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Is fudging a little on your tax return a federal crime?

On Behalf of | Apr 20, 2023 | Fraud |

Under U.S. law, we all must file a federal income tax return every year and pay what we owe in income taxes. If you are afraid you cannot afford to pay what you owe, it may be tempting to fudge a little on your tax return or simply not file a return at all. Doing so, however, might be a federal crime.

What is tax fraud?

If you intentionally lie or leave out information on your tax return to pay less than you owe or to obtain a greater refund than to which you are entitled, you have committed tax fraud. Tax fraud is a federal white-collar crime. It is also referred to as tax evasion.

There are a variety of ways that a person might commit tax fraud. They might:

  • Intentionally claim credits or deductions they are not entitled to
  • Intentionally fail to report income paid under the table
  • Intentionally misclassify personal expenses as business expenses
  • Intentionally hide assets, or
  • Intentionally use someone else’s identity on their tax return

Note that taking advantage of legal loopholes in the tax code to reduce what you owe in federal income taxes is not considered tax evasion. It is called tax avoidance, and while it is not a crime it is generally frowned upon.

But what if I just made a mistake?

Sometimes, despite our best intentions, we make a mistake on our tax return. We might unintentionally fail to report some of our income or take the wrong deductions.

Making a mistake on your tax return is not a crime the way tax evasion is. This is because tax evasion is intentional, and making an honest mistake is not. However, even if you make an honest mistake on your tax return, you will still be required to pay what you owe, plus you might incur a 20% penalty for making the mistake.

It may seem to many that federal tax laws are purposely made so complicated that it is hard to know what is legal and what is not. Know, though, that intentionally trying to evade your tax obligations is likely to be considered a federal crime.


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