Accidental Fraud or Committing a Crime?

Author: Keith Huggett 

Tax fraud. During tax season it's in the headlines right next to the advertisements for tax preparers. So what constitutes tax fraud? Why are so many people committing it? Or maybe the question is, do people know they are commiting fraud or is it nonintentional?

While most Americans legitimately try to file their taxes correctly and on time, there is a small percentage that intentionally avoid it or try to cheat in some way of their legal tax obligations. If you intentionally violate your legal duty to voluntarily file your income tax returns and/or pay the correct amount of income, employment, and excise tax due, you are committing a "tax fraud." Some of the ways you can break the tax laws and commit tax fraud include:

• Claiming false deductions
• Concealing or transferring assets or income
• Knowingly changing your income
• Over reporting the amount of deductions
• Possessing two sets of books
• Recording personal expenses as business expenses
• Using false amounts in books and records

In 2012 there were 1863 general tax fraud investigations initiated by the IRS Criminal Investigation Division. 1384 cases were recommended for prosecution. There were 1306 indictments. 897 cases resulted in sentences being passed. The average sentence involved 34 months spent in a federal prison, halfway house, home detention, or combination of all three.

From the 1920's to the present day there has been a long list of famous people convicted of committing tax fraud or tax evasion. This is most definitely not a "Who's Who" list you want to become a part of. Famous tax evaders:

• Al Capone - Wanted for a host of crimes but was convicted of tax fraud. Sentenced to 11 years in federal prison and fined $80,000.
• Pete Rose - Spent 6 months in prison for filing 2 false income tax returns. He was required to pay $366,000 in back taxes.
• Leona Helmsly - She was convicted of tax fraud and spent 4 years in prison.
• Walter Anderson - Has the honor of having the largest tax evasion case in the history of the United States. in 2006 he pleaded guilty to hiding approximately $365 million word of income through the use of aliases, offshore accounts and shell companies. He was sentenced to 9 years in prison and restitution of $200 million.
• Former Vice President Spiro Agnew - In 1973 he pleaded no contest to tax evasion and money laundering. He resigned, received 3 years of probation and paid a $10,000 fine. 

There are many, many more people on the list of famous people who have paid fines or back taxes to the IRS without serving time in prison. The consequences are not worth the effort it takes not to file your tax returns.

While the IRS knows the difference between a genuine mistake and intentional tax fraud, it pays to get your carefully prepared tax returns submitted on time. Or, if you can't get your return filed by April 15th, be sure to have your tax preparer file that extension.  

Filing your taxes can get complicated. Get help from experienced, professional tax preparers. When you are choosing your tax preparer, make certain it is a reputable company. You want to make certain you have the best for the job. April 15th is right around the corner.