IRS Tax Fraud : Types and Penalties for Income Tax Fraud
IRS deems tax fraud a complete disregard for the regulations and rules that they have created. When the IRS believes that an individual has not complied with IRS rules, they are investigated for tax fraud. There are different categories of tax fraud listed by the IRS, which includes purposeful failure to file and hiding income. Individuals who are found to be fraudulent face the maximum penalties that are associated with each specific instance of fraud.
Types of tax fraud
An IRS audit will discover and report tax fraud if found. It is a violation of IRS tax law, and subject to heavy penalties if intent is proven. Before the IRS can apply any penalties, they first have to investigate and prove that there was fraudulent activity. The code book created by the IRS outlines two different forms of tax fraud.
General civil tax fraud
Omitting or under-reporting income to pay fewer taxes is fraudulent. To be judged fraud, the IRS needs to prove that you deliberately and consciously showed less income on your tax return to pay a lesser amount. If you are found guilty of general civil tax fraud, the IRS will add an additional seventy-five percent penalty to what you already will owe, which will be a new amount based on a more accurate reporting of taxes. There are many example of general civil tax fraud:
• Hiding your revenue in off-shore accounts
• Using a social security number that is fake
• Destroying evidence of income, such as records, logs and receipts before an audit or being dishonest while undergoing an audit
• Failure to keep accurate records
• Using a second bookkeeping method in effort to hide income
• Failure to report accurate assets, hiding income, or only dealing in cash payments to evade reporting
Fraudulent failure to file civil penalty
The IRS will consider it fraudulent activity if you filed late taxes or you did not file your taxes at all because you wanted to evade tax laws. The standard penalty associated with failure to file is five percent every month, which is based on the total amount that you owe. However, if the IRS establishes that your failure to file is fraudulent, the standard penalty is raised to fifteen percent a month with and additional seventy-five percent maximum total penalty. Common instances of failure to file fraud include:
• Being unwilling to work with the IRS throughout an audit
• Refusing to provide a reason for your failure to file taxes
• Showing a history of filing late returns or failure to file taxes
• Knowing the requirements for filing and deliberately failing to follow proper tax filing rules
It is your responsibility, as the taxpayer, to file your taxes accurately. You are held responsible for filing taxes in a timely matter in accordance to the regulations and rules supplied by the IRS. The deadline assigned for filing taxes is April 15 unless the IRS personally grants you an extension.
If you are unsure about how to file taxes on your own, individuals can seek the assistance of an IRS agent, ask for help from a tax professional, or purchase tax software programs. Getting help means that you want to file your taxes properly and as required by the IRS. It does not matter the method you choose to file taxes, you will be responsible for any outcome if it confirmed that you have committed tax fraud.