Tax fraud occurs either when taxpayers intentionally try to evade or mislead the government about their income and the amount of taxes they owe, or when someone steals information from a taxpayer in order to collect that person’s tax refund.
How to Avoid Becoming a Victim of Tax Fraud
One of the most common ways a person can get your tax return information is by preparing your taxes for you. Before hiring a tax preparer or accountant for filing your taxes, be sure to do your homework about what is tax fraud and what isn’t.
- Only get tax preparation help from people you trust. Ask someone you know personally or get a recommendation from a trusted friend or relative.
- Ask for their tax preparer identification numbers and verify their status through the IRS. If they are unable or unwilling to provide this information, walk away.
- If they ask you to sign any blank or partial items, deposit money into an account that doesn’t belong to you, or only use a single paycheck instead of a full W-2 to gather information, they are not someone with who you want to work.
- If you receive a message from the IRS stating that you already filed for a tax return when you have not, it is possible someone has your information and used it to file for a return. If this happens to you, act immediately by contacting the IRS Identity Protection Unit, filing a police report, and contacting credit bureaus to watch for fraudulent activity.
How to Avoid Committing Tax Fraud
As long as you report all income and do not intentionally omit or provide inaccurate information on your tax returns, you should not have a problem avoiding committing tax fraud. However, we understand that mistakes happen or people are sometimes unaware of what is tax fraud, so here are some things the IRS watches out for:
- Income – You are required to report all income on your tax returns, including side hustles. If your bank account shows money deposited that isn’t accounted for on your income taxes, it could be a red flag for auditors.
- Bank Accounts – You are also required to report all bank accounts. Do not omit information about accounts in your name.
- Suspicious Spending, Accounts, or Deductions – The IRS checks for suspicious behaviors. This may include spending money that you don’t appear to have, treating a personal account as a business account, or claiming deductions that are for personal items or are not clearly documented.
- False Statements or Delay Tactics – If you are contacted by the IRS for an audit, do not delay in providing information or make false claims. They have access to a lot of information and may actually know the answer to the question before they ask it.
Who Can Help Me with Tax Fraud Charges?
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