The federal tax fraud statutes are 26 USC §7201 (tax evasion), 26 USC §7202 (failure to collect or pay tax), 26 USC §7203 (failure to file return, supply information or pay tax), 26 USC § 7206 (fraud and false statements), and 26 USC §7212 (attempting to interfere with administration of IRS laws).
Examples of tax fraud include:
- Underreporting or hiding personal or business income
- Overstating tax deductions
- Using a set of fraudulent account records to hide income
- Making false entries in financial records
- Claiming personal expenses as business expenses
- Claiming false deductions
- Obfuscating assets or income
Individuals and companies are not the only people who can face tax fraud charges. The IRS also commonly investigates tax preparers for alleged fraudulent schemes.
The federal government indicts tax preparers for tax fraud when it can trace a tax identification number (TIN) to a fraudulent return. Tax preparers may find themselves in this situation if their company markets itself on obtaining high refunds for their customers by manipulating numbers. The company's reward is a kickback from the refund. The IRS has also charged tax preparers with fraud for preparing false tax returns to collect refunds for people who do not exist.
Tax evasion occurs when there is a willful attempt to defeat or evade payment of taxes. Examples of willful conduct include keeping a double set of books, making false entries or alterations, or false invoices or documents, destruction of books or records, and the concealment of assets or covering up sources of income. There must be a tax deficiency for the government to charge tax evasion, and there must be an affirmative act constitution an evasion or attempted evasion of the tax due. The statutory maximum sentence for tax evasion is 5 years.
The willful failure to file a tax return is a misdemeanor.
The Law Office of Ann Fitz has defended many tax fraud cases involving individuals, small business owners, CPAs, and other tax professionals defense. We regularly consult with forensic accountants to help develop viable theories of defense to these serious charges.