What Is Tax Fraud?
Tax fraud is defined as a deliberate act of willful or intentional falsification of information on an annual tax return in order to limit or reduce the amount of taxes owed. Essentially, tax fraud is cheating on your tax return. Individuals do this by claiming false deductions, claiming that personal expenses are business expenses or lying about one’s income.
Tax fraud is very serious business and is investigated by the Internal Revenue Service Criminal Investigative Unit. Tax fraud can be punishable by both civil penalties (financial penalties) as well as criminal penalties (jail time). While tax fraud is very difficult to prove because the IRS has to prove a taxpayer’s intentions, the consequences are very serious. Filing a fraudulent return can cost you up to $250,000 if you are an individual and $500,000 if you are a corporation. In addition to these hefty fines, you could also face up to 3 years in jail and thousands more dollars in attorney fees.
How far back can the IRS look for tax fraud?
Generally speaking, the IRS has three years to request an audit of your tax return. If, however, you have failed to report more than 25% of your income, the IRS automatically has 6 years to request the audit. The IRS may ask for an extension to this time period of up to a year, and most tax experts advise you to grant them this time (though you should make sure to get specific advice for your situation). And, in instances of tax fraud, the IRS has the right to look back an indefinite amount of time, but they rarely look back more than 6 years or so. Keep in mind, it might take the IRS some time, but they generally are able to find those who have deliberately withheld information on their return. It never pays to lie on your return – the risks are simply too high.
What you can expect if you are suspected of tax fraud?
If the IRS suspects that you or your corporation is guilty of tax fraud, you will receive a written notice requesting that you address the issues and repay the debt owed immediately. If you fail to do so, a formal investigation will ensue. In large cases (more than $100,000), you may actually receive a visit (to your home or office) by IRS agents who will have questions for you. This would be a good time to hire the services of an attorney.
Get the help you need
If you receive a personal, unannounced visit from the IRS to your door, getting a lawyer is the best next step. However, if you have questions or concerns about whether the IRS might review your return and suspect you of tax fraud or tax evasion, you may want to have a reputable tax firm review your documentation and provide advice about your risk level. Taxes are complicated and there are many reasons for errors on your tax return. If it turns out that you do owe money, we can help you talk to the IRS and create a plan where you can pay it back. Success Tax Relief has extensive experience reviewing complicated returns and assessing risk as well as dealing with the IRS. Contact us today to find some peace of mind.