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HELP!!

A really good friend of mine has always paid his taxes on time, always filed on time etc. About 25 years ago, an investment of his got disallowed (some kind of limited real estate partnership or something -- sorry I do not know any more) and the IRS asked for a BUNCH of money in back taxes for that year. He paid up and has had no problems since. Was audited once after that, and did not owe. He was just going through his records this last year figuring out mileage and realized that he had not added some commissions he received from an advertising agency for referring acounts to them in 1999 and again in 2000. The amounts were about a total of $3,000 one year and about $4,000 another. (All in smaller amounts throughout the year.) He did not get a 1099 or any type of documentation from them and that is why he totally forgot about this money. He is petrified that he will be audited for this and will "GO TO JAIL". Should he file amended returns or just let it go hoping that everyone just forgot? Is there a statute of limitations on this? What would be his penalties and could he actually go to jail if the IRS caught this? Thanks to anyone who helps. I really appreciate ANY assistance.

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Reply to
jca
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It was probably a tax shelter scam that he bought into.

Your friend needs to keep better contemporaneous records. That way he wouldn't be sorting through 1999 and 2000 records trying to figure out 2005 mileage. It's too late to file amended returns for 1999 and 2000. If your friend wants to make right, tell him to calculate what tax he should have paid and make a contribution toward reducing the public debt. Instructions for doing that are in the 1040 instructions.

-- Phil Marti Clarksburg, MD

Reply to
Phil Marti

Those years are most likely out of statute. Accordingly, absent fraud, there is nothing to do at the present time.

-- This written advice was not intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer. (The foregoing legend has been affixed pursuant to U.S. Treasury Regulations governing tax practice.)

---> real address on hobokenx or hobokeni

Reply to
Benjamin Yazersky CPA

Your friend is not going to jail, at least not for this. He should file amended returns for the years involved and pay the additional taxes. After a while the IRS will bill him for interest and, perhaps, penalties. He should then pay the interest and request that the penalties be abated. Once the IRS has decided whether to abate any of the penalties they might have assessed, he can go from there. The most likely penalty is for "failure to pay" taxes when due. The maximum is 25% of the taxes due.

Reply to
Bill Brown

He should file amended returns. He will not be in any trouble beyond interest and penalties. The IRS has three years from the due date or received date of the return, whichever is later, to assess a tax. That assume there was no substantial understatement of income or fraud. An honest mistake is not fraud.

Reply to
Mike Wellman

No it isn't. It's too late to file them and get a _refund_ based on the new returns. Providing the understatement of income was less than 25%, those years can no longer be audited (if he filed reasonably timely); if income was understated by 25% the IRS has 6 years. (I'm not certain that's still the rule.) Seth

Reply to
Seth Breidbart

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