If you are one of the people who are confuse of the difference between negligence and tax fraud you are not alone, many are baffle of these two. Negligence is a failure to take reasonable care to avoid causing injury or loss to another person. However negligence will take time to be proven.
- there is a duty in the circumstances to take care duty of care
- the behavior or inaction of the defendant in the circumstances did not meet the standard of care which a reasonable person would meet in the circumstances (breach of duty)
- the plaintiff has suffered injury or loss which a reasonable person in the circumstances could have been expected to foresee (damage)
- the damage was caused by the breach of duty (causation)
Now, what is income tax fraud, Tax fraud occurs when individual, business or company owners intentionally fabricates information regarding their tax returns in order to limit their tax amount liabilities. Tax fraud is basically involves misrepresentation or omission of data on tax return to avoid paying the entire tax obligation. Failure to comply on legal duties, falsifying or withholding information is against the law. Claiming false deductions, claiming personal expenses as business expenses and not reporting income are examples of tax fraud.
Is it negligence or tax fraud? Tax code is a very complex issue that many of us cannot easily grasp. In layman’s term negligence is just an honest mistake. The IRS can usually differentiate if an error was due to negligence or a willful evasion of tax law. Tax evasion will occur if:
- Overstatement of deductions and exemptions
- Falsification of documents
- Concealment of transfer of incomes
- Keeping two books
- Using a fake Social Security Number
- Claiming an exemption for a nonexistent dependent
- Willfully underreporting an income
- Not paying taxes that are overdue
- Intentionally not filing an income tax return
- Not reporting all the income tax received
In most recent year only .0022% of all the taxpayers in America re convicted of tax crimes. It is surprisingly small considering a fact that it is very easy to cheat on your tax obligations. Why is this possible? Auditors always give the suspected tax offenders the benefit of the doubt; they will assume that it was just an honest mistake.
People cheat on their tax by intentionally underreporting income. A sloppy mistake can cost you 20% penalty on your tax bill while tax fraud will cost you 75% civil penalty. Even though auditors are not investigators they are credible on detecting suspected offenders and can spot types of wrongdoings, called badges of fraud. Surprisingly, the line between negligence and fraud is unclear even to IRS and the court. But since the tax system relies on the obedience of the taxpayer, they usually discourage informing the public about taxpayer offender’s imprisonment or their inhumane penalties. But although chances of being convicted are small it is best to be honest in everything you do most especially your tax obligations.