You have always done your best to run your business correctly. That’s why you were surprised to see a letter from the IRS wanting to do an audit with the implication that your taxes have not been correct.
Most businesses and people get audited at one time or another, but during yours, it became clear that the investigation was looking at your actions for fraud. You later received notice that the IRS Criminal Investigation branch of the agency was accusing you of fraud.
What should you do if you’re being accused of tax fraud?
The first thing you need to do is to speak with your attorney. The IRS has a lot of power and money behind it, so you will want to do all you can to protect yourself as soon as possible once you know that you could be facing trouble.
What are the penalties for income tax fraud?
Tax fraud penalties range, but for income tax fraud, you could face criminal and civil penalties. The exact kind of fraud is what determines the penalties that apply to the case.
For example, attempting to evade taxes comes with a felony and may result in imprisonment for up to five years and fines of no more than $250,000 for individuals.
For willfully failing to file a tax return or to supply information to the IRS, you could be convicted of a misdemeanor and face penalties of up to a year in prison with up to $200,000 in penalties for corporations.
For making false statements or for fraud, you face a felony. Convictions come with up to three years of imprisonment and fines of up to $500,000 for corporations.
To be convicted of any of these crimes, it has to be proven that you intentionally evaded taxes or attempted to defraud the IRS. Income tax fraud is:
- When you intentionally prepare and file a false return
- When you fail to pay taxes due purposefully
- When you intentionally fail to tell the Internal Revenue Service about the income you’ve brought in throughout the year
- When you make false claims or fraudulent claims
- When you intentionally refuse to file your income tax return with the IRS
In many cases, people make mistakes on their taxes, but those mistakes don’t constitute fraud. If there is any question in your case about whether you’ve committed fraud or just made mistakes, your attorney can help.