It’s That Time of Year: Tax Season and Tax Fraud
Another year has gone by, and that means tax season is upon us. Many of us dread it, some look forward to it (to get those refunds), but everyone has to fill out a tax form. This year may be brighter for many of us, because of the new tax laws. But with opportunity also comes danger, as they say. We’re expecting to see a serious uptick in fraud charges this year due to the new laws.
That’s not to say people will be looking to cheat. The fact is, with our complicated tax codes, it’s easier than ever to make mistakes. And while a mistake should be easy enough to correct, incorrectly filling out a tax return is a crime. Pleading ignorance is not an excuse when it comes to an audit.
What Happens If You Get Audited?
Getting audited is a fear for many people. It means the IRS has decided to look more closely at your tax returns and discover if there are any discrepancies. If they find any, you could be facing heavy fines and even jail time. Needless to say, avoiding an audit in the first place is the ideal solution. Unfortunately, an audit can be outside of your control. In certain instances, taxpayers are selected at random to go through the process, while in other cases, an audit could be triggered by suspicious information or other red flags found in a previous return.
Once the audit process has been initiated, you will be sent a notice in the mail requesting more information concerning your financial records. For instance, you may be asked to provide evidence of a charitable gift, or document one or more of your deductions. You will need to follow the steps outlined in the letter and respond in a timely manner with the requested information.
At this stage, if you discover a mistake in your tax return or are missing the required documents, you will have the option to pay a fee to cover the mistake. Alternatively, you will have an opportunity to track down the missing records. Either way, if you complete all that is requested of you, the audit should end there.
However, if the IRS sends a second notice that challenges your version, you will most likely want to get professional help. One option would be to consult with an accountant, who may be able to assist you in properly responding to the audit. Another option is to work with a tax lawyer. This is not absolutely necessary at this point in the process, as you have not yet been charged with a crime, but it could give a lawyer a head start to ensure you aren’t charged with something down the line. The more time a legal professional has with your case, the better he or she will be able to manage your situation effectively.
What Are the Penalties for Tax Evasion and Tax Fraud?
The two most likely criminal charges that will arise from an audit are tax evasion and tax fraud. Evasion means you have sought to avoid paying taxes that you rightfully owe, while fraud means you have lied or misled the authorities on your filed tax forms. Depending on the amount of money involved, the penalties can be quite severe.
If you failed to report any part of your income, this is tax evasion. If caught, you will be required to pay any back taxes you owe, plus interest, as well as a stiff penalty that could be as much as $250,000. But tax evasion charges will likely be coupled with tax fraud charges as well. This not only carries the $250,000 fine, but could include a prison sentence of up to three years.
Anyone who’s worried about criminal charges associated with a tax audit shouldn’t wait for federal agents to knock on his door to hire a lawyer. A capable tax attorney can help you go through your financial returns and ensure you are compliant with all relevant tax laws. This includes helping you become familiar with any changes in the tax code, as is the case this year.
Trying to fill out your taxes legally while ensuring you save the maximum amount possible is a complicated process. Especially for high earners facing a heavy tax burden, the best thing you can do is engage the help of a capable legal team with experience handling federal tax cases. The lawyers at Werksman Jackson & Quinn LLP have a proven track record of success representing defendants in both federal and state courts. Call us today at (213) 688-0460 to learn more.