The difference between tax fraud and tax negligence

According to statistics provided by the IRS, about 17% of taxpayers fail to comply with the tax code every year. It’s individuals, not corporations, who account for three quarters of all tax fraud every year. Not all tax violations in Minnesota and other states, however, are considered tax fraud. In some cases, the agency recognizes that people make mistakes due to the complexity of the tax code. This is sometimes known as tax negligence.

Tax fraud is a distinct crime in that it involves the willful attempt to defraud the IRS or evade tax law. Fraud can occur when a person or organization intentionally misreports income, makes false claims, prepares false returns or intentionally fails to file an income tax return. Workers paid in cash and self-employed people who run cash-based businesses are most likely to commit tax fraud according to the IRS. Penalties can range from fines to years in federal prison.

Sometimes taxpayers make careless errors when filing returns and reporting income, and the IRS may consider this negligence if signs of fraud are not present. These signs of fraud can include anything from using a false social security number to keeping two sets of financial ledgers. If an agent believes a person was simply negligent, they may pursue a tax penalty rather than filing criminal charges.

People accused of tax crimes by the IRS may want to get representation from an attorney as soon as possible. Federal investigators and prosecutors have a lot of resources at their disposal, but each defendant has the right to mount a federal criminal defense. An attorney may examine the situation and discuss available legal options with their client. Because tax law is so complex, finding an attorney with detailed and up-to-date knowledge of the tax code is essential.