What is Tax Fraud?

With tax time quickly approaching, the IRS is getting ready to process tax returns. They are also looking out for signs of fraud. Tax fraud and evasion are common crimes costing $1 trillion a year.

So, what exactly is tax fraud? Tax fraud occurs when a person or business intentionally falsifies information on a tax return so that they can lower their tax liability. It is essentially cheating on a tax return in order to avoid paying up.

Examples of tax fraud include:

  • Claiming to be a resident of another state.
  • Claiming false deductions.
  • Making false claims for refunds.
  • Not reporting income.
  • A suspicious tax preparer.
  • Closing and reopening a business to evade taxes.
  • Claiming personal expenses as business expenses.
  • Using a false Social Security number.
  • Falsifying business records.

In the United States, taxpayers have a legal duty to file a tax return and pay the correct amount of income, employment, sales, and excise taxes. Failure to do so by falsifying or withholding information is considered tax fraud.

Tax fraud does not include mistakes or accidental reporting, which is considered negligent reporting.

Tax Fraud vs. Tax Evasion

Tax fraud and tax evasion are terms that are often used interchangeably, but they are not the same thing. Tax fraud is different from tax evasion, which is defined as illegally avoiding payment of taxes owed. The IRS does, however, treat both crimes very seriously and impose fines and jail time for those who engage in these activities.

There are many types of tax fraud, and all involve an intentional or willful act. That willful act is usually filing a false tax return that reduces the amount of tax owed or increases the refund. Tax fraud is often discovered during an IRS audit.

Tax evasion, on the other hand, is when a taxpayer intentionally chooses not to pay their full tax liability. This can refer to the nonpayment or underpayment of taxes. The tax code breaks down evasion into two categories: willful attempts to avoid assessment and willful intent to evade payment of tax.

For someone to be found guilty of tax evasion, the IRS must prove that they acted intentionally. The IRS considers a number of factors when making that determination. For the most part, though, the IRS will usually find that someone has committed tax evasion if it is clear that their lifestyle and spending could not be supported by their reported income.

Contact Our Austin Criminal Defense Lawyers Today

Tax fraud is a serious crime. Even though nobody is injured in these crimes, the amount of money at stake is often a large amount (six or seven figures). This means the penalties can be severe.

You need a solid defense to avoid felony charges. Contact the Austin criminal defense lawyers from Granger and Mueller PC for experienced representation. Schedule a consultation with our office today by filling out the online form or calling (512) 474-9999.