According to the Statistic Brain Research Institute, 1.6 million people cheat on their tax returns every year, resulting in $270 billion in lost revenue to the IRS. While you are allowed to use tax planning strategies to reduce your tax burden, outright dishonesty like misrepresenting your income can result in criminal charges. Because the IRS loses billions in false tax returns, they have a lucrative incentive to pursue the people who submit them. What can you do to ensure that you are doing the right thing on your tax return?
You are responsible for what you submit to the IRS
A felony conviction of tax evasion or tax fraud can carry penalties of more than a year in prison and hundreds of thousands of dollars in fines. While the idea of charges or a conviction is daunting, it is important to remember that the IRS doesn't usually pursue criminal penalties for simple mistakes. Instead, charges of tax evasion or tax fraud require negligence or willful action to deceive the IRS.
However, it is important to remember that you are responsible for what you report on your tax return, even if you have it prepared by someone else. Further, even though the IRS may not pursue criminal penalties for a simple mistake, many criminal cases begin with a routine civil audit.
Why people cheat and what can be done to prevent it
As lawyers, it is not only our goal to understand the tax code, but to understand why people might cheat it too. According to the Washington Post, there are six big reasons why people cheat on their taxes including:
- They think they can get away with it
- The IRS is unwilling to help them solve a tax problem
- A belief that everyone else is doing it
- They don't trust the government
- They don't understand the tax code
- They don't want to pay taxes for 1099 work
It doesn't take a lawyer to tell you that cheating on your taxes is a bad idea. However, it may take a lawyer to advise you on your business and international tax affairs, especially as the Tax Cuts and Jobs Act of 2017 is implemented.
At Goldburd McCone, LLP we help individuals and business owners understand the law and guide them in tax planning strategies. We are here to guide you when the IRS can't because we have the resources and the time to spend on your personal needs. The consequences of tax fraud and tax evasion are too steep not to seek help when you need it.