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What is the difference between tax fraud and a mistake?


What is the difference between tax fraud and a mistake?

On behalf of Patrick T. McNally, Attorney at Law | 
April 30, 2020

People often feel nervous when doing their taxes, as if any little mistake they make is going to lead to an investigation by the IRS, serious financial fines and perhaps even jail time. This makes the tax season very stressful because the vast majority of Americans are not tax professionals, but are still required to properly file their taxes every year. 

One important thing to note is that mistakes on your taxes are not automatically tax fraud. Just because you did not do the paperwork correctly does not mean that you tried to defraud the government and that the authorities are going to take you to jail. They understand that having private citizens do their own taxes naturally means some mistakes are going to be made. 

In order for it to be fraud, you have to have an intent to commit that financial fraud. You need to do it on purpose. 

For instance, perhaps you do not want to pay taxes on all $500,000 that you earned this year. You decide to report that you only made $300,000 to lower your taxes. That’s an act of fraud since your intent was to make it appear that you earned less than you did. 

However, if you decided to write off some personal expenses as business expenses because you did not know the difference between the two or because you honestly thought they were business expenses, that’s not necessarily fraud. That’s just an oversight or a lack of understanding of the process. You may still need to rectify the error, but, without intent, you did not commit fraud. 

If you do find yourself facing criminal accusations, make sure you know what rights you have

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