There are several types of tax fraud that can be committed by either an individual, business or the tax preparer. Sometimes, tax fraud is committed unintentionally or through negligence without the person meaning to commit the crime. However, it can still be punishable by time spent in jail, fines or probation depending on the overall circumstances surrounding the charges and fraud committed.
According to the IRS, about 17 percent of people who file taxes don’t properly comply with the tax codes that are set forth by the service each year. About 75 percent of those people are individuals who find some way to commit tax fraud. In short, tax fraud is a willing attempt to avoid paying taxes or evade and defraud the IRS. There are a few scenarios that comprise tax fraud. One of the most common ways that people commit fraud is by not filing a tax return. Most people file a return at the beginning of each year. For many, they will receive a refund of some kind. Even those who have to pay taxes still file a return. Those who see that they have to pay a significant amount of money to the IRS are usually among the people who don’t file a return at all. Another way that tax fraud is committed is if someone doesn’t pay taxes that are owed. Most states and the federal government have some kind of plan in place to make it as easy as possible for people to pay taxes that are owed. Many people are able to have taxes owed taken from any refund that they get with any money that is left over being electronically deposited into a bank account or mailed in the form of a check.
Sometimes, a person might fail to report all of the income that is earned in order to pay less in taxes or to get a larger refund back. Businesses sometimes do this as well so that they don’t have to pay out as much in taxes from company profits. Tax preparers sometimes create a false tax return for customers in order to get more money for the customer or to get more money for themselves since they have the software to complete multiple returns.
When someone files a tax return or pays taxes, that person needs to understand that the IRS already knows that tax codes and laws can be confusing and can be difficult at times to understand. If the IRS detects an issue that is clearly a mistake or an error that wasn’t intentionally made, then a notice will be sent so that the person or business can correct that information. However, if the IRS sees a drastic change in the information that someone files from one year to the next, then it raises red flags for the IRS, which is when charges of tax fraud could come into play. Even if the mistake wasn’t done on purpose, there could still be a minimal fine to pay.
There are some common issues that the IRS will pay attention to when looking for tax fraud. One is a significant change in income from one year to the next. If someone loses a job, then the income will decrease. However, the IRS will usually want proof of a job loss or unemployment received. A benefit is that most documents pertaining to unemployment payments are sent to the IRS. Overstating deductions or a drastic change in deductions is another issue that is commonly seen. The birth of a child or a child leaving home to go to college isn’t a big deal. When you add a large number of people on your deductions or when there are several types of deductions made that haven’t been made in the past, the IRS will begin to scrutinize the details. Some people will use other children who don’t live in the home as a deduction to get more money. They will report that they earn less money than they do or claim personal expenses as business expenses to get a larger deduction.
An attorney can help if you’ve been charged with tax fraud. You need to keep all documents related to the tax return filed and information from the previous year to show any mistakes that have been made. Most attorneys can seek a judgment that involves payments over a certain length of time instead of jail for tax fraud unless there is a willing attempt or a large amount of money involved.
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