Is It Tax Fraud or Negligence?

It’s possible for an individual to stand before a judge who is facing charges of criminal tax fraud.

It could be a case of intentional tax fraud designed to illegally obtain significant amounts of money. A person may be given a bail hearing. They could contact a bail bondsman and arrange to have their bail paid and get out of jail. This will give them an opportunity to meet with their attorney and work on their legal defense strategy. The goal may be to prove what happened was simply negligence.

Tax Crimes

The IRS estimates only a small number of tax crimes end as criminal convictions. It also says that over 16 percent of taxpayers fail to comply with the United States tax code in some form. Individual taxpayers are responsible for committing more than 74 percent of tax fraud. The United States tax system depends on voluntary compliance. The taxpayer often will be responsible for assessing the taxes they owe. It is still a challenge to determine what constitutes tax fraud and what is unintentional negligence.

Tax Fraud

There are certain things the IRS considers intentional tax fraud. Willfully failing to file an income tax return, preparation and filing of a false tax return, intentionally making false or fraudulent claims on a tax return, intentionally failing to pay taxes owed, willfully not reporting all income, and more.

Most Common Tax Fraud

There are certain categories of taxpayers who are responsible for committing the most tax fraud. This includes services workers who are mostly paid in cash as well as people who are self-employed and operate a cash-based business. It is very easy to not to report cash income. Others who are known to regularly commit tax fraud are accountants, doctors, restaurant owners, clothing store owners as well as car dealers and hairdressers. It’s also common for mechanics and handymen to not report all of their income.


The IRS realizes that the United States tax code is a complicated set of rules and regulations. Properly interpreting them is a challenge for even the most experienced tax professional. It is easy to make mistakes. Should there not be any signs of intentional fraud, the IRS will assume anything that appears wrong was the result of negligence and not intentional. In these situations, the IRS will acknowledge an unintentional mistake. They will still impose a fine on the taxpayer equal to 20 percent of an underpayment.

Punishment for Tax Evasion

Should a taxpayer be found guilty of tax evasion, they will have a felony conviction on their record. They can be subject to a variety of penalties including incarceration for up to five years. They could also be required to pay a fine of up to $250,000 if they’re an individual. A corporation found guilty of tax evasion could be fined up to $500,000. A taxpayer could be imprisoned, fined, and also required to pay the cost of their prosecution. Charges of tax evasion charges in California

Failure to File a Return

Should a taxpayer not file a return, not pay tax at the required time or supply income information as required by law, they could face criminal prosecution. This could also happen for failure to pay final or estimated tax and more. A taxpayer found guilty of this will have a misdemeanor conviction. They could face incarceration for up to a year and a fine of up to $100,000 for an individual. A corporation could be fined up to $200,000. A taxpayer could be imprisoned, fined, and also required to pay the cost of their prosecution.


An IRS auditor is not trained to detect intentional tax fraud. There are some situations where it is obvious. There are individuals who have used a false Social Security number on their tax return. A business may have two sets of financial books. One set for the IRS that shows the minimal income and another one that records actual income. Individuals have tried to claim deceased relatives as dependents, provided false receipts to increase deductions, and more. An IRS auditor may not be able to identify all tax fraud, but they do notify others in the IRS when they suspect it.

Avoiding IRS Problems

A good way to avoid problems with the IRS is to have taxes done by an experienced tax professional. They will know the many different ways a person can legally lower their tax bill. It’s possible for a tax return to contain mistakes, but the IRS will know if these mistakes are unintentional or show a pattern of deception.