Tax Fraud: What You Need to Know

Tax Fraud

Have you or has someone you know been charged with tax fraud?

What is the difference between tax fraud and tax evasion?

Filing taxes is always nerve racking whether you are worried about how much you may owe, if you are filing properly or, something else. To help fight off that anxiety, this article will provide information about what tax fraud is, what tax evasion is, and what the penalties are.

What is Tax Fraud?

According to the IRS,

“Tax fraud is often defined as an intentional wrongdoing, on the part of a taxpayer, with the specific purpose of evading a tax known or believed to be owing. Tax fraud requires both: a tax due and owing; and fraudulent intent.”

Tax fraud is broken down into two different types, civil and criminal.

Civil Fraud

If the government if is pursing civil tax fraud that means they are claiming that the tax payer made a mistake on their tax forms like a miscalculation or negligence when filing taxes. Here the government is usually pursing the underpaid taxes.

It can be hard to find “direct proof of fraudulent intent”, so according to the IRS, it must be proven by circumstantial evidence and reasonable inferences. There are usually one of more of the following involved with fraud; deception, misrepresentation of material facts, false of altered documentation, or evasion.

The IRS provides a list of what they call key badges of fraud to help determine if there was “intent to evade tax.” Below you will find part of that list, for the full list, please see the IRS’ Chapter 1. Fraud Handbook, Section 6. Civil Fraud.

  • Understatement of income (e.g., omissions of specific items or entire sources of income, failure to report substantial amounts of income received)
  • Fictitious or improper deductions (e.g., overstatement of deductions, personal items deducted as business expenses)
  • Accounting irregularities (e.g., two sets of books, false entries on documents)
  • Obstructive actions of the taxpayer (e.g., false statements, destruction of records, transfer of assets, failure to cooperate with the examiner, concealment of assets)
  • A consistent pattern over several years of under reporting taxable income

Criminal Tax Fraud

Criminal tax fraud is very serious. The penalties can range in up to 5 years in jail, up to $500,000 in fines, and costs for prosecution of each tax crime. For a full list of penalties, please see Related Statutes and Penalties – General Fraud by the IRS.

Tax Evasion

The IRS reports that tax evasion, “some affirmative act to evade or defeat a tax, or payment of tax.” This often looks like intentionally misrepresenting taxable income. Tax evasion is a subset of tax fraud.

Tax Avoidance

Remember that tax avoidance is not a criminal offense. According to the IRS, taxpayers like you and me have a right to reduce, avoid, or minimize taxes.

Take Away

If you or someone you know is in need of legal counsel concerning tax fraud, please get in touch with an experienced federal criminal defense attorney right away. Having legal counsel by your side can make all the difference in a tax fraud case. Please call my office at:

248-348-7400 or 586-530-1000


Please note that the information provided are general overviews for informational purposes only and should not be considered legal advice. For more information, please see, disclaimer. If you have specific questions about your unique tax fraud case, please contact my office.