I have a friend who is part of a family with a fortune. According to my friend, the patriarch of this family never pays his taxes. Instead he waits until he's audited and then his team of lawers and tax accountants supposedly pay a comparitively nominal fee (if i remember correctly he said 10% of his unpaid tax debt) to satisfy the IRS until the next time they audit him- in few years- for tax evasion. Do you know of this sort of behaviour? Can or will you give me the informed scoop on the IRS, tax evasion, tax lawers and whatever I'm not enquiring about yet should be? This information is very important to me, and I will be gratefull for all serious replies. Thanks
http://www.irs.gov/businesses/small/article/0,,id=108327,00.html#Will Why, you want to stiff the Govt. and lay the burden on everyone else?
I don't think so. If he repeatedly doesn't file until the IRS files for him, that is tax evasion and it's off to jail. If he files but doesn't pay, then the IRS can attach bank accounts and property at thier discression WITHOUT a court order and get their money if he has it. If he files but claims bogus deductions to indicate that he owes no tax then there is a very very slim chance that his claim could be correct but most likely it would be tax evasion and its off to jail again. Probably, though, you misunderstood and what he is doing is not paying the quarterly estimates but instead paying them when he files and paying in addition to the taxes a 10% penalty plus interest.
thank you both for the replies I have mixed feeling towards the government, but I don't necessarily want to stiff anyone, I'm not a criminal. If I can pay less tax as an informed citizen then I deserve to like everyone else. "Probably, though, you misunderstood and what he is doing is not paying the quarterly estimates but instead paying them when he files and paying in addition to the taxes a 10% penalty plus interest."-pspr Do you see this as a good strategy? In total my friend's family- if they're paying according to the above statement-are paying more tax, but only in the long run. Because time used properly is money, is my friends family likely to be earning more using this penalty stratagem? What annual capitalization rate would be needed in order to make this stratagem successful? Could it be successful using treasury bills? Am I correctly understanding the gist?
I think you need to talk to someone who has tried this. I would think the IRS would be more inclined to audit you regularly when you aren't playing by the rules on purpose. And, I don't think you want any more audits than necessary. Another possibility is that he is claiming business deductions that are questionable or he doesn't have records for and when he gets audited the IRS dissallows those deductions and he has found some method to reach a compomise with the IRS on which are and which aren't allowed. I wouldn't want to rely on that either unless you had an army of accountants and lawyers.
>Because time used properly is money, is my friends >family likely to be earning more using this penalty >stratagem? Your friends family can easily find money MUCH cheaper than borrowing through the IRS. JB
Good point maybe and probably. But can you figure out what they would be paying percetage wise- hypothetically- if they filed but didn't pay what they owed and instead payed the minimum penalties necessary to stave off IRS? Let's say they initially owe 1 million.
If the penalty was only 10% then they might make money if the IRS took several years to initiate the audit. There are probably plenty of cpa's that could tell you how long it would take before the alarm bell rings.
Call your local IRS office and ask them. Just don't offer any SS numbers. Better yet, ask a good accountant. A good accountant will know more or less what triggers off the IRS.