Tax fraud costs the government millions of dollars every year. In other words, it’s a big deal and it has some serious penalties if you get caught.
But what’s the difference between fraud and making a simple mistake? What should the average taxpayer be aware of?
Here’s a quick roundup of what to keep in mind.
What Is Tax Fraud?
Tax fraud is a misrepresentation or omission of information on your tax return. This can be something major — like filing a false return or failing to file a return at all — or it can be something that seems more innocuous, such as failing to report the entirety of your income or overvaluing your deductions or expenses.
Tax Fraud vs. Tax Avoidance
While the two terms are often conflated and both are intended to limit one’s tax obligation, tax fraud and tax avoidance aren’t quite the same. Unlike the deliberate fudging of the numbers or return status associated with tax fraud, tax avoidance refers to the use of legal loopholes to limit the total amount owed. Notably, tax fraud is illegal and tax avoidance isn’t.
What Happens if You Commit Tax Fraud?
If you are caught committing tax fraud, there are two ways your case could go:
- Civil cases are those where the government alleges a mistake or negligence in the filing of your return.
- Criminal cases are those where that mistake is deemed intentional.
A civil charge is likely to result in a fine, while a criminal case could lead to a steeper fine and a prison sentence.
Have questions about this or any other legal issues? Reach out today (330) 394-1587 .