April is the Cruelest Month for Lawyers Behind on Their Taxes

Although most lawyers pay their taxes and file their returns on time, some don't. And those who don't often make for a doozy of a story.

One longtime Illinois lawyer, now deceased, simply refused to file, says George Collins, himself a longtime Chicago practitioner who regularly represents attorneys in disciplinary and ethical matters. Eventually, this scofflaw lawyer came to the attention of the Internal Revenue Service, but the story has a happier ending than one might expect.

Because the lawyer made a practice of overpaying his estimated taxes by a considerable amount on a timely basis, the IRS decided to let well enough alone and just keep accepting the overpayments, Collins tells the ABA Journal. This, of course, is not what he recommends as a best practice to attorneys and other clients concerning their own tax obligations.

There is similar good news, however, for those who have procrastinated too long and are worrying anew as another April 15 filing deadline approaches:

They can probably avoid prosecution by sending a check and a tax return to the IRS before the agency comes to them, Collins says. While there is no guarantee that all will go well, the IRS is usually willing to overlook issues regarding past-due returns and underpaid tax when a scofflaw comes forward to make amends.

Thus, by doing so, lawyers and others who have gotten behind on tax obligations can generally wipe the slate clean, he says. They should, however, expect to pay potential hefty penalties due to their delay.

As a starting point, Collins says, he often recommends that clients with tax issues get to work, with the help of an accountant, on preparing a Form 1040X (PDF), which amends a prior return. That gives them a realistic picture of what will be expected when they go to the IRS, with hat and check figuratively in hand.

"If the person comes forward, even though belatedly" and "makes nice and pays the taxes," Collins says, that's usually the end of the story.