If you've waiting until the upcoming October extension deadline to file, chances are you wanted the extra time to ensure that you got your filing right.
That's smart. Making mistakes or overlooking tax breaks could cost you, not only money but also time if you end up having to answer Internal Revenue Service questions about your filing.
And when an audit — or examination as the IRS likes to call the process — definitely doesn't go your way, you could end up in more trouble.
That's what happened to John David McAfee. Yes, the guy whose name is on the computer antivirus software (although he sold the company in 2010 to Intel) and who's now known, among other things, for his promotion of cryptocurrency and taunting of the IRS.
I have not filed a tax return for 8 years. Why? 1: taxation is illegal. 2: I paid tens of millions already and received Jack Shit in services. 3. I'm done making money. I live off of cash from McAfee Inc. My net income is negative. But i am a prime target for the IRS. Here I am.— John McAfee (@officialmcafee) January 3, 2019
Major tax challenges lead to charges: Federal prosecutors unsealed an indictment earlier this month against McAfee that charges him with evading taxes and willfully failing to file tax returns from 2014 to 2018 despite making millions during that time.
That rich people sometimes (OK, often) push the tax envelope is no surprise. Even we regular taxpayers occasionally get aggressive on our 1040 forms.
Regardless of financial status, it's generally not a good idea to challenge the IRS — which McAfee literally did in a video! — unless you're certain you can prove your tax claims.
If you can't, and remember that the burden is on you to convince the IRS that your filings are legit, you'll likely end up owing the taxes you thought you were escaping, along with beaucoup penalties and interest.
Tax lessons from the rich and indicted: To avoid ending up in tax trouble like McAfee, tax attorney Robert Wood, managing partner at Wood LLP in San Francisco, looked at what the ostensible millionaire's case can teach us about taxes.
His Forbes column, 7 IRS Tax Lessons From John McAfee's Tax Evasion Indictment, is this weekend's Saturday Shout Out.
I'll let you read it at your leisure, but since as noted at the start of this post a tax filing deadline is imminent, I'll pass along part of Wood's first lesson:
Report your income, and always file. You must file a tax return each year with the IRS if your income is over the requisite level. Don’t forget, and don’t be late either, even if you can’t pay what you owe. File anyway, and you can work out payments later.
That's good advice at any tax deadline time. It's even more important as the absolutely final filing due date nears.
So enjoy Wood's tax tips and then get to work on your extended filing! The posts below could help.
- 8 tax tips to meet the Oct. 15 filing extension deadline
- State tax deadlines mostly follow federal due dates, too
- IRS Free File sees record use in 2020 filing season