Federal Tax Fraud

Tax fraud is a federal crime that can involve individuals or business corporations. Intentionally submitting false information on a tax return, with the intent to lower tax liability, is subject to civil and criminal charges for tax fraud. If you are being investigated by the Internal Revenue Service (IRS) for tax fraud or tax evasion, find a local federal criminal defense lawyer with experience handling federal tax fraud cases.

What Are the Elements of Tax Fraud?

Tax fraud is a federal crime. Under federal law, tax fraud requires an “affirmative act.” This means if you willfully submit or aid your tax preparer in submitting materially false information on your tax return, you can face tax fraud charges. Another form of tax fraud is tax evasion, where you willfully fail to file your tax returns to avoid having to pay any income tax. Tax evasion is a felony.

Some common ways individuals can commit tax fraud and face criminal prosecution are:

• Failing to file a tax return
• Over-inflating expenses or overvaluing tax deductions to reduce federal income tax
• Providing false statements on your federal or state income tax return
• Concealing taxable income in offshore bank accounts

Corporations can also be found guilty of tax fraud. Some ways that corporations commit tax fraud include:

• Failing to calculate employee payroll taxes correctly
• Failing to pay the proper amount of employer payroll taxes
• Claiming personal expenses as business expenses
• Claiming false deductions to reduce the amount of income
• Hiding taxable income in offshore bank accounts

What Are the Criminal Penalties for Tax Fraud?

For a conviction for federal tax crimes, you can face the following criminal penalties:

• Up to five years in federal prison
• Fines of up to $100,000 for individuals
• Fines of up to $500,000 for corporations
• Attorney fees, court costs, civil penalties, and restitution for the amount of tax defrauded or evaded

Make sure you understand all the federal tax reporting requirements and the tax liability laws for your business before claiming business exemptions or tax deductions. If you have questions, you should talk to a tax attorney or a licensed tax professional for help.

In addition to criminal charges, the IRS can assess a civil penalty of up to 75% of the amount you underpaid in your taxes. If you are found guilty of tax fraud, you can also be the target of future tax audits by the federal government and state tax authorities.

Are There Legal Defenses Against Tax Fraud?

If you or your business are facing a criminal investigation for tax fraud, some common defenses include:

• Failures were a mistake and not willful fraud
• The statute of limitations for the prosecution has expired (there is no statute of limitation period for civil tax fraud)
• Entrapment

If you want more information about defending against tax fraud charges in federal court or need help negotiating with the IRS, contact an experienced tax attorney for legal advice. Do not wait until you are charged. You should talk with an attorney as soon as the IRS notifies you that you will be audited. Responding quickly and proactively to an investigation can help you build the strongest possible defense. It could make the difference in whether you ever face criminal charges.