The IRS and Darryl Strawberry's audit for unreported income
The IRS audited the tax returns of Darryl Strawberry, a former major league outfielder. It contended that, between 1986 and 1990, Strawberry earned $422,250 for autograph signings, appearances, and product endorsements, but he reported only $59,685 of income. Strawberry attributed the shortfall to his receipt of cash for autograph sessions and promotional events. He allegedly concealed the cash payments in separate bank accounts of which his CPA was unaware.
What tax compliance issues regarding the alleged underreporting are pertinent?© SolutionLibrary Inc. solutionlibary.com 9836dcf9d7 https://solutionlibrary.com/business/accounting/the-irs-and-darryl-strawberrys-audit-for-unreported-income-7dot
...d income can include legal as well as illegal income. In thinking about Al Capone, we assume he failed to report illegal income, but Strawberry's income was legal. Both are reportable under tax compliance rules.
Tax avoidance is legal; tax evasion is illegal. Evasion can include
? Knowingly not reporting income,
? Underreporting income, or
? Providing false information to the IRS which results in improper income reporting, or
? Deliberately underpaying taxes
? Understating a reportable transaction
? Substantially understating your taxes. This involves having the amount of your income taxes on your return being substantially less than the actual tax amount that you owe the ...