A business owner recently asked us if they could offset their taxes by backdating an expense check of $150,000 back to December 2019 so they could pay nothing for their taxes for 2019. Is this legal?
There are many people out there who want to avoid paying taxes by using questionable methods like these as loopholes. While these methods sound "clever", they actually don't work and they are "ACTUALLY ILLEGAL" and will land them in hot water.
So a person who "backdates" a document to an earlier date than the original drafted date, and when it's done for tax reasons, it's illegal and it may rise to the level of a tax obstruction violation - IRC § 7212. According to IRS, violation of IRC § 7212, shall, upon conviction thereof, be fined not more than $5,000, or imprisoned not more than 3 years, or BOTH!!!
No one is above the law, this is why we follow the IRS rules and regulations and why they're important for business owners to stay in compliance with the IRS.
There is a legal way to pay less taxes, with XQ CPA's proactive tax planning where we review your entity structure, maximize your deductions, and establish a tax plan for you so you can reduce your taxable income LEGALLY and proactively!
If you're still confused on what backdating is and the legal ramifications behind it, then contact us! We'll be glad to help!
Written by Alex Ortiz, Marketing Coordinator and Edited by Charlene Quah, CPA, CTC