You’ve likely heard the phrase “experience is the best teacher” before.
And when it comes to getting audited, it really only takes one bad experience to keep you from filling out your tax return falsely (or haphazardly) ever again.
Now you’re probably not the person purposefully misleading the IRS. A lot of people just make small mistakes. Let me be clear, this is not where intense audits and severe consequences come into play.
But, if you have been misleading about your income and your debts, then this should be a sobering note for you today. While the IRS isn’t a bad guy, they are very serious when it comes to tax evasion. If they sniff out any kind of misreporting on your part, they WILL hold you accountable.
As your Long Island friend in the tax business, I don’t want you to end up in the crosshairs of that kind of “experience.” Which is why I want to take a closer look at some examples that show exactly what I mean by “experience is the best teacher.”
With audits and investigations, the repercussions of fraud and negligence can be severe and far-reaching. Take these three noteworthy cases from 2024. Notice who was getting audited, the outcomes, and the broader implications for taxpayers (you).
- Salvador Gonzalez – Tax preparer sentenced to six years for preparing false returns. Gonzalez, a tax preparer from Corona, California, was sentenced to six years in prison after preparing thousands of false tax returns for clients over a decade. By inflating deductions for charitable donations and medical expenses, and directing clients to form sham businesses, Gonzalez caused a tax loss of at least 28 million. He also faces restitution penalties equaling over 400K.
- Gregory Gumucio – Yoga business leader pleads guilty to tax evasion. Gumucio, leader of the nationwide Yoga to the People business, pled guilty to tax evasion for failing to file tax returns from 2012 to 2020, despite generating over 20 million in income. Gumucio and his associates used various methods to hide income, including accepting cash payments and falsifying records.
- Dwayne Lorenzo Richardson – Software engineering manager convicted of tax evasion and fraud. Between 2017 and 2019, Richardson significantly underreported his income, claiming to owe only 28.5K in taxes on over 1.2 million earned. He also falsely claimed over 1.1 million in medical expenses, primarily related to a 2010 appendectomy. This deliberate misrepresentation allowed him to obtain fraudulent tax refunds totaling over 165K. When confronted by IRS agents during an audit, Richardson persisted in his deception, providing false information about the nature and extent of his medical expenses.
Those types of misleading tax preparations might seem harmless at first or you might think you’ll slip under Uncle Sam’s radar… after all, they’re just trying to help you maximize deductions. But all it takes is one experience of getting audited to turn those minor exaggerations into a BIG DEAL.
So, here’s what you should take away from this…
- It matters who you hire to prepare your tax returns. Taxpayers who relied on Gonzalez’s services may face audits and have to repay any refunds they improperly received. His case goes to show the importance of verifying the legitimacy of tax preparers (check the IRS’s website) and double-checking that claims made on tax returns are accurate.
- The IRS will likely increase its vigilance in monitoring tax preparers, individuals, and businesses. Expect them to implement stricter oversight, leading to more individuals getting audited who claim large deductions or file with dubious businesses. They may increase scrutiny specifically on cash-intensive businesses or those with a history of underreporting income. Entrepreneurs could also see more frequent audits as the government seeks to prevent tax evasion by those with complex business structures.
These tax audit cases serve as cautionary tales against tax fraud and evasion. Every one of these individuals caused harm to the tax system through their bad behaviors, and they’re now paying a hefty price for it.
For you, these cases emphasize the importance of honesty in your tax filing and being vigilant with who you trust to prepare your taxes. Moral of today’s message, my Long Island friend? Take your tax responsibilities seriously.
Again, I’m sure you’re not intentionally misleading the IRS for your own financial benefit. And we’ve all made mistakes. Typically, the IRS doesn’t send you to prison for doing the math wrong.
But if you think you’ve made a mistake in your reporting (more than a math error), or if the IRS sent you a notice saying you did and now you’re getting audited, that’s something we should talk about.
I’m here to help you sort things out and stay on the IRS’s good side.
Keeping you from learning about the IRS by experience,
Frantz Pierre-Louis