Yes, it’s that dreaded time again when Americans dig down deep into their pockets for their annual donation to their favorite uncle — Uncle Sam, that is. But before you hit “send” on your income tax return, make sure that you are in full compliance.
According to Internal Revenue Service estimates, annual convictions for income tax crimes represent only .0022 percent of all taxpayers. But it’s also estimated by the agency that another 17 percent of taxpayers aren’t compliant with the United States tax laws.
When does a violation of the federal tax code turn into tax fraud? It can be a very fine line, as some taxpayers inevitably discover.
One way the IRS distinguishes tax fraud from taxpayer negligence is that intent is involved. The taxpayer allegedly made a willful attempt to evade the laws governing the U.S. tax code for their own benefit.
The following are indications of tax fraud for taxpayers of companies:
- Submitting falsified or fraudulent claims
- Intentionally neglects to list all income received
- Doesn’t file annual tax returns
- Willfully ignores any tax debt due
- Files and prepares fake or fraudulent tax return
Even the IRS realizes that understanding the tax code is almost impossible for non-tax professionals. That’s why they are willing to assume that many discrepancies are something that falls short of fraud — usually negligence.
But even a finding of negligence by an auditor can result in a 20 percent penalty on top of the underpayment itself. And now you’re on the agency’s radar for future years.
Don’t gamble on your freedom. If you face charges of tax fraud, learn about all of your legal options.
Source: Findlaw, “Income Tax: Fraud vs. Negligence,” accessed April 14, 2017