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the IRS definitely has a long reach.. best to try to settle it some way or another and if it's a large amount of money get a good tax attorney and CPA.
Just a little tidbit though: At one time not so long ago the laws stated that it was against the law not to report your income. However, there was no law stating that you had to pay any taxes on that income. I'm sure they've changed it up but this law was in effect within my lifetime and i'm not ancient.
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