Years ago, when I was practicing law, I received a touching anonymous letter asking this question: “what could a person do if he filed ‘Fifth Amendment’ tax returns or has not filed returns at all, how could he get back into the filing system without being penalized for all the previous years?”

The answer to this question was impossible to explain simply. So, I provided a general answer. Here it is. Tax evasion, failure to file, and filing false returns, are serious federal tax crimes. Very few lawyers, even those in criminal defense practice, know much about these and related crimes ~__ let alone accountants. People in the anonymous letter writer’s position need first-rate professional help. Under no circumstances should they try to re-enter the filing system by themselves. What s necessary, is “making a deal.” That’s Rule One.

Rule Two: don’t throw yourself on the mercy of the I.R.S., the United States Attorney, or the Department Justice. Your advisor must make a thorough analysis of your tax situation to ascertain just what federal laws you may have broken, and the extent of your tax liability. Then, and only then, when you both know the strengths and weaknesses of your situation, is it time to make an overture to the proper authorities.

Rule Three: be prepared to spend a not insubstantial sum of money. Quite apart from the cost of a knowledgeable professional, surfacing from the non-tax underground can be costly. In addition to a likely fine, plus payment of all taxes and interest owed, there’s the fraud penalty to be considered: an additional 50% of the taxes owed. But as expensive as surfacing can be, in most cases it will be cheaper (in strictly financial terms, that is) than if the I.R.S. moves in first. Make it real: if the government gets to you before you get to it, in addition to all the civil liability, there’s the real pos­sibility of a criminal charge. more