Taxes are difficult. It is easy for anyone to make a mistake when attempting to file taxes, but what makes the difference between an honest mistake and a crime? The following helps to answer this question.
Mistake versus crime, what’s the difference? In most cases, the Internal Revenue Service (IRS) will review a tax error for signs of fraud. If signs are not present, the agency will presume that the mistake was an honest error.
Unfortunately, although an honest mistake does not generally come with criminal charges, the taxpayer in question is not necessarily free from consequences for the mistake. The IRS may still fine the taxpayer a penalty for the mistake. A publication by Findlaw notes that this penalty can reach up to 20 percent of the underpaid tax due.
What exactly is tax fraud? Tax fraud is more than just a mistake; it is a willful attempt to get out of tax obligations. The key to a tax fraud claim is that the person accused of the crime willfully or intentionally committed acts to avoid paying taxes. Examples include failing to file an income tax return or preparing a false return.
Although the penalty for a simple mistake may seem severe, those that apply in cases of a tax fraud conviction are even more severe. A failure to file can come with up to one year imprisonment and a monetary penalty of $100,000 while an attempt to evade taxes can come with up to five years imprisonment and a $250,000 fine.
What should I do if I am charged with a tax crime? It is important for anyone accused of committing a tax crime to take the allegations seriously.
It is often wise to hire an experienced criminal tax matters attorney to review the charges. Legal counsel can review the accusations and discuss the best course of action to help reach a favorable outcome.