The last day to file personal and C Corp (1120) tax returns is 15th April 2024. Please expedite your filings.

Don’t Mess with IRS: Tax Frauds and their Penalties

As the tax season starts, people rush to prepare and file their tax returns. Do you think that you are lying into Tax Fraud activity unintentionally if you making typo errors in your Tax Returns?

IRS believe that Tax Returns are a complex thing. If a person makes error unconsciously then it is called Negligence or not a Tax Fraud. IRS is now strong enough that it can differentiate negligence and fraudulent errors.

If you unconsciously meet that frauds or errors then you should report to IRS earlier, before the IRS contact you, otherwise, it may consider as Tax Fraud if you report after many years later. But you have to explain the reason why you met with this error then you can get compensation in penalties.

In General, What Is Tax Fraud?

Tax fraud is generally known as the scam made by an individual or companies by giving false or fake information intentionally on their tax returns in order to lessen the amount of their taxes.

Scammers make fake tax returns essentially to avoid paying or lowering the amount of tax liability. IRS Criminal Investigation (CI) unit investigate General Tax fraud examples, which include

  1. Purposely neglect to report income.
  2. Using false SSN.
  3. Demanding individual expenses as business expenses.
  4. Claiming for Unqualified Tax deductions or Credits.
  5. Failed to pay his tax dues (Intentionally).
  6. Failed to file an income tax return
  7. Late payment (Purposely)
  8. Not Filing tax return
  9. Late or not paying estimated tax returns
  10. Early withdraw from retirement accounts
  11. Prepared and Filed Incorrect or fake tax returns
  12. filed fake payroll tax reports
  13. False documents to file.
  14. Fail in keeping records or making two records to hide income
  15. Claiming a nonexistent dependent, for example, child

Penalties for Not filing a return/or late paying (Unintentionally)

  • 1 year in jail
  • $250K fine for individuals and $500k for businesses
  • With the cost of action and taxes owed

Penalties for Not filing a return/or late paying (Intentionally)

  • Imprisonment for 1 to 5 years
  • A fine of $100K for individuals and $200k for corporations
  • With all taxes owed and cost of action

Penalties for Filing Fraud and false reports:

  • 3 years in Jail
  • $250K fine for individuals and $500K for corporations
  • With legal action fee and all taxes owed

Penalties for Failing to Pay/File Estimated Taxes

  • Imprisonment of up to 1 year
  • $25k as Penalty
  • With legal fees and pay all taxes owed

Penalties for Early withdraw from retirement accounts

Before turning into 55, if you withdraw from IRAs or 401(k) account it will impose a penalty of 10%

Penalties for Using Fudge numbers & SSN

  • Few years in jail
  • Up to $250K fine.
  • With legal fees and all taxes owed

Penalties for Claiming False Deductions

  • Imprisonment of a few years
  • $250K in penalty
  • pay all taxes owed with the cost of legal fees

Types of Tax Fraud

  • Abusive Tax Shelters
  • Corporate Tax Fraud
  • Employment Tax Fraud
  • Money Laundering Tax Fraud
  • Off-Shore Tax Fraud

Get Legal Help to Avoid Frauds and Penalties:

Yeah, no one like to pay taxes and tax penalties, well either it may be due to negligence or fraud. Penalties can cause problems so you should consult with Tax advisors to know what will be the best step to choose and avoid these circumstances. They have a lot of knowledge about Tax and audits that likely to make ways for you to reduce or eliminate penalties or problems to avoid in the future.

The attorney at SG INC CPA has the relevant experience to help you to minimize the chances of fraudulent actions and give expert advice to save your money from penalties and paying more tax liabilities. This amount could be used on useful activities i.e. buying a laptop, spending holidays abroad and much more.

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