It may seem that the difference between tax negligence and tax fraud are trivial. However, these are legally two very different types of illicit actions that taxpayers may commit when filling out their tax returns. Accordingly, they have different definitions and carry different penalties under the law.
Because of the distinction between tax negligence and fraud, if you are accused of making a mistake on your tax return or failing to pay the full amount of what you owe, it is important to understand what you face. Generally, the likely outcome will depend on whether your actions are believed to be accidental or intentional.
Difference between negligence and fraud
Contrary to what you may think, the Internal Revenue Service understands, up to a certain point, that the tax code is rather complicated, and people can easily be confused by it and make mistakes as a result. Because of this, you are not likely to face significant penalties for a simple math error, for example.
However, if the error is more serious, you may face allegations of tax negligence. Compared with tax fraud, this is the lesser of the two charges. Tax negligence encompasses many acts of general carelessness regarding the tax return. If faced with allegations of negligence, you may face a fine equal to 20 percent of the amount you underpaid. Although this penalty is stiff, it is much more desirable than the penalty for tax fraud.
Although the IRS will likely give you the benefit of the doubt and consider most minor errors as negligence, if the error is egregious enough, or if there is evidence you deliberately attempted to cheat on your taxes, you may face allegations of tax fraud. Tax fraud charges are often the result for taxpayers accused of:
· Using a false Social Security number to file
· Preparing or filing a false return
· Concealing or transferring income
· Falsifying tax documents
· Keeping multiple financial ledgers
· Claiming exemptions for dependents that do not exist
· Making false claims on the tax return
· Failing to file a return, if you owe taxes
The primary difference between tax negligence and tax fraud is intent. Since fraud charges require taxpayers to willfully attempt to get away from paying tax (or failing to file a return at all), the charges carry more serious penalties, including heavy fines and lengthy prison sentences.
Get knowledgeable help
If you are being investigated for are accused of tax fraud, it is vital to obtain the assistance of an experienced tax attorney. Criminal penalties can be reduced or avoided completely with legal representation, especially if obtained early in the process. The experienced attorneys at Kundra & Associates PC can work on your behalf to obtain the best possible outcome for you.