What Generally Constitutes a Fraudulent Tax Return?

tax returnA false income tax return may mean different things to different people. How, you ask? There are different types of actions or omissions that broadly constitute tax fraud.


On a corporate or personal level, business owners and taxpayers may take a little off here, and add a little there, feeling that this is generally acceptable tax practice. But a tax return is not like a social media profile, and fudging the numbers here and there can lead to serious tax controversy.


What does the IRS consider to be tax fraud?

There are different types of activities that add up to fraud. The easiest way to define a false tax return would be any return that includes false information or misrepresentations. As criminal tax attorneys, we understand there is a fine line between an honest misrepresentation and a falsehood. That said, taxpayers who knowingly provide inaccurate information to the Internal Revenue Service (IRS) could unwittingly end up involved in a criminal tax matter.


Here are common actions typically considered tax fraud by the IRS:

  • Things that go down: Your return may flag attention if you inaccurately lower your income, omit income like bonuses or other types of compensation like cash payments.
  • Things that go up: Boosting deductions with dependents that do not exist or deductions that are not legitimate are common forms of tax return fraud. This includes claiming personal expenses on a business return.
  • Now you see it, now you don’t: Failing to reveal income sources, assets held in offshore tax havens or foreign bank accounts, or cooking the books by keeping two sets are fraud tip-offs.  Failing to file your FBAR on those foreign accounts intensifies scrutiny on personal and corporate returns as well.


If you knowingly file a false tax return, will you get caught? The answer is always “it depends.” The IRS now uses sophisticated algorithms to identify probable problem returns, as well as other associative techniques involving Big Data to create webs in which a fraudulent return might stick.


The sleepless nights after you receive a letter from the IRS notifying you of a tax audit, and the potential aftermath, is a high price to pay for sketchy numbers on an income tax return. If you become aware that the IRS is interested in your return—speak with an experienced IRS tax lawyer as soon as possible.


Skilled legal guidance on criminal and civil tax audits or IRS tax questions

Located in Cleveland and Chicago, the legal team at Robert J. Fedor, Esq., LLC provides thorough answers to your questions about your personal or business tax return, or concerns you might have about offshore tax investments or reporting.  When you need experienced tax advice, call 800-579-0997 or contact us.


Understanding Tax Fraud