Understanding Your Obligations as a Taxpayer to Avoid Tax Fraud Penalties
Only a small percentage of tax crime convictions occur in a year. Yet the IRS estimates that close to 20 percent of individual taxpayers fail in some way to comply with the written tax code, which begs the question: How does the IRS distinguish between negligence and willful income tax fraud, and how does the convicted taxpayer deal with civil or criminal tax fraud penalties?
Are you facing charges of tax fraud and in need of representation? If you’re in the Worcester, MA area, don’t hesitate to contact the attorneys at Murphy and Rudolf, LLP, and let our experience work for you. Contact us online or by calling: (508) 570-3037.
Is It Tax Fraud or Is It Negligence?
Not all violations of the tax code constitute fraud. To an extent, the IRS is understanding of the fact that the tax code is complex. It, therefore, attributes some violations to negligence and misunderstanding. Tax violations that constitute willful tax fraud or evasion, however, are penalized as such.
Tax fraud is defined as the willful attempt to evade tax law or defraud the IRS. Examples of this include:
- intentionally failing to supply accurate information,
- intentionally failing to report complete income on a tax return,
- intentionally failing to file an income tax return,
- intentionally not paying income taxes due, or filing a false claim.
- To find this kind of tax fraud, auditors will look for falsified documents or false identification, overstated exemptions or credits, and under-reported income or earnings.
The IRS relies on something called “voluntary-compliance” to protect against tax fraud, and in an effort to encourage voluntary-compliance, it uses cautionary language about tax fraud penalties widely available to taxpayers.
So What Are Tax Fraud Penalties?
There are civil and criminal penalties for convicted cases of tax fraud. Tax fraud penalties range from misdemeanor to felony charges with fines of up to $250,000 for individuals and jail sentences of up to 5 years. Tax fraud penalties are to be taken seriously and can survive the death of the taxpayer who committed the fraud, meaning the penalties can be inherited.
Tax fraud penalties can also hold in cases where a taxpayer files a fraudulent claim and then shortly thereafter files an amended return to correct the fraudulent one. Tax fraud penalties can complicate matters for the taxpayer for many years.
Civil Tax Fraud and Its Penalties
In the case of civil tax fraud, penalties may be imposed, including the obligated repayment of any fraudulent underpayment. The penalties in cases of civil tax fraud are entirely financial and typically stop at the reclamation of underpaid taxes or asset seizure. In order to issue these penalties, the government must be able to prove willful or fraudulent underpayment.
Criminal Tax Fraud and Its Penalties
Intentional tax evasion is how many of us have become accustomed to thinking about criminal tax fraud. Tax evasion might look like:
- filing a false return or amended return,
- concealing income or assets under other taxpayer names,
- or destroying records.
The statute of limitations for the government to charge cases of criminal tax fraud is 6 years.
Don’t Leave It to Chance — Hire Defense With Experience
At Murphy & Rudolf, LLP, we take the rights and interests of our clients very seriously. We understand that being faced with tax fraud penalties can be incredibly stressful. Our Worcester-based team of tax lawyers offers sound and reliable legal advice.
If you are faced with civil or criminal tax fraud charges, our lawyers are ready to vigorously defend you and help you become compliant with the written tax code while minimizing criminal exposure.
Call our office today at } or contact us online for a free consultation. We are here for you.