The Unintended Consequences of "Playing Games" with your Business Tax Return

Do you own a business? 

Not staying current with your tax returns? 

Underreporting income or over stating your expenses on a tax return?

So you "beat" the system but when disaster strikes -- will you be harmed?

Your actions may have ramifications beyond the apparent ones.........

Beyond committing a federal crime (See Tax Crimes Section), there are often some unintended consequences for not filing a proper tax return.  The recent events in the gulf oil spill have caused me to briefly revisit this point.

After speaking with many of my colleagues in Louisiana, many businesses in the gulf area are faced with additional issues in getting loss of income claims paid.  That's in addition to the red tape mess. 

Why?  They simply have not filed a tax return in prior years, have under reported income (utilizing the "cash" system-thinking uncle Sam does not need to know and it won't hurt), or significantly over stating their expenses.

Now-they are experiencing great difficulty in proving their losses.  By doing such, you're making it fairly easy to be denied legitimate claims and you will find no sympathy under the law to protect you.  Everyone hates the tax cheat!! In addition, the claims people know this and will cut you NO slack in getting what you deserve.  You just make it so easy for them to give an extra amount of grief and not pay you the damages you suffered. 

I experienced this first hand with many business interruption insurance claims from the recent hurricanes.  The claims process required extensive financial statements and books/records (in addition, to 2-3 years of tax returns).  Folks with solid records got very favorable results (the insurance industry tends to "over-pay" these claims when faced with litigation).  Folks with a weak track record struggled to get a claim anywhere in the vicinity of reality during a very stressful time (non-filing, late filing, underreporting, over expensing). 

Thinking you will just catch everything up after the disaster? A couple of problems---first, your undertaking this at the climax of financial stress ---and two, you greatly weaken your credibility when offering returns filed after the "event".  You ask why?  Because they will assume you "rigged" them to maximize the claim.  Your tax return is biased based on the subsequent event ---- and your ripe for cross examination if it went to trial.  Your evidence is weak and they know it.

They pay claims when they typically have a loaded litigation gun to their head---not because they are nice.  From their perspective --- that's good business.             

For damage purposes--- there is no greater evidence than having a proper prepared and timely filed tax return (having been filed under the penalties of perjury before the event) to support your claim.

Failure to do such is just bad business on your part and can severely hurt you in numerous instances.  Get it right.


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