The past three years have seen the IRS increase its tax crime investigations by approximately 10 percent. According to the IRS, it estimates that only a small percentage of tax crime convictions of about 0.0022 percent of taxpayers take place each year. It further provides an estimate of 17 percent of taxpayers fails to comply with the tax code in some way. It is the individual taxpayers rather than the corporations that commit the 75 percent of income tax fraud. However, are they all violations of the tax code fraud?

The following are some of the definitions and methods in which the IRS tries to differentiate between revenue tax fraud and carelessness.

So what do you understand of Income tax fraud?

Income tax fraud is the deliberate effort to escape tax law or attempt to defraud the IRS. Tax fraud takes place when the person or company does the following:

• Genuinely avoids paying taxes

• Prepares and files a false return

• Intentionally fails to report all income received.

• Purposely fails to sleeve an income tax return.

• Genuinely refuses to report all income received.

• Makes fraudulent or false claims.

Negligence or Income Tax Fraud?

The IRS has a complete understanding of the tax code as a complex set of regulations and rules that is not easy for people to decipher. Whenever careless mistakes happen, when signs of fraud are absent, the IRS makes an assumption that it was an honest mistake than the genuine escape of the tax code. In such cases, the tax auditor will consider a mistake that is considered negligence. Even though the IRS shall still fine you a penalty of about 20 percent of the underpayment. The IRS normally can make a difference of whether the mistake is an outcome of negligence or the deliberate dodging of the tax law. The tax auditors normally are on the look for common types of suspicions and fraudulent activity like:

• Falsification of documents

• keeping two sets of financial ledgers

• having a false Social Security number

• Concealment or transfer of income

• An overstatement of deductions and exemptions.

• Genuinely underreporting your income.

• Claim an exemption for a dependent that doesn’t exist.

These are some of the tax crime investigations that the IRS carriers out.

So who breaks Income Tax Fraud?

The majority of the service workers who get paid cash and self-employed taxpayers running businesses have been identified as the key taxpayers fond of committing a lot of the tax fraud since it is easy to underreport cash income. Restaurant and clothing store owners, salespeople, doctors, lawyers and accountants, and hairdressers are ranked as the top offenders by the government study of income tax fraud.

The IRS Criminal Investigation into Income Tax Fraud

The IRS does investigations into alleged violations of the tax code via the IRS-CI, which is the law execution branch of the IRS. The CI agents are the ones given the task to investigate tax crimes, Bank secrecy violations and money laundering. Investigators use complex methods to uncover computer information protected through encryption, passwords and some other barriers. Since the tax system wholly depends on the voluntary compliance or the self-assessment of the taxes owed. The IRS strives to discourage violations through publicizing convictions, seek prison time for offenders and assess fines, civil taxes and penalties.

Penalties for Income Tax Frauds

When a tax crime investigation is done, and a person found guilty. The taxpayer is willfully subjected to criminal and civil penalties. The type of fraud shall decide on the applicable penalty.

Get to understand the major difference between tax fraud and negligence and stay safe from penalties on tax crime investigation.