What is Tax Fraud?

It’s the end of the year, which means most people will be doing their taxes within the next four months or so. Tax time can make anyone nervous—there’s no government agency that scares people more than the IRS.

It’s a good time to talk about the difference between making an honest mistake on your tax return and committing actual tax fraud or evasion.

Tax Negligence

Tax negligence is an unintentional mistakes. The IRS sometimes corrects these themselves and then charges a 20% penalty on the underpayment, but they do not seek criminal charges when they think they’ve caught an honest mistake. 

The IRS knows that most people don’t have a very good understanding of the tax code. If there’s no evidence of criminal activity, they’ll typically assume you just didn’t know what you were doing. 

Tax Fraud

Tax fraud, or tax evasion, occurs when a person intentionally fails to file or prepares false returns in the hopes of avoiding tax liability. The key here is that the attempt to defraud the IRS must be intentional. Examples might be underreporting your income, attempting to hide assets, or falsifying documents. 

Sometimes employers commit tax fraud as well. They often underreport workforce numbers, fail to collect payroll taxes, and fail to pay those to the IRS. Paying payroll taxes is part of an employer’s legal responsibilities. There is no getting around it in any sort of a legal way. 

Another way companies commit tax fraud is by failing to file regulatory reports. This is often seen as an attempt to hide wealth from the IRS. 

Some tax preparers commit fraud as well. This happens when a tax preparer files false tax returns on their client’s behalf, or makes false statements on the client’s behalf. The client may still be charged if the client either had knowledge or should have had knowledge that a false tax return got filed. 

Failure to file charges can come with up to one year in prison and a fine of up to $100,000, whereas attempts to evade taxes are punishable with up to 5 years in prison and up to $250,000 in fines. 

Charged with Tax Crimes?

If you’ve been charged with tax crimes you need a federal white collar crimes lawyer to help you navigate the charges. You’re facing a federal investigation and federal prison, as well as an agency that has nearly unlimited resources to push their side of the case.

We have the experience to help. Contact our team to get help today.

See also:

4 Mistakes to Avoid If You’re Under Investigation for a White Collar Crime

How to Resolve a Federal Criminal Case Before Charges Are Filed 

Should You Go To Trial if Accused of A White Collar Crime

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