Tax Fraud and Tax Scam Laws

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What Is Tax Fraud?

Tax fraud is an intentional conduct where a person or a company purposefully underpays taxes or engages in fraud when dealing with taxes. Tax fraud has to be intentional and knowingly. Mistakes and carelessness is not considered tax evasion.

Even though you should fill out all your tax information correctly and with care, you should not be worried about being convicted for tax evasion or tax fraud for mistakes or simple errors.

In order to be convicted for tax fraud, the IRS must know that you are intentionally and purposefully trying to underpay your taxes or trying to hide your taxable assets to avoid a higher tax bill.

What Is Tax Avoidance?

Traditionally, tax fraud refers to types of crimes: tax evasion and tax avoidance. Tax evasion is when a person intentionally fails to submit a tax report in efforts to dodge tax payments. Tax avoidance is when a person makes use of lawful tax mechanisms to rearrange their statements in order to pay less tax amounts. Both are considered to be tax crimes punishable under state and federal criminal laws.

What Is Tax Preparation Scams?

More recently, tax fraud has expanded to include a string of scams and tax preparation schemes conducted by scammers who take advantage of unaware consumers. These crimes might not involve a direct offense against the U.S. government, but they are still punishable under criminal laws. These newer types of tax fraud schemes can take a wide range of forms, such as impersonating a tax official to gain information, or selling false tax documents. They are often used as methods of achieving identity theft. 

What Are Some of the Different Forms of Tax fraud?

Tax fraud can come in the form of tax evasion, tax avoidance, or tax preparation scams:

Tax Evasion:

Tax Avoidance:

Tax Preparation Scams:

You should be aware that you yourself may be liable for tax fraud if you knowingly cooperate with persons who are conducting a tax fraud scam. You should report any suspicious activities to authorities. Your information can help prosecute an entire operation, which are sometimes extensive and far-reaching.    

What Are the Penalties for Tax Fraud?

Since many taxes are considered federal taxes, federal agencies (like the IRS) are commonly in charge of prosecuting tax evasion cases rather than law enforcement. Individual federal law govern each tax evasion offense. Additionally each state might have their own tax evasion laws and penalties.

Do I Need a Lawyer for Tax Fraud Charges?

As you can see, tax fraud should not be taken lightly because it carries very severe penalties. You should contact a tax lawyer for advice if you have been charged with tax fraud. Also, you may wish to consult with an attorney if you have been the victim of a tax scam. A tax lawyer will be able to determine your course of action under federal and state tax laws.

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Last Modified: 02-03-2015 03:42 PM PST

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