your tax figures. It sound tempting to play the odds, cheat and then fix it if you get caught. But before you do, make sure you understand what could happen if you get caught. All of what could happen. Is it really worth it?

Comments

[Jessica Dorsett]

I've started reading your blog lately and love that you tell it as it is. I'm a CPA as well and have the same thoughts that you've posted often. I'm also a new blogger and enjoy your style of blogging. Thanks for your work!