IRS Tax Fraud: Do not try to fool the IRS

IRS Tax Fraud: Avoid these Common Mistakes

IRS tax fraud is serious

IRS tax fraud is the intentional defrauding of the US government to avoid paying taxes. There are many people who claim they have the secret to Pay Zero Income Tax but do not be fooled; you must file IRS taxes every year. No matter how many times these claims are disproved, there are still many who believe they do not have to pay income taxes. Those who fail to pay their taxes may be investigated for IRS tax fraud, which is a serious criminal offense that could result in seizure of assets and property, penalty fees, and even imprisonment (think Wesley Snipes). The IRS will use every resource it has to prosecute IRS tax fraud offenders.

The primary motivation for individuals to commit IRS tax fraud is to pay little or no taxes on their income. The two most common methods of IRS tax fraud are underreporting or filing false claims.

  1. Underreporting
    Underreporting is when you file less income than was actually made in an attempt to lower your tax liability. By underreporting your income, you defraud the federal government out of taxes owed. Many people who have cash-only or side jobs will omit these earnings on their tax filings. According to the IRS, an individual should report any income earned over $600.

  2. Filing False Claims
    False Claims pertains to filing income taxes with inaccurate claims, like overstating tax deductions and credits. By claiming more children than you have or stating erroneous charitable donations, you are committing IRS tax fraud. Furthermore, the IRS examines small-business filings with even more scrutiny, looking for omitted expenses or personal expenses claimed as business deductions.Making false claims isn't the same thing as making an honest mistake on your return. Human error is usually classified more as tax negligence than IRS tax fraud, and won't have criminal implications but will still leave you with any assessed tax debt. Also, there is a separate classification for individuals who have their taxes professionally prepared with fraudulent claims. This is considered Tax Preparer Fraud, and though you will still be responsible for any tax debt that they cause, you will not be brought up on criminal IRS tax fraud charges.

The largest group of taxpayers who commit IRS tax fraud are surprisingly in the middle class income bracket, with the highest numbers coming from individuals who work in the service industry. This industry is frequently targeted with IRS audits because of its high volume of cash-handling.

Do the Crime, Do the Time

Jail time for IRS Tax Fraud is not as rare as you think. According to the IRS statistical data, the tax year 2010 had a 79.6% incarceration rate for those convicted of IRS tax fraud. Those who are incarcerated for IRS tax fraud can be sentenced to federal prison, put on house arrest, or sent to halfway housing. Tax Evasion carries the punishment of five years, while filing false statements can land you in jail for three years. In both cases, you may also be fined up to $250,000, in addition to court costs, lawyer fees, penalties, and whatever tax debt you may receive. Committing IRS Tax Fraud to get out of having a tax debt or to lower a tax debt just isn't worth the trouble it can cause.

If you are worried about an upcoming debt, do not doctor your filings to eliminate the tax liability. Contact a Tax Debt Professional today to find out how you can resolve your tax situation. Fill out the form below or call us toll-free to speak with a tax professional in our extensive network of tax attorneys, enrolled agents and CPAs. No one wants a tax debt, but you certainly do not want to commit the serious crime of IRS tax fraud.

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