I missed a continuing professional education program on IRS criminal tax procedures yesterday due to ongoing problems restoring utilities after the storm on Tuesday. But I just read the program materials and the IRS 2019 report on criminal tax investigations and one thing jumps out at me:
Drug related cases far outweigh all other categories of tax crime prosecutions and the trend is accelerating. I’ve forecast in earlier @potcpa postings that this will accelerate further in New Jersey after the November election that will hasten the move to decriminalize cannabis. In other words, the number of New Jerseyans in jail for pot will increase, but the reason will be different. It will be for federal tax evasion, not state drug crime.
Does an illegal pot or mushroom business always mean tax fraud? Not necessarily, but I’ve never seen a case that did not. In all real cases, unlicensed growers and sellers never report their income from this activity. That may change a bit after decriminalization of cannabis in New Jersey.
My advice is clear: if you choose to operate an unlicensed pot or mushrooms enterprise, then pay your taxes. It’s far easier to get caught for tax evasion than criminal drug offenses. The relatively small amount of tax is not worth the high percentage likelihood of jail time if you do get caught.
If you find yourself at risk for any of the less common reasons for tax prosecution, talk it out now. A solution might be within reach easier than you think. It is always better to address the problem yourself rather than wait to get caught.
As always, I offer free consultations on tax matters, including an engagement agreement that includes the highest possible level of privacy protection. Whether you are simply worried about not having filed tax returns or know that you have a risk to your assets and future criminal prosecution, it is always smart to talk about it in attempt to resolve the problem. We will discuss adding special extra procedures and precautions if there is any risk of criminal tax liability. Most tax problems can be solved more easily than feared.