I would say that intentionally underreporting income on her tax return is illegal, and that I could lose my CPA license if I do not abide by the Integrity and Objectivity rule in the AICPA Code of Professional Conduct. I would tell her that underreporting income is an instant audit trigger, and that it is highly unlikely for her to get away with this sort of cheating on her tax return. The IRS ensures taxpayers' compliance through its Automated Underreporter Program. The program matches income reported on the federal income tax return to information obtained from third parties, such as employers and financial institutions. If there is a mismatch, she will receive a notice from the IRS informing you of an additional tax assessment. If her penalties have been assessed and she can show...