Understanding negligence and tax fraud

| May 31, 2019 | Tax Controversies

When facing tax problems, it is important for tax payers to understand how tax fraud is looked at and treated by the IRS. Any tax controversy can be overwhelming to the tax payer so it is helpful to understand what is considered negligence and what might be considered fraud.

Income tax fraud refers to when a tax payer intentionally fails to file a tax return in order to avoid taxes; intentionally fails to report all of the income they received; willfully fails to pay taxes that are due; makes fraudulent or false claims on a tax return; or prepares a false tax return. It is important to understand that the IRS recognizes the complexity of the tax code and the challenges that may present for tax payers.

The IRS will evaluate an alleged error in the filing and if it believes signs of fraud are absent, it will usually not treat the mistake in the filing as an evasion of the tax code. There are a variety of behaviors the IRS will look to in determining if the filing error was negligence or was indicative of fraud in their assessment. It is important to note, however, that the tax payer may still receive a significant penalty. Because of this, it is helpful to be familiar with the process of filing an income tax return and to know what to do and how to respond if a mistake on the income tax return has been alleged or made.

Being accused of income tax fraud can be alarming and upsetting, and because potential penalties are on the line, it can be valuable for tax payers to have trained guidance to help them better understand how to properly file their tax returns. If they are facing a tax controversy, it is also important for them to understand the resources available to help them in those circumstances as well and how the tax controversy may be evaluated by the IRS.

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