The year is almost over, and it will soon be tax time again. However, according to the IRS, a significant portion of taxpayers in Maryland and across the U.S. fail to adhere to the tax code when they file their returns.
The IRS reports that around 17 percent of tax returns contain errors of some sort. Of those returns, 75 percent are filed by individual taxpayers as opposed to corporations. Most of the mistakes are due to negligence, but some of them are serious enough to constitute tax fraud.
In order for taxpayers to commit tax fraud, they must do certain things. For example, individuals that intentionally fail to file tax returns or willfully refuse to pay their taxes are committing tax fraud. The same goes for those who intentionally attempt to hide some of their income, make fraudulent claims or intentionally prepare and file false returns. In order for IRS auditors to determine if a taxpayer simply made an error or willfully committed fraud, they look for typical types of suspicious or fraudulent activity. These activities include overstating deductions and exemptions, falsifying documents, keeping two sets of financial books, concealing income and attempting to pass off personal expenses as business ones. Other fraudulent activities include using a false Social Security number and claiming a nonexistent child as a dependent.
Individuals who are convicted of tax fraud can be sentenced to up to five years in prison and assessed fines of up to $250,000. Given the gravity of the situation, many people facing tax fraud charges choose to work with an attorney familiar with tax crimes. A lawyer could evaluate the case and work to develop a defense to the accusations. These efforts could help the defendant either avoid conviction or obtain a more lenient sentence.