In 2016 the IRS uncovered an estimated $387 billion in underreported income. Underreported income includes revenue not reported to the services or deductions taken that are disallowed. This figure alone shows the wide spread “cheating” taxpayers commit to reduce their tax liability.
The most common cheats include:
-Not reporting tips
-Working under the table
-Falsifying business expenses
-Under-reporting cash business income
They don’t call it cheating for nothing. There are consequences ranging from penalties to prison, depending on the severity.
Taxpayer negligence does not include criminal charges, but often imposes penalties on the taxpayer. The key with negligence is that the error is “unintentional”. The IRS understands that the tax code is complex and that careless errors can occur. However when the “cheating” is intentional, that is when you cross the line into tax fraud.
Tax fraud is the willful attempt to evade tax law or defraud the IRS. This is considered a crime, and can include criminal charges. Tax fraud normally includes:
-Intentionally not filing a tax return
-Willfully failing to pay taxes due
-Intentionally failing to report all income received
-Making fraudulent or false claims
-Preparing and filing a false return
Our articles are not intended to be tax advice. To seek tax advice regarding your specific tax situation, it is best practice to consult with a Certified Public Accountant.