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The Gartzman Law Firm, P.C. | Tax Law
  • Home
  • About
    • Jeffrey S. Gartzman, Tax Attorney & CPA
  • Practice Areas
    • IRS Collections
    • Tax Return Preparation
  • Results
  • Blog
  • Contact
  • Make A Payment
770-695-7337
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  5. What’s the difference between tax fraud and negligence?

What’s the difference between tax fraud and negligence?

On Behalf of The Gartzman Law Firm, P.C. | Aug 24, 2022 | IRS Audits, IRS Guidance

You may have received a letter from the IRS stating that it found a discrepancy in your 1099 or 1040 return. Rather than fearing the worst, open the letter and read what it says carefully. People make mistakes, and there is no need to panic. While it could involve allegations of tax fraud, the notice often informs the filer that there was a mistake and you owe more than you thought. If the latter is the case, there is no need to worry about jail.

Innocent negligence

We all make mistakes. Simple negligence will not involve criminal charges. Instead, the filer must pay the difference. Common examples of negligence are:

  • Misidentifying your filing status
  • A math error somewhere on the return
  • Transposing some of your Social Security numbers on your return
  • Reporting income that doesn’t match your 1040, 1099, W-2, or K-1

Fraud shows intent

Tax fraud generally involves deliberate acts of misinformation for financial gain. Examples include:

  • The recipient refuses to pay their taxes.
  • The recipient refuses to pay their taxes when they are due and does not file an extension.
  • The filer deliberately understates the amounts for income or revenue.
  • The filer uses deductions and exemptions they are not qualified to use.
  • The filer deliberately lied in some other way on their return.

Self-employed people are more likely to be audited

Working for yourself has many benefits, but there is a higher chance of getting audited, particularly for those dealing with large sums of cash. Depending on the business and the filer, it may make sense to hire a reputable accountant to prepare your taxes. If you feel confident in doing it yourself, you should run your numbers several times to ensure they add up. It is also crucial to proof the rest of the return so there are no other errors not related to the sums. If the letter makes no sense or seems quite extreme, it is time to consult with a tax law attorney.

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