Have you ever wondered what you might get away with on your tax return? Let’s take a look at what tax fraud means.
You are one of the unlucky few who just received an Internal Revenue Service (IRS) audit letter and the agency wants to know about unreported income it can prove you received. You remember what you did—and frankly—you did it on purpose. The large bonus you received is no business of the IRS. But along with the unreported bonus, you also claimed two deductions that are not quite legitimate. You are feeling pretty nervous. What do you do?
The correct answer is that you call a trusted tax attorney as soon as possible. You may have committed tax evasion and filed a fraudulent tax return.
You are holding a 1099 in your hand that just arrived—long after you filed your return. You had forgotten about that consulting project almost as soon as it was done. You made some good money, but you realize you did not pay taxes on this portion of your income. You were not trying to get away with anything. You stand there, wondering what you do next.
Good news. You can probably amend your return.
What is the difference?
What is the difference between these two examples? The taxpayers in both examples have unreported income and will likely hear from the IRS because of it. But the key difference is intent. According to the IRS, fraud is “deception by misrepresentation of material facts, or silence when good faith requires expression.”
As anyone can see, the taxpayer with the IRS audit letter in hand has a problem. They willfully omitted the bonus money from their tax return. Even with that, the taxpayer might claim ignorance of the requirement to report a bonus, pay the extra tax and move on. But there is the matter of those two deductions. While the taxpayer could rectify an omission, fabricating deductions is harder to explain.
For the second taxpayer, standing in their kitchen wondering if they can go to jail for filing taxes wrong, the definition of tax fraud as “an intentional wrongdoing” just does not fit the circumstances. Mistakes happen, and this taxpayer can probably work toward a reasonable resolution.
These are everyday examples of what tax fraud looks like and the difficulties that can arise when attempts are made to evade rather than avoid taxation. If you know there are issues with your return, contact your tax lawyer before the IRS decides to take a closer look at your business.
Hiding something from the IRS?
If you are involved in tax evasion or if you believe you, or your business, are being surveilled by the IRS, making the right move matters. Call us at 440-250-9709 or schedule 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 "Will I Be Charged with Criminal Tax Fraud?" ebook for insights into warning signs and potential legal defenses.
