The Difference Between Tax Evasion, Tax Fraud and Negligence

We hear about it on the news. Watch movies where characters make millions from it. See individuals accumulate mass amounts of wealth over it. Yet, we’re told it’s wrong.

Tax fraud and tax evasion may be glorified on the big screen, but that doesn’t mean for a second that you should participate in either activity.

Not only will you be required to pay a tax fraud penalty when (not if!) you’re caught, but you’ll also be required to pay INTEREST on that penalty. And the penalty is equal to 75% of the taxes owed.

But that is not the only punishment you’ll be subjected to. If the IRS suspects that you’ve committed fraud, and not mere negligence, they’ll send your case to the IRS criminal investigation unit for criminal tax prosecution. Penalties for criminal tax fraud are very serious, with consequences ranging from up to five years in jail, plus up to $500,000 in fines, plus the cost of prosecution for each separate tax crime. Once the case is completed, the IRS will add a civil tax fraud penalty on top of the criminal tax fraud penalty.

“But what if I just made a mistake?”

A lot of clients ask this, thinking that if they can convince the IRS that they just “forgot” to pay their taxes, their punishment will be less severe. However, the IRS has methods for determining the true frauds from the truly forgetful.

Here are a few things the IRS looks for to determine a real case of tax fraud:

·      Understatements of income;

·      Inadequate records;

·      Failure to file tax returns;

·      Implausible or inconsistent explanations of behavior;

·      Concealment of assets;

·      Failure to cooperate with tax authorities;

·      Engaging in illegal activities;

·      Attempting to conceal illegal activities;

·      Dealing in cash; and

·      Failure to make estimated tax payments.

If you’ve committed any of the above, are being audited by the IRS or both, you may need to hire a tax fraud attorney. Actions you take from the moment the IRS contacts you can turn a run of the mill tax audit into a criminal tax fraud case. An experienced tax fraud attorney can help you navigate the mucky waters of your case and come up with an effective strategy.

Your financial well-being, as well as your personal freedom, may be at stake here. Contact us at 877-254-4254 or visit to speak with one of our tax attorneys today.

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