Understanding the Difference Between Criminal Tax Fraud, Civil Tax Fraud & Tax Negligence

The US Internal Revenue Code is notoriously complex and difficult for just about anyone who does not fall under the category of “tax expert.” Mistakes are frequent, and the fear factor for the common taxpayer with regard to the IRS is through the roof. But if you make a mistake on your income tax returns, do you really need to be worried? Is the IRS going to come bursting through your door, ready to arrest you for tax fraud if you miscalculate a number or forget to cross a “t” or dot an “i”? No, probably not.
Unfortunately, the IRS sometimes can be harsh in its outlook. IRS agents who deal with the code and regulations may assume that taxpayers are more knowledgeable than is the case. There not always a clear line between tax fraud and negligence. Furthermore there is no clear line between Civil Tax Fraud (a penalty of 75% of the tax liability plus interest thereon) and Criminal  Tax Fraud (the 75% penalty plus interest thereon and  jail time and criminal fines).
So what characterizes that line between fraud and negligence? When is it that the IRS will no longer view errors as a careless mistake, and start to suspect criminal motivations? The line can get blurred and your liberty may be within the discretion of someone whose view of the world may be different from yours or mine.
The general definition of income tax fraud is any sort of purposeful attempt to evade US tax laws or defraud the IRS. Any individual who intentionally lies on their return or knowingly  misrepresents any material fact could be prosecuted for tax fraud. In certain instances the IRS need not even establish that there is any tax due. Section 7206(1).
Some of the most common forms of tax fraud include purposefully failing to file tax returns or pay the amount of taxes you owe, deliberately failing to report all sources of one’s income, willfully making a false claim on your return, or filing a false return.
Depending on the nature of the tax fraud, there can be very serious penalties, including being charged with a felony that could result in hundreds of thousands of dollars in fines and penalties as well many years in jail.
However, the IRS does not criminally prosecute every case that it could and many smaller cases and unintentional mistakes are not considered for criminal prosecution. Negligence may cost you some extra cash, but there is little chance that a simple error on your tax returns will result in anything more than a  penalty.
Nonetheless, if you find yourself facing some sort of dispute with the IRS over your taxes or if you find that you have made a significant error on your tax return,  there is a strong chance you will want to have experienced and effective legal tax counsel representing your interests and ensuring that you pay no more than what is legally required. For an aggressive and dedicated defense when facing criminal or civil tax issues, please contact the law firm of Weisberg Kainen Mark today.

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Weisberg Kainen Mark, PL

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