Income tax fraud is one of the most serious white collar crimes, as a conviction can result in life-altering consequences.

Income tax fraud comes in many different forms, with these among the most common:

  • Preparing and filing a false return
  • Intentionally failing to file a return
  • Intentionally hiding income from the Internal Revenue Service (IRS)
  • Making false or fraudulent claims on your tax return

Are negligence and fraud the same?

There’s a big difference between income tax fraud and negligence.

Fraud occurs when you specifically take action in an attempt to evade taxes. Negligence, however, typically comes in the form of a simple mistake.

The IRS is skilled at distinguishing the difference between the two. Here are some of the most common red flags associated with fraudulent activity:

  • Falsification of documents
  • Overstatement of exemptions and deductions
  • Keeping two sets of books
  • Using someone else’s Social Security Number
  • Claiming personal expenses as business expenses
  • Hiding income, such as cash earnings

Potential penalties

If you made a simple mistake on your tax return, such as a math error, the IRS will notify you by mail and tell you what to do next. It may cost you some money, but it doesn’t carry the penalties associated with income tax fraud.

Potential penalties for tax fraud include:

  • Imprisonment
  • Fine
  • Cost of prosecution

This depends largely on the type of tax fraud. For example, an attempt to evade paying taxes is subject to the following punishments:

  • Imprisonment for up to five years
  • A fine up to $250,000 for individuals
  • A fine up to $500,000 for corporations
  • Both imprisonment and a fine, along with the cost of prosecution

With so much on the line, any charge of tax fraud against you should be taken seriously. If you assume that this isn’t a big deal, you’re only putting yourself in a more challenging position.

There are many defense strategies you can employ, with the idea of beating the charges altogether or, at the very least, minimizing the punishment you receive.

Even though you’re in a tough spot, you have legal rights as a taxpayer and you must protect them at all costs.

Visit our website for more information on income tax fraud and other white collar crimes.