The federal tax code changes often, and new rules may increase the chances of filing mistakes, especially during an unusually hectic filing season. While rushing to sign and file a return, you may have overlooked an item that might raise a red flag.
Most individuals have a legal right to claim credits and deductions on their returns; neglecting or forgetting to file a coinciding schedule, however, may raise suspicions of tax fraud. As noted by GOBankingRates, incorrect or missing information may lead to an audit based on the IRS receiving an incomplete return.
What might occur if the IRS claims I made an error?
Mistakes made because of negligence could result in costly penalties. For example, if you claim the Earned Income Tax Credit without fully qualifying for it, the IRS may prohibit you from applying for the next two years under Section 32(k) of the Internal Revenue Code.
If an IRS examiner has reason to believe a return contains intentional errors such as inflated deductions, you may require a defense against an allegation of tax fraud. Maintaining detailed records of all your deductions and expenses, however, may serve as evidence to counter a potential fraud charge.
Which is a more serious allegation, tax evasion or tax fraud?
U.S. tax officials may consider evasion an act of fraud, which could result in facing charges for both offenses. Suspicions of intentional concealment of income or a substantial underreporting of earnings might appear as an attempt to dodge taxes owed.
The burden is on a prosecutor to prove that a charged individual had an intent to reduce a tax liability or claim false credits that resulted in a higher refund. If you find yourself facing allegations of tax fraud or evasion, you have a right to mount a strong enough defense to avoid a felony conviction.