A local court recently sentenced a businessman with a thriving law practice in New York to over one-year imprisonment for tax evasion. The government accused the businessman, who specialized in bankruptcy and criminal defense matters, of tax evasion in both his personal and professional financial affairs. More specifically, the prosecution accused him of failing to pay payroll taxes for his employees as well as under-reporting his own income. In addition to failing to properly report these tax obligations, the IRS also claims he never paid the taxes that he acknowledged he owed on his tax returns.

The prosecution also stated he lied about assets during the Internal Revenue Service’s (IRS) investigation. Ultimately, the agency states the man’s tax scheme resulted in a loss to the U.S. Treasury of over $800,000.

The case provides three important lessons for New York business owners:

Lesson #1: The IRS will investigate if the numbers do not add up.

The IRS is receiving information from multiple sources. Employees and contractors, for example, are also sending in tax paperwork. As such, the IRS will likely notice any discrepancy in reporting. This could trigger a federal tax audit.

Lesson #2: Options are available to come into compliance.

The business owner initially considered an offer in compromise agreement. If the government approves, the taxpayer can settle their tax debt for less than owed. However, it is important to be honest in the paperwork used to submit the offer. In this case, the IRS states the taxpayer was denied because he lied about his income in his application for the offer.

Lesson #3: Get the right counsel

Although this businessman was an attorney with over 15 years of experience practicing the law, he did not practice tax law. The law, like medicine, is becoming a very specialized field of practice. As such, those who face tax issues are wise to seek the counsel of a tax attorney. The attorneys at Goldburd McCone deal with these types of issues and can review your case and provide guidance tailored to your situation.