How the IRS differentiates between taxpayer fraud and taxpayer negligence
Even though most people haven’t thought about their federal income taxes for months and won’t do so for at least another six months, memories of their most recent filing are likely still incredibly vivid. Indeed, they may have visions of a not-so-distant past in which they pored over Internal Revenue Service publications, searched online for answers and spent hours filling out their return.
Given the degree of difficulty the average person encounters when completing their tax return — and the mistakes they potentially make — its understandable how they might start to feel concerned as to whether they could inadvertently become the subject of an IRS investigation into possible income tax fraud.
In general, IRS officials are very good at their jobs, meaning they are able to distinguish between tax inconsistencies that are the product of simple negligence on the part of the taxpayer and those that are the product of various forms of income tax fraud.
Indeed, some red flags that can cause the agency’s Criminal Investigation division to launch a formal investigation include the submission of false documents, keeping of two sets of financial books, falsification of personal expenses as business expenses, and overstatement of deductions and/or exemptions, to name only a few.
While there might be some temptation on the part of more bold taxpayers to dismiss the severity of the threat posed by such an investigation, thinking the most they might have to do is pay a small fine, they might want to consider the following penalties called for under federal law for convictions for various forms of tax fraud:
- Willful failure to file return, supply information, or pay tax: A misdemeanor punishable by up to one year in prison and/or a fine of up to $25,000 for each year the return is not timely filed.
- Fraud and false statements: A felony punishable by up to three years in prison and/or a fine of up to $100,000 for each false return filed.
- Attempt to evade or defeat taxes: A felony punishable by up to five years in prison and/or a fine of up to $100,000.
In the event you find yourself under investigation or facing criminal charges for any form of income tax fraud — intentionally filing a false return and willfully failing to file a return — it’s imperative to consider speaking with an experienced legal professional as soon as possible as the stakes are simply too high.
At the Law Offices of Mark L. Horwitz, P.A., we have extensive experience handling federal tax matters, and are committed to protecting your freedom, future and reputation.