What is Tax Fraud?
Example of Tax Fraud
For example, let's say John owns a painting business. As an employer, he dutifully withholds payroll taxes from his employees' paychecks. However, John fails to remit those funds to the IRS and instead uses the money for a vacation and a new car. One of his employees finds out about the activity and reports him using IRS Form 3949-A (though he could also send an anonymous letter to the IRS). The IRS investigates and determines that John has committed tax fraud, which is a felony.
Other examples of tax fraud might include deliberately underreporting or omitting income, making false accounting entries or keeping two sets of books, taking deductions that the taxpayer is not entitled to, claiming personal expenses as business expenses or hiding assets.
Why does Tax Fraud matter?
Tax fraud cheats the government out of millions of dollars a year. It is illegal and punishable by fines, penalties, interest, and/or prison time. It is important to note, however, that tax fraud generally requires willful and intentional activity for the purpose of lowering a tax liability, not mistakes or accidental misreporting.
Personalized Financial Plans for an Uncertain Market
In today’s uncertain market, investors are looking for answers to help them grow and protect their savings. So we partnered with Vanguard Advisers -- one of the most trusted names in finance -- to offer you a financial plan built to withstand a variety of market and economic conditions. A Vanguard advisor will craft your customized plan and then manage your savings, giving you more confidence to help you meet your goals. Click here to get started.
Read This Next
My clients didn't believe me when I said they could make an extra $10,000 a year, right away. "Kate, we don't want to work harder. We're close to...Read More →
America is over the Nigerian prince scam -- I think -- but there are fresh scams getting invented every day, and not necessarily on the Internet or by email, where you would expect them....Read More →
For many decades, investors had a simple choice: stocks or mutual funds. If you lacked the time or expertise to pick stocks,...Read More →