can business owners drastically underpay income taxes?

[Anonymous]

1. Run a business

2. Keep shoddy books, pay tiny income taxes.

3. get audited years later

4. Plead poverty, negotiate to pay 50% or less of amount owed.

Is there a flaw?

[Anonymous]

If you are in a business where your customers issue you 1099s your flawed books are going to bite you in the ass when you have no support for deductions from the income you received.

But yes, there are some businesses where you can get away with inflating expenses or, for cash businesses, not reporting all of your income.