Reasons to Avoid IRS Tax Fraud
Tax fraud is defined as a situation when an individual or company intentionally falsified any information on a tax return with the purpose of limiting the tax obligation. The term applies to several activities that violate the laws found in the Internal Revenue Code or in the United States Code. Someone found guilty of IRS tax fraud is found guilty of copying their tax return for unwarranted returns or failing to pay the full amount owed. There are many dealings that fall under the umbrella of tax fraud, and it is significant to avoid these tempting practices at all costs.
Negligence vs. Income tax fraud
To find a person guilty for tax fraud, the IRS has to reveal that the person intended to misrepresent or provide incomplete information on a tax return. Generally, it is complicated to prove a taxpayer’s intention to break the tax law. The IRS Criminal Investigation Unit has to reveal your intention by providing very specific evidence regarding your motives. This is why the government often chooses to pursue the taxpayer in a civil matter simply by submitting information that they paid less than their taxes. Generally, if the taxpayer has any legal disagreement about why they did not pay their taxes, they will generally earn the criminal charge.
Types of tax fraud
· Deliberately less information or omission of income
· Hide or transfer assets or income
· Exaggerating the amount of deductions
· Claiming false deductions
· Claiming personal expenses as business expenses
· Create false entries in books and records
· Keeping two sets of books
· Tax evasion
And every other thing that violates Title 18 or Title 26 codes
Can you go to jail for tax fraud?
If you are found guilty of tax fraud, you may go to jail. Tax evasion and some cases of tax fraud can convict you of a serious crime and see you imprisoned for no more than five years. Once you have a federal crime conviction, you lose your voting rights, your jury duty, your right to federal employment, the right to hold federal office, the right to obtain federal licenses and the right to obtain a pilot’s license. You cannot join the military, you lose your right to possess firearms, and you may lose certain travel opportunities and more if you live in certain states.
Penalties for Income Tax Fraud
Different types of tax fraud spur different types of IRS punishment. If you deliberately try to evade paying income taxes, then you are subject to criminal and civil penalties. Below are just a few examples of possible penalties you could receive.
1. Fraud or false statements
If convicted, the taxpayer is convicted of a criminal act and is not subject to more than three years in prison, a fine of not more than $ 250,000 for individuals or $ 500,000 for corporations, as well as the cost of the prosecution.
2. Tax evasion or frivolous tax arguments
Subsequent to a conviction, the taxpayer is now guilty of a criminal act and can be jailed for no more than five years, and pay a fine of no more than $ 250,000 for individuals and $ 500,000 for corporations plus the cost of prosecution.
3. Tax frauds and scams “Dirty Dozen”
Yearly, the IRS creates a list of the infamous “Dirty Dozen” – the 12 biggest tax scams of the year. Some trends rise and fall with new technology and easily accessible information, which some other patterns remain the same. Keep in mind that the IRS has been dealing with tax fraud for over a hundred years, so they are well versed and adaptable to tax fraud schemes. Avoid making wrong statements and only trust an ethical tax preparer to avoid penalties, late payments, and possible imprisonment.
4. Falsely padded deductions
You cannot deceive the IRS. It’s quite easy to inflate the amount of deductions or expenses on a tax return to pay less than you really owe or to receive larger refunds. Always double-check your statement to make sure you didn’t unintentionally misunderstand or quilt deductions to avoid fraud allegations.
5. Excessive claims for trade credits
If you own your own business, it is very important to learn the applicable tax codes. It is not uncommon for new business owners to improperly file their taxes and penalties that represent a major blow to their businesses. Always stay up to date with the IRS laws for business tax credits to make sure you file your application properly. A common example of excessive claims is the fuel tax credit. Contrary to popular thought, this credit is not always available to taxpayers. If you think you qualify for this credit, take detailed notes on your mileage and submit it to an ethical tax preparer for review.
6. Inflated Refund Statements
Unethical tax preparers will promise more than they can offer. If someone approaches you promising inflated tax refunds before examining your information, then you should stay out of it. These scammers are willing to steal your information and your information at your expense. Generally, you can spot fraud because they advertise through flyers, advertisements, and community groups where they are more likely to find trusted contributors that they can take advantage of.
7. Falsifying income to claim credits
Do not be tempted to recoup fake income to qualify for tax credits. Scammers sometimes deceive taxpayers into doing this even though it is not legal. Always file the most exact tax return possible because you are legally responsible for the information on the return, regardless of who prepared it. When the IRS discovers this, they’ll force you to pay back taxes, interest, and penalties.
8. Abusive tax shelters
The IRS is skilled in unraveling complex tax evasion schemes and prosecuting the people who create them. If you are offered a complex tax package or service, you should seek the opinion of a third party before accepting it.
9. Declaring donations to fake charities
Unfortunately, there are many fake charities on the market looking to make a fast buck out of your good motives. If you’re thinking of donating to a charity, always check the confirmation to make sure it’s a legitimate organization. One way to sense a fraudulent charity is to recognize if its name is similar to that of another charity. The IRS provides the tools you can use to find out the current status of charities.
10. Fraud by an unscrupulous tax preparer
There are many eligible tax preparers, but not all are moral. Notice tax preparers who cut corners and try to find faults in the tax code. The IRS will still pursue legal action even if you used someone else’s help. You are still responsible for the erroneous information in your file, so you want to use a trustworthy source to file your taxes.
11. Frivolous tax arguments
Frivolous tax arguments are not a scam to speak but are the subject of an allegation of tax fraud. Using arguments such as declaring that a tax law is unconstitutional is not a basis not to pay taxes. Refusing to pay for an argument like this is no excuse and can lead to criminal prosecution.
12. Foreign tax evasion
This is a regular problem that may simply be due to negligence, but there are still a lot of persons who commit fraud with a foreign state. It may sound easy, but the Internal Revenue Service (IRS) now understands how to eliminate offshore tax cheats and participating organizations. If you committed tax fraud or simply did not pay your taxes, then it is best to willfully log in to stay up to date with the tax files.