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Dr. Fiona Chen
Dr. Fiona Chen, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 4667
Experience:  Former IRS Revenue Agent
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I did not report side income on two years of tax returns.

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I did not report side income on two years of tax returns. Should I amend those returns?
JA: Which tax year are you filing for?
Customer: 2017 and 2018
JA: Anything else you want the Accountant to know before I connect you?
Customer: No

Hello there. My name is Alex and I would like to help you. I am a Certified Public Accountant (CPA), Enrolled Agent (EA) with the IRS, and a Certified Financial Planner (CFP®).

 

Customer: replied 11 days ago.
Hello
Customer: replied 11 days ago.
I am good with chat
Customer: replied 11 days ago.
Are you there??

Please note that offers for a phone call are initially generated by the site, not myself. Accordingly, I would be glad discuss your questions by phone, but we can also continue our conversation through this chat -- whatever works better for you.

 

 

Please give me a moment to type my response.

If your income tax returns which were filed for tax years 2017 and 2018 were incomplete (ex. they did not include the side income that you received), then those returns should be amended to accurately reflect your tax liability for each of those years. While you may be subject to the assessment of penalties and interest due to late payment of any additional taxes, those penalties may be higher if the IRS and/or the state taxing authorities contact you in the future regarding the unreported income.

 

Does that help?

Customer: replied 11 days ago.
The side income was a substantial amount. Will the amended returns raise a red flag for an audit?

Please give me a moment to type my response.

If you address the unreported income prior to receiving correspondence from the taxing authorities by filing amended income tax returns, then an audit will not be necessary given that the unpaid taxes will be calculated and paid. With that said, allowing income to remain unreported certainly exposes you to an audit for one or more tax years.

 

Does that help?

Customer: replied 11 days ago.
So, if I amend and correct the returns, it will relieve me from audit risks later on regarding the original return, correct?
Customer: replied 11 days ago.
And the IRS would not consider it to be fraudulent, correct?

I see that you have additional questions regarding your situation. I would be glad to answer further questions via a phone call. Accordingly, please feel free to accept the Premium Service request to continue our discussion.

Customer: replied 11 days ago.
No. I'll chat.

Thank you for your questions. I will now refer your request to other professionals who may be able to help you. Best of luck!

Dear Customer,

When we report the tax return amounts correctly, we don't have to be concerned of IRS audit.

If you amend tax return to give money to the IRS, they should be happy to receive the money.

Amended tax returns commonly ask for refund. When the refund asked is below a certain range, the IRS usually does not question the refund.

Go ahead to amend the tax returns. It may increase your social security income in the future. When you need to apply for mortgage, you will have evidence of self employment income in addition to your regular income.

Please let me know if you need a follow-up to my last answer or if the response completed your question.

Before you leave the session, I need your rating for my services which is done by you clicking on those stars which appear on your screen!

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I will wait online for your response with your rating so that we can complete the session.

Thank you for using JustAnswer.

Regards,

Fiona

Fiona Chen, Ph.D., CPA, Former IRS Revenue Agent

Customer: replied 11 days ago.
Will the IRS suspect fraud or tax evasion if I amend the return to include large amounts of side income that was omitted from my original return though?

Dear Customer,

Why would this be fraud if you voluntarily amend the tax returns?

Regards,

Fiona

Customer: replied 10 days ago.
I’m curious if they would consider it fraud/tax evasion on the initial return since it wasn’t reported until the amendment, but was known about at the original filing.

Dear Customer,

Fraud is not mistake or omission or math error.

When once you realize the mistake and you correct it, it is evidence that it was not fraud.

Regards,

Fiona

Customer: replied 10 days ago.
It will not raise any red flags even if it increases my taxable income by 40%?

Dear Customer,

It will not. The more, the merrier for the IRS.

When you filled out the explanation, you can simply say to include corrected or self employment income.

You will be a model citizen.

No matter what the IRS will do, you have to report the income. You want to do this as soon as possible before the IRS comes to you.

Regards,

Fiona

Customer: replied 10 days ago.
Can that impose any civil or criminal penalties for not reporting it on the original return?

Dear Customer,

With the new tax due, it is suggested that if you can, pay the entire amount due when you submit the amended tax returns. Or you can apply for installment payment plan after the tax returns are processed. It is best that you start to pay.

What you may owe is failed to pay penalty or late payment penalty. The IRS will not put criminal penalty at this point.

If you are asserted with penalties, you may want to apply for penalty abatement.

Regards,

Fiona

Customer: replied 10 days ago.
Okay, thank you. I just want to make sure I don’t do anything to put me in a civil or criminal position

Dear Customer,

What you are about to do is excellent.

Well, once you realized that you need to file the tax returns for these amounts, you did it immediately.

Do so as soon as possible.

If you have concern, find a professional return preparer to do the tax return for you.

Before you leave the session, I need your rating for my services which is done by you clicking on those stars which appear on your screen!

Please don’t leave the session before providing your rating, because without a rating that would leave me not paid by JustAnswer for the work I performed for you. There is no additional charge to you for providing the rating.

I will wait online for your response with your rating so that we can complete the session.

Thank you for using JustAnswer.

Regards,

Fiona

Customer: replied 10 days ago.
Am I likely to see an audit after amending these returns?

Dear Customer,

The IRS audit selection is based on its internal selection formula. This is a question I cannot answer.

If we prepare our tax returns correctly, the IRS audit is not something we need to be concerned about.

Do you mean that other than this on the side income, you have other items on the tax returns which would be incorrect? Correct those items, too.

Regards,

Fiona

Dr. Fiona Chen, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 4667
Experience: Former IRS Revenue Agent
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