Federal prosecutors charged that Hatch, 43, filed false 2000 and 2001 tax returns, omitting his income from the CBS show, as well as another $321,000 he was paid by a Boston radio station.
The penalty could be up to five years in federal prison and a $250,000 fine for each charge. However, as part of the plea agreement filed in federal court on Tuesday, the U.S. Attorney's office said it would recommend a lesser sentence.
The agreement is not binding, and Hatch could still choose to plead innocent and proceed to trial.
Hatch was scheduled to be arraigned in U.S. District Court in Providence on Monday.
The charges were announced Tuesday by the U.S. Attorney's office. The details of the plea agreement appeared in court documents, which were signed by Hatch on Jan. 6 and filed Tuesday.
According to the U.S. Attorney's Office, Survivor Entertainment Group paid Hatch $10,000 in August 2000 for appearing on the final episode of the reality show and $1 million for being declared the show's winner. Prosecutors allege that in November 2002, Hatch filed a false personal income tax return for the 2000 tax year by failing to report the $1.01 million.
Prosecutors also said that Hatch failed to report income he earned working as on-air co-host and on-air personality for "The Wilde Show" on WQSX-FM in Boston between January and December 2001.
A message left at Hatch's Newport home was not immediately returned. He declined an interview request from The Early Show.
But CPA Joel Podgor of Holtz Rubenstein Reminick commented to CBS News Correspondent Trish Regan on The Early Show Wednesday that he finds it "shocking that somebody wouldn't report the income when it's so blatant and obvious and it's all over the TV that he earned it."
Tax attorney Larry Feld, author of "Tax Fraud" told Regan it's a good move for Hatch to agree to a plea bargain with the feds. "By pleading guilty," Feld says, "he acknowledges his situation, he's accepted responsibility for what he's done, and that will be favorably considered by the judge when the judge imposes a sentence."
On "Survivor," Hatch stood out because of his penchant for nudity and as the only openly gay contestant. Dave Letterman dubbed him the "fat naked guy."
For Hatch, the often arrogant king of the island, nakedness was an important part of his plan. It was something he did throughout "Survivor: Borneo" and "Survivor: All-Stars."
Since the television show, Hatch has weathered a series of legal battles.
He was arrested in April 2000 on a charge of abusing his then 9-year-old son. That charge was later dropped.
In 2002, in a ruling that overturned a conviction from several months earlier, Hatch was found innocent of assaulting his ex-boyfriend.
He has been touring the world as a spokesperson and motivational speaker. He worked as a correspondent for "Entertainment Tonight" and the The Early Show, and appeared as a guest-star on CBS's "Becker."