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Does the IRS consider a mistake to be tax fraud?

When you are preparing your federal and California state taxes, you may end up making a mistake on your return. Tax codes are often complex, and it may be easy for you to violate the rules unintentionally. If the IRS finds an error on your return, it may perform an investigation to determine if you were intentionally trying to commit tax fraud or were simply negligent.

According to FindLaw, tax code violations are not out of the ordinary. Some IRS estimations indicate that around 17% of taxpayers file returns that are not in compliance with the tax code. Non-compliant returns may lead to underpayment of taxes. If you submit an erroneous return, chances are the IRS will assign an auditor to determine if your return is fraudulent.

If your return has errors, an auditor may look for specific elements to determine whether you made a careless error or committed intentional fraud. For example, some common indicators of tax fraud include falsified documents, concealed income and ineligible deductions. If you deduct personal purchases as business expenses or claim exemptions you do not qualify for, the IRS may count these actions as intentional fraud. However, if you make a simple accounting error, chances are the IRS will consider it a mistake rather than an attempt at fraud.

If the IRS determines that your errors were due to negligence or an honest mistake, you may avoid a charge of tax fraud. In some cases, you may still be subject to a fine or penalty. If the IRS concludes that you committed willful fraud, there may be further investigations and civil or criminal penalties.

This information on negligence and tax fraud is intended for educational purposes and should not be interpreted as legal advice.

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