Telling tax fraud and negligence apart

On Behalf of | Jan 31, 2019 | General Litigation |

Dalton residents could face a number of challenges that might lead to mistakes in filing their taxes this year. Fortunately, making a genuine mistake isn’t going to have a catastrophic impact. There are differences between tax fraud and negligence that set the two acts apart.

The Internal Revenue Services (IRS) has somewhat of a poor reputation as an organization many dislike. However, they can also be very understanding. They know that genuine tax mistakes do happen, and that these issues are actually much more common than intentional tax fraud or evasion. But how exactly are the two differentiated, and how does a mistake through negligence affect a tax payer?

FindLaw takes a closer look at tax fraud versus negligence, which can essentially boil down to the intentions of the tax payer. Fraud is an intentional act of deception, in which the filer is purposely lying about things like their total income, the deductions they have, or the exemptions they should be getting. Negligence can look similar, since it may result in a person paying less than what is due. However, these mistakes are entirely unintentional and the tax payer has no intention of getting away with paying fewer – or no – taxes.

Unfortunately, even negligence is punishable despite the fact that it is recognized as a legitimate mistake. The IRS can charge people up to 20 percent of their underpayment if they are found guilty of tax negligence. However, this is still very different from the jail time and enormous fees that those convicted of tax fraud can face.