Income Tax Returns Your Accountant Should Not File
You've been feeling uneasy (perhaps even guilty) becauseyou've failed to report your under the table business income. Perhaps you've never filed a tax return, even though you know you owe money. Finally, you contact anaccountant to resolve the situation.
Although it is commendable that you are trying to correctmatters, hiring an accountant to do these delinquent returns could be a big mistake. The reason why is because tax evasion is a criminal offence or felony. You might also be subject to civil action.
Would you hire an accountant to defend you in a criminalproceeding? Not likely. You would be wise to hire aqualified attorney.
First of all, lawyers have something called solicitor-client privilege (also known as attorney-clientprivilege or legal advice privilege). This basically means that things you tell your lawyer when seeking legal advice are confidential and can't be used against you. Even written records can be covered by this privilege.
On the other hand, your accountant can be compelled totestify against you and all records in his possession canbe demanded by the authorities.
Second, your lawyer can prepare a legally binding agreement that can protect you. In return for your comingclean, the tax authorities may agree not to charge youcriminally and, in some cases, even reduce penalties ortax liability.
If your accountant tried to do the same thing, they could demand all information about you. Your accountant would not be protected by solicitor-client privilege.
If, say, your accountant filed your tax return from tenyears ago on your behalf, the tax authorities could stillcharge you with tax evasion, despite the fact that youare obviously trying to rectify matters (albeit a bit late).
It is even possible that your accountant could get intotrouble for failing to report your delinquency. On theother hand, your lawyer can't be compelled to testifyagainst you, being protected by solicitor-client privilege. Your lawyer may also have his own in-houseaccountant in order to protect you.
Your lawyer (specializing in criminal and tax law) willlikely negotiate an agreement with the tax authoritiesbefore filing any tax returns.
Therefore, if there is a good chance you could be charged criminally for your failure to file tax returns or properly report income or expenses, don't see your accountant. Instead, consult a lawyer specializing in such matters before you file or amend any returns.
J. Stephen Pope, President of Pope Consulting Inc., has been helping clients to earn maximum business profits for over twenty-five years.