Hire a Lawyer, not an Accountant, to file Income Tax Returns
Failing to report under the table business income is likely to make one feel uneasy, or even guilty. It is also possible that you skipped filling your income tax returns even though you are aware of the legal responsibilities in respect to this. To rectify the situation, you might be considering hiring an accountant.
While it is appreciable that you are on your way to set things straight, stop and think whether or not you are making a big error by getting an accountant to help you deal with the issues of delinquent taxes. The reason for this is that tax evasion is considered a criminal offence or felony. Defaulters might find themselves faced with civil action as well.
Would you consider getting an accountant to defend you if you got caught robbing a bank? I’d venture to say you most definitely would not. A much wiser decision would be to invest in the services of a capable attorney.
One advantage of hiring an attorney in this context is that they have solicitor-client privilege (alternatively referred to as attorney-client privilege or legal advice privilege). This implies that the information with regards to income tax returns or delinquent taxes that the client divulges to his lawyer remains strictly between the lawyer and the client and cannot be used against the client. Written records are also included in the gamut of solicitor-client privilege.
Comparatively, if you hire an accountant to help you deal with matters of delinquent taxes, he might, at some stage, be compelled to testify against you and is obliged to hand over a complete of the records he possesses pertaining to the case upon request.
Your lawyer also has the ability to create a legal document that would protect you. Since you are coming clean, the tax authorities may refrain from slapping criminal charges on you and might even waive or decrease penalties or tax liability.
If your accountant, on the other hand, attempted to achieve the same end, every bit of information about you might need to be divulged. Your accountant would not come under the protection of the solicitor-client privilege.
If you hire the help of an accountant, the tax authorities might charge you with tax evasion even if you are trying to set things straight by filing your tax returns from, say, ten years back.
In fact, concealing your delinquent taxes might place the accountant in a precarious situation. The reverse is true when you choose to let an attorney handle this for you. Your lawyer cannot be legally forced to give testimony against you, thanks to the solicitor-client privilege protection. It is highly possible that your lawyer would have his personal accountant to help deal with the concerned issues.
Since you would hire a lawyer specializing in criminal and tax law, he would be cognizant with the process of negotiations with the tax authorities before filing your tax returns.
If you feel that there is a good chance of you being charged for a criminal offence owing to delinquent taxes, it is better to steer clear of accountants. Alternatively, hire a lawyer who is highly knowledgeable in these matters when you set out to file or amend tax returns.