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Tax Fraud
Tax fraud occurs when taxpayers willfully and intentionally violate their legal duty to file income tax returns and/or pay the correct amount of tax that is due. If an individual chooses not to comply with tax laws, he or she could be audited or investigated. Individuals who commit tax fraud can face criminal prosecution and civil penalties.
According to the Internal Revenue Service (IRS) Web site, the following are examples of activities that constitute tax fraud:
- Intentionally failing to report income or underreporting it
- Overstating the amount of deductions
- Keeping multiple sets of records and books
- Entering false information in books
- Claiming deductions for business expenses that are actually personal expenses
- Making up deductions
- Concealing assets and/or income
The Criminal Investigation (CI) unit of the IRS investigates potential criminal violations of the Internal Revenue Code (IRC). The General Tax Fraud Program is CI's largest enforcement program. This program investigates tax crimes involving individual taxpayers, self-employed individuals and small business owners.
There are both civil and criminal penalties for tax fraud. If a person is convicted of a tax fraud crime, he or she can face civil penalties (fines) in addition to criminal punishment for the same offense.
Tax Crimes Involving Fraud
Attempt to evade or defeat tax — Under section 7201 of the IRC, it is a felony to willfully attempt to evade or defeat federal taxes. A conviction could result in a sentence of up to five years in prison, a fine of up to $250,000 or both.
Making false and fraudulent statements — Under section 7206(1) of the IRC, a person is guilty of the crime of making false and fraudulent statements if he or she made and subscribed a tax return or other document with a written declaration that it was made under penalty of perjury when he or she knew it was materially false, and that the person acted with a willful, specific intent to violate the law. Penalties for a violation of section 7206(1) are a prison sentence of up to three years, a fine of up to $250,000 or both.
Aiding, assisting in or advising the preparation or presentation of a fraudulent or false tax return — Under section 7206(2) of the IRC, it is a crime for any person to willfully aid, assist in or advise the preparation or presentation of a tax return or other document that is fraudulent or materially false, regardless of whether or not the individual who is required to present the return or other document is aware of or consents to the falsity or fraud. Penalties for a violation of section 7206(2) are a prison sentence of up to three years, a fine of up to $250,000 or both.
Conspiracy — Under 18 U.S.C. § 371, it is a crime for two or more people to conspire to commit an offense against the United States or to defraud the US, including its agencies. An individual convicted of conspiracy under this section could face a prison sentence of up to five years, a fine of up to $250,000 or both.
Preparing for a Meeting with Your Tax Attorney
To read and print out a copy of the checklist, please follow the link below.
Preparing for a Meeting with your Tax Attorney
You can download a free copy of Adobe Acrobat Reader here.
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