Overview of Tax Fraud

Overview of Tax Fraud

Cheating on your income taxes is a serious crime, and this should come with no surprise.  A willful attempt to evade filing your income tax or pay your taxes, can result in serious prison time.

 What is tax evasion and tax fraud?

Each taxpayer has a voluntary duty to file and/or pay their income taxes.  A taxpayer commits tax fraud when the taxpayer willfully acts with the intent to defraud the Internal Revenue Service. Filing false tax returns, failing to pay taxes, failing to file a tax return, filing false documents and filing inaccurate income are all examples of tax fraud.  Additional examples of fraud include using a fake social security number, claiming a fake spouse, concealment of assets and failing to cooperate with authorities.

How is tax fraud detected?

Trained IRS auditors review the taxpayer’s documents in search of common types of wrongdoings, also called “badges of fraud.”  Taxpayers are given the benefit of the doubt for simple or common mistakes on their tax returns.   Some common “badges of fraud” include:

·         Incomplete or lack of records

·         “Fresh” receipts

·         Altered checks

·         Secret or concealed bank accounts, brokerage accounts and other property

What penalties are imposed for tax fraud?

If after conducting an audit the IRS determines a taxpayer has committed tax fraud, civil and criminal penalties can be imposed. Civil penalties include a fee up to 75% of the tax owed, plus interest.  Criminal tax fraud penalties include prison time up to 5 years or a $100,000 ($500,000 in the case of a corporation), or both.

Tax evasion and tax fraud are serious allegations.  If you have been accused of tax evasion, contact our experienced Massachusetts tax attorneys.  Our skilled attorneys will discuss the facts of your case and defend your rights in courts. Contact our office for a confidential consultation.