The U.S. government takes taxes very seriously, and the potential penalties for committing fraud are significant. As complex as taxes are, there is an obligation to navigate the system properly at all times. A willful intent to do anything else may constitute fraud and lead to legal charges.
There are two key things that an IRS compliance employee is going to look for in a fraud investigation. Both things must be shown for it to really be a fraud case. They are:
- That you deliberately intended to avoid paying all the taxes that were due, and that you still owe that additional money as a result.
- That you willfully sent in inaccurate paperwork or made inaccurate statements in an attempt to keep from paying this money.
As you can see, there are two key words in each section. In the first, the key word is "intended" and in the second, it is "willfully."
What this tells you is that mistakes made for their own sake are not tax fraud. If you honestly think that you reported your taxes to the best of your ability, while the discovery of a mistake still means you need to pay what is owed, that's not fraud. If you intended not to pay and took illegal and deliberate action to do so, that could be fraud. It is a massive distinction and you must be aware of the role that it plays.
At the same time, you need to know your legal rights and defense options. The IRS does not take these cases lightly, and you shouldn't either.