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Does Tax Negligence Count as Tax Fraud?

After submitting their taxes to the IRS, many citizens breathe a sigh of relief that their taxes are done for another year.  In some cases, those same people are gulping in despair when they open their mailboxes a few weeks or months later and find a letter from the IRS notifying them that there were discrepancies in their taxes that needed to be examined.  Taxpayers may find that those discrepancies were their own mistakes, which results in worries about whether or not they are destined for an audit.  With most publicized cases of IRS audits resulting in legal ramifications for the parties involved, citizens take their cues from what they've seen and ready themselves for any of the many penalties that they could face. It's important that taxpayers understand the difference between tax fraud and tax negligence, especially because we know just how much an attorney can charge.  While some clients may indeed be actively committing tax fraud, other clients simply neglected to properly proofread their tax information and fix the mistakes they may have made on their taxes.  So what's the difference, and what can it cost you?


Tax Fraud

Tax fraud is the act of willfully putting incorrect information on your tax forms so that you can receive certain deductibles or other benefits. Sometimes tax fraud makes an appearance in the form of fraudulent information, or omissions of certain income or bank accounts to escape the taxes that may be associated with them. In many cases, citizens who commit tax fraud are attempting to either lessen the cost of their taxes owed or may even be attempting to stay below a certain tax bracket so they can receive a tax refund. Tax evasion, claiming taxes with someone else personal information (such as a social security number), and claiming the children who don't exist are also examples of tax fraud.

Tax fraud is heavily investigated by the IRS, and in some cases the FBI may get involved. What types of penalties can someone committing tax fraud look forward to? Tax fraud can result in up to 5 years of imprisonment per violation/count, $250,000 in fines, or both. In some cases, the fraudulent taxpayers may also be responsible for court fees and fines, and they may also be required to pay the government for the amount lost, including fines tacked on to that amount.

Tax Negligence

So you received a letter from the IRS telling you that something, somewhere on your taxes was incorrect and needs to be examined. Before you go into a panic, it's important that you understand that most issues found on tax forms are actually treated by the IRS as simple negligence. Perhaps you mistakenly used something as a deductible that wasn't one, or maybe you accidentally added an extra number where it wasn't supposed to go. It happens, and just because you made a mistake doesn't mean that the IRS has you tagged for tax fraud.

Have you received a letter from the IRS stating that your taxes are incorrect, or that you could be facing an audit? Our best advice would be to consult an attorney before taking legal action, and to be sure to have someone more familiar with IRS statutes take a look at your forms, especially if you aren't sure where the mistake is. If you're truly concerned, however, be sure to find a tax attorney who knows what they're doing to assist you in the bumpy road ahead.

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Mr. McKellar was voted by his peers as a “Top Attorney” by Knoxville’s CityView Magazine in its 2010, 2011, 2012, 2013, 2014, 2015, 2016, and 2017 editions. In 2014, 2015, and 2016, Mr. McKellar was selected as a member of the “Top 100 Trial Lawyers” by the National Trial Lawyers.

Ms. Easter was voted by her peers as a “Top Attorney” in Cityview Magazine for Family Law / Divorce / Child Support in 2012, 2013, 2014, 2015, 2016, and 2017.

Mr. Devore was voted by his peers as a "Top Attorney" by Knoxville’s CityView Magazine for Social Security Disability in 2017. "

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