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Fraud Penalty Assessed Against Attorney for Unreported Income


Posted on June 04, 2020

In a recent case, the civil fraud penalty was assessed against an attorney because he failed to report income on an already filed tax return.  As a result of the under-reporting, he underpaid his income tax liability.  The Court also stated that he exhibited fraudulent intent because he failed to maintain adequate records, offered implausible and inconsistent explanations for his failure to include this income and presented false testimony to the Court.  The income at issue was a contingency fee that the attorney received in one year but that he did not report on his tax return for that year.  The civil fraud penalty can be assessed against a taxpayer if he or she willfully and intentionally did not file an honest and accurate tax return with the IRS.  When you sign a tax return, you are signing it under the penalties of perjury, meaning that you are swearing that the tax return is honest and accurate.  If it turns out later that your tax return was not honest or accurate, not only are there criminal issues in your case, but there are also civil fraud penalty issues in your case.  If the IRS assesses the civil fraud penalty against you, that liability is not dischargeable in a bankruptcy and it is not compromiseable under an Offer in Compromise.  That liability will remain around your neck until the collection statute of limitation expires, which is typically 10 years, or until you pay that liability in full, whichever comes first.  10 years is a long time to wait for the IRS to go away.  Do you have unfiled tax returns or unpaid liability due to the IRS?  Have you filed a tax return that is not honest or accurate?  Call us, we can help!


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