Taxpayers throughout the country work to reduce their tax bill and many strategies are legal, but some cross the line and can result in allegations of fraudulent attempts to avoid one’s tax obligations. Regardless of how taxpayers feel about the Internal Revenue Service (IRS), one thing is true: a failure to honestly fill in tax returns can result in serious problems.
What happens if I make an error on my tax returns?
It depends on the error. In some cases, the IRS may send a notification and request for additional information to correct a relatively minor mistake. In others, this request may signal the beginning of a bigger problem. It may be the start of a full-scale investigation that could lead to criminal charges and potential prison time.
When does the IRS pursue legal action?
The IRS looks for honesty and accuracy in tax returns. The agency uses various strategies to differentiate between simple errors and fraudulent activities. Some factors that might trigger a more serious investigation can include:
- Underreporting income
- Falsifying documents to support illegal deductions
- Multiple years of erroneous filings
While taxpayers can rectify most tax mistakes through penalties and fines, certain actions can escalate to criminal charges, possibly resulting in imprisonment. Key factors that increase the risk of criminal charges include:
- Evidence of clear and willful intent to evade taxes
- Large amounts of unpaid taxes
- Use of elaborate schemes to avoid paying taxes
These situations reflect a direct intention to deceive the tax system, which is a criminal offense.
Can I fight back against tax fraud charges?
There are defenses available that can help to challenge the charges. It is important to tailor a strategy to your specific situation to better ensure a more favorable outcome, but some common examples include establishing that the error was an honest mistake or that the agency does not have enough evidence to support their claim. A successful defense strategy can result in the reduction or even dismissal of charges.
Remember, the IRS is a large government agency motivated by financial reward to build a successful case against taxpayers. Do not take notification of an impending audit or investigation lightly. Take action to protect your legal rights.
