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Is it fraud if you don't follow the tax code?

Every time you need to do your taxes, you feel quite nervous. You double-check the paperwork. You use the Internet to find tips and assistance. You feel conscious of the fact that you never took a tax class or prepared to do this on your own, even though that is exactly what the IRS expects you to do.

Why are you so nervous? Certainly, it is not because you worry about paying too much or too little in taxes from a financial standpoint. Your finances are secure. The reason you feel on edge is that you worry that making a mistake will send the IRS to your door, asking to see your paperwork and accusing you of tax fraud.

The statistics

Tax code violations are more common than many people realize. The IRS claims that about 17 percent of the returns they get violate the tax code. While corporations do this in some cases, the IRS also says that about 75 percent of the fraud cases come from individual taxpayers.

How likely are you to fall into that category? Are your mistakes going to put you behind bars or bring on heavy fines?

Negligence or fraud

You know the tax code gets confusing. So does the IRS. While that does not give you a free pass to not do your taxes, they anticipate mistakes. Many of these are honest errors. Even if they contact you, they may simply try to correct the error, rather than considering criminal proceedings.

When things cross the line is when the mistakes are not negligent. If you make them intentionally, then you could face fraud allegations. Your "mistake" is no longer viewed as merely an error by the IRS.

A thin line

Of course, the line between honest mistakes and active fraud can be incredibly thin. You may get accused of fraud over an error.

For instance, perhaps you have two part-time employers. You get the proper paperwork for your main employer, that covers 80 percent of your income, and the secondary employer, that covers the other 20 percent. However, you accidentally lose the paperwork for that 20 percent of your income.

When you fill out your taxes, you forget that you should have two sets of documents. You merely report the 80 percent and send it in. You see this as an honest mistake, but the IRS may feel like you intentionally reported less than your real earnings so that you could pay less in taxes.

Your options

Are you already facing fraud allegations? If so, no matter what led up to them, make sure you fully understand all of your legal options.

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Is it fraud if you don't follow the tax code? | Martin & Reed, LLC