Tax fraud is said to be an intentional act to cheat or defeat taxes. That said, sometimes unintentional errors can occur while filing taxes that could lead to a tax fraud accusation. Whether a tax preparer files on your behalf, the IRS holds you accountable for your returns.
According to the Internal Revenue Commissioner, Charles Rettig, the US government loses $1 trillion in unpaid taxes every year. In an attempt to curb tax crimes, the IRS makes note of the slightest discrepancies in tax files. To avoid being flagged or audited by the IRS, ensure you’re filing the correct forms with the right details.
To help you take extra caution, here are some ways you may be committing tax fraud without knowing.
1. Filling in incorrect information or missing information
It’s not uncommon to forget to fill out part of a return or key in a piece of information in the wrong section. An error such as keying in your deductions in the wrong line or mistaking one digit of your Social Security number can cause significant delays in your tax processing. Moreover, it may prompt a deeper investigation into you by the IRS.
2. Miscalculating your returns
Calculating taxes is a simple task of addition and subtraction but sometimes, errors can occur. You might add where you ought to subtract or vice versa or perhaps miss or add a digit. For example, instead of deducting $1,000, you could deduct $10,000. If it’s an isolated incident, you won’t be flagged as a criminal but you’ll be required to correct the error. Using tax software helps reduce the risk of miscalculations.
3. Using the wrong type of return
Before you start filling out any form, it’s important to double-check to ensure you’re filling out the right one. It’s easy to mistake a 1040EZ form for 1040. This is a common mistake for first-timers, but can still happen to anyone. You are aware of your tax obligations i.e. whether you have dependents, student loan write-offs, etc. Every form is different and if you filled one that doesn’t have slots to include all your liabilities, chances are you picked the wrong one.
What happens when you accidentally commit tax fraud?
If you think you might have made a mistake on your tax returns, you can correct the error by filing an amended return with the IRS. You’ll receive a notification of the error from the IRS via mail.
While the IRS is stringent on tax rules, it does not consider accidental mistakes as fraud. To be charged with tax fraud, a case of intent has to be made. Failure to correct an error can lead to penalties and interest and possibly losing your returns for that year. You may also be under close watch by the IRS in the future.