According to the IRS, a good tax fraud definition is “deception by misrepresentation of material facts, or silence when good faith requires expression, which results in material damage to one who relies on it and has the right to rely on it. Simply stated, it is obtaining something of value from someone else through deceit.”
As we have discussed, tax fraud is more than a mistake. It is willful. For example, to commit tax fraud through a fraudulent return, there are two necessary factors: tax liability and intent or willfulness to defraud.
In some instances, a tax liability may be slightly understated, or there could be math errors. In other words, there could be a genuine question as to whether the taxpayer intended to deceive the IRS by configuring a return to pay less tax or earn a larger return. In other cases, the IRS will likely notify a taxpayer of the problem. Barring a convincing argument, the taxpayer will earn a tax assessment, a possible penalty, and interest until the sum owing is paid.
In another situation, the IRS may identify false deductions, doctored documents, understated or outright missing income, and abuse involving tax credits, among other issues. When an examiner is looking at a false financial statement or proof that deductions are not correct, it is pretty tough to argue an innocent mistake. For a taxpayer with offshore holdings, failure to file a Foreign Bank and Financial Accounts Report can quickly raise the question of tax evasion.
The bottom line, when you know there are false (or missing) numbers on your tax return before you file, there is a concern that the IRS may identify your return as fraudulent. Tactics that represent your financial condition and earnings as anything other than what they are can lead to further questions regarding your actual tax liability and the potential for an assessment, or worse, an allegation of tax fraud.
If you are involved in tax evasion, your best defense is skilled legal representation. If you have filed questionable tax documents or failed to file regulatory reports, speak with a criminal tax attorney for straightforward information and options.
Call us at 440-250-9709 or reach out to set up a consultation. We serve domestic and international clients from offices in Cleveland and Chicago.
Not sure what to expect if you are already under scrutiny? Download our free eBook, Understanding Tax Fraud, for insights into warning signs and potential legal defenses.