As a business owner, it is your responsibility to avoid making mistakes on your taxes. You are responsible for filing on time and paying the appropriate amount of tax to the federal government, state or local government.
Tax fraud can get you into deep trouble with the law. Tax fraud occurs when you intentionally or willfully falsify information on your tax return. The purpose of doing this may be to limit your tax liability, but what it really does is put you in a position where you may end up facing charges and paying fines or interest.
What are some common kinds of tax fraud?
Some common forms of tax fraud include:
- Not reporting income
- Claiming false deductions
- Not filing a tax return for your business
- Avoiding filing payroll tax reports
- Failing to report cash payments made to employees
- Not paying withheld payroll taxes
The thing to remember is that there is a difference between tax fraud and tax avoidance or negligence. With tax fraud, intent has to be a part of the process. Intending to defraud the government is what makes certain actions illegal. If, however, you may mistakes on your taxes because you misunderstood what you owed or forgot to file on time, then you should not face criminal penalties.
Negligent tax payers may be fined with penalties, sometimes as much as 20% of an underpayment, which is still a significant punishment. However, the criminal aspect of the case won’t exist, which helps the tax payers avoid a threat of additional financial penalties or imprisonment.
Tax avoidance is a legal way to use loopholes to reduce a business’s tax obligations. This isn’t a violation of the law, so it should not result in penalties. Even if it is frowned upon, those loopholes are used by many businesses throughout the country and are not illegal.
Accused of tax fraud? Protect yourself
If you are accused of tax fraud, it’s important to protect yourself. Tax fraud is serious enough to result in penalties, fines, interest and prison time, so you need to have a strong defense to help avoid those concerns.