Are you Looking at Tax Fraud or Tax Evasion?
Tax Evasion – In most tax audits the IRS is only interested in collecting the taxes owed, plus interest along with come penalties. Generally, the typical worse case is that the IRS might impose a negligence penalty or a late filing penalty. If, however, during a tax audit, the IRS suspects that you have committed tax fraud they can impose a civil tax fraud penalty. The civil tax fraud penalty is equal to 75% of the tax owed, plus interest on the penalty. It can get worse though. The IRS tax auditor might then request that the tax fraud specialist to look at your case to see if it should be sent to the IRS Criminal Investigation unit for criminal tax prosecution.
Tax crimes include the filing of one or more false tax returns, actual tax evasion, or the filing of false documents; failure to collect employment taxes, failure to pay taxes, or simple failure to file a tax return. The penalties for criminal tax fraud are both significant and serious. Charges range up to 5 years in jail, plus fines of up to $500,000, plus the costs of prosecution for each tax crime.
So what is the Difference Between Fraud and Mistake?
Generally speaking, tax fraud or tax evasion involves an intentional wrongdoing on the part of the taxpayer. Simple mistakes or carelessness is not tax fraud. The IRS has rules for determining whether tax fraud has been committed by looking for prior evidence of tax fraud such as:
- failure to file tax returns
- concealment of assets
- operating only in cash
- engaging in illegal activities
- hiding income
- understatements of income
- inadequate records
- implausible explanations of behavior
- failure to cooperate with tax authorities
If you have any of these tax serious problems and you are about to be audited by the IRS or currently undergoing an audit you really should consult with a tax fraud attorney. Comments and actions you take during the course of your tax audit can turn an “ordinary and routine” tax audit into a messy and complicated tax fraud case.
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