Individuals and businesses alike are required to closely adhere to all tax laws. While it’s easier said than done to do so, it’s still required if you want to remain in good standing with the IRS.
Many people confuse income tax fraud and negligence, assuming that they’re one in the same.
Income tax fraud comes about if you willfully attempt to defraud the IRS. Common examples include:
- Filing a false tax return
- Hiding income, such as in offshore accounts
- Failure to report all income
- Making fraudulent claims
Negligence, on the other hand, isn’t nearly as serious. While it can still cause confusion and cost you some money, it won’t lead to criminal charges. Instead, negligence is considered to be more of a mistake. Here are some examples:
- Making a math error on your tax return
- Claiming a credit or deduction you don’t qualify for
- Providing an inaccurate account number
- Filing under the wrong status
While you do your best to avoid these types of mistakes, the IRS realizes that they’re going to occur.
The penalties for income tax fraud are serious
If you make a mistake on your tax return and the IRS catches it, you’re given the opportunity to correct it. Depending on the circumstances, this may mean paying additional money, along with penalties and interest.
However, criminal charges never come into play.
But with income tax fraud, it’s an entirely different scenario. For example, if you attempt to evade paying taxes, you face up to five years in prison and a fine of up to $250,000.
If you receive a letter from the IRS, read it carefully to better understand what they’re asking and the next steps in the process. For basic issues, you may be able to provide more information on your own, thus resolving the problem.
Conversely, if you’re faced with serious trouble, such as criminal allegations, you must learn more about your legal rights, how to protect them and what you’ll be dealing with in the future.
With the right defense strategy guiding you, it’s possible to avoid a conviction and the many consequences associated with it.