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When could someone face charges over allegations of tax fraud?

On Behalf of | Jun 26, 2024 | Criminal Defense

The Internal Revenue Service (IRS) is tasked with a challenging mission. The IRS must review income records and tax returns to ensure that individuals and businesses pay an appropriate amount in taxes every year. Comparing information provided by employers and financial institutions to the actual returns filed by taxpayers is a key part of that process. The IRS may audit people and businesses if there appear to be discrepancies and income tax records.

Occasionally, the IRS might reach the conclusion that an underpayment of taxes is the result of intentional tax fraud. Federal prosecutors might potentially file criminal charges against those accused of fraudulent underpayment of their taxes. What scenarios might eventually lead to tax fraud charges?

Tax fraud involves intentional misrepresentation

Some people end up accused of tax evasion, which is an inappropriate attempt to avoid taxes. Tax evasion can take many forms, including fraud. Those accused of tax fraud provided information to the IRS that is inaccurate based on other financial records. If the IRS believes that the misrepresentation was intentional, that could lead to accusations of tax fraud.

Tax fraud can involve vastly different conduct for different taxpayers. For example, a business facing tax fraud accusations may have altered financial records to reduce the revenue that it reported for the year. There could be accusations of intentionally abusing right off and deductions for business expenses. Companies may have intentionally altered or failed to file payroll tax information.

For individuals, tax fraud might entail intentionally misrepresenting the value of personal holdings or claiming to have dependents that don’t exist. They may have refused to pay tax debts or may have intentionally avoided filing tax returns. Any scenario that involves a lie told with the purpose of reducing tax obligations could potentially constitute tax fraud.

The bigger the overall amount of unpaid taxes, the more likely someone is to face prosecution. Allegations of tax fraud can lead to a variety of criminal penalties and financial consequences. Sometimes, what initially looks like tax fraud may have simply been a mistake. Even when people use professional tax services, the possibility exists for the preparer to make a mistake that looks like fraud.

Reviewing the information provided by the IRS regarding the underpayment of taxes and personal financial records with a skilled legal team is a good starting place for those accused of a tax crime. Those who understand what has led to tax fraud accusations can develop a defense strategy that addresses those concerns.