Fraud probably never factors into the thought process of the Americans who faithfully file their annual tax returns and make payments accordingly. Although it can be difficult to satisfy delinquent tax liability, most individuals recognize its legality and, therefore, establish a payment agreement with the IRS when necessary.
Still, questions of fraudulent activity often arise. Whether allegations concern mistakes or deliberate acts of deception, accusations of defrauding the government can lead to severe criminal penalties.
Billions of dollars were at stake in 2020
The IRS’ Criminal Investigation Division (CI) handles cases related to drug trafficking and money laundering. Though, its current priorities relate to cybercrimes and schemes surrounding the pandemic.
Reports suggest that during fiscal year 2020, the nation experienced $2.3 billion in alleged tax fraud. The 1,600 investigations initiated by the Division include claims related to:
- Payroll tax credits
- Paycheck Protection Program (PPP) loans
- Economic impact payments
Tax fraud is illegal under any circumstances. The penalties of such a conviction during the pandemic could be even worse for those perceived as using the international health crisis as a means to achieve personal gain.
Fraudulent activity and government involvement
The government seizes assets each year from individuals accused of tax fraud. Recent cases included a Florida man who purportedly found a way to get ahold of nearly $4 million in PPP loans and millions of dollars from a cryptocurrency scheme.
In addition to cases handled by the CI, the Department of Justice regularly releases information about tax crimes.
Claims of falsified returns and tax evasion are among the common convictions. Though, recent court judgments include wire fraud and charitable contribution scams that long preceded the Coronavirus – some of which have California roots.
Fines, restitution and imprisonment are common consequences for conviction of a tax crime. Yet, those who face sentencing could be innocent.
Diligence could sidestep allegations
Accusations of fraud could potentially affect any taxpayer. However, to convict someone of tax fraud, the IRS must prove a deliberate intent to leave out or misrepresent data when filing a return.
You could face allegations of fraud if investigators believe you:
- Failed to report income
- Didn’t file your income tax return
- Falsified your Social Security number
- Wrote off personal expenses through a business entity
- Didn’t withhold payroll taxes
- Claimed deductions for which you were ineligible
There ought not be criminal repercussions for making mistakes. While errors aren’t illegal, they could draw unwanted attention from auditors.
You may be responsible for any financial penalties related to negligence. And although you might have ways to reduce your tax liability and maintain financial liquidity, it’s imperative to do so within your rights.
Whether you own and operate a business, are the beneficiary of a trust fund or wish to leave assets to your loved ones, filing a complete, honest accounting of your personal or business financial transactions is the best way to mitigate risk. Should your accuracy or goals be put to the test, you may prefer not to deal with the IRS on your own.