The Distinction Between Tax Fraud Cases and Negligence

Most Union County taxpayers have no reason to fear a federal IRS tax fraud charge. The reason is that less than one percent of taxpayers are the subject of allegations of tax fraud that result in a conviction in any given year. But tax fraud does happen. In fact, 75 percent of income tax fraud charges are made against individual taxpayers.

An audit of a New Jersey resident’s tax return that discloses under reported income or deductions to which the filer is not entitled may not be the result of an attempt to commit tax fraud. The complexity of the tax code and the tax laws can result in mistakes being made by taxpayers, accountants and tax preparers.

Negligence in preparing a return might result failing to report income because you misplaced a 1099 for commissions earned early in the year. Criminal charges of failure to report earnings and income could result if you falsify payroll records to show that you earned less income than you actually earned.

Common activities that could trigger FBI and state investigations of tax fraud include:

• Claiming personal expenses as business deductions
• Listing fake dependents on your tax return
• Knowingly concealing income
• Maintaining two sets of books
• Submitting false documents to the IRS
• Using fake Social Security numbers

Penalties can be severe if you are charged and convicted of committing tax fraud. Evading the payment of taxes is a felony punishable by fines up to $250,000 and up to five years in prison. Filing a false tax return could result in a prison sentence of up to three years. Refusing to file a tax return or to provide information about your income and other financial information to the IRS could lead to criminal felony charges and up to a year in prison.

If you suspect that IRS, FBI and state tax investigations of tax fraud may be focusing on you as a target, a criminal defense attorney familiar with federal criminal violations might of assistance to you.