3 mistakes that create a risk of tax-related criminal charges

On Behalf of | Mar 13, 2024 | Criminal Law |

Individual workers and those who run small businesses have to pay income taxes based on the revenue that they generate via economic activity. Some people go to great lengths in their attempts to reduce their income tax responsibilities.

Those familiar with tax statutes can sometimes reduce their state and federal income tax obligations through clever tricks and understanding of current income tax requirements. People make last-minute retirement contributions or charitable donations at the end of December, for example.

Unfortunately, some people try a little too hard to reduce their tax responsibilities and end up facing allegations of criminal tax evasion or tax fraud. Certain behaviors are more likely than others to put someone at increased risk of criminal charges related to income taxes.

The misuse of credits and deductions

There are multiple different income tax deductions and credits available for people in different circumstances. Those running small businesses can write off certain operating expenses. There are tax credits related to parenting. People can write off certain expenses, such as medical costs, to reduce their total taxable income. The deductions and credits available every year change, and people might make mistakes if they misunderstand what credits are available and in what circumstances.

The failure to file a return

People sometimes assume that if their employers withhold funds to cover their income tax obligations, then a tax return filing is optional. After all, those who pay their tax responsibilities through weekly withholdings often receive a refund. Failing to file a return can sometimes lead to people misunderstanding their tax obligations and owing money to the IRS without realizing it.

Not reporting all sources of income

Perhaps someone forgot about a gig that they had the previous year. They might not report the income from that one-time work arrangement even though the company may have reported paying them thousands in wages. People might also forget about certain investment holdings and could fail to report the returns on those investments. When the IRS believes that someone willfully underreported their income, an investigation could follow. The outcome of that investigation could lead to a major tax debt and possibly criminal prosecution.

Those accused of tax evasion and other forms of tax fraud may have several options for defending against those allegations. Reviewing tax records and the government’s claims about tax fraud or evasion with a skilled legal team could help someone to craft the best response to their pending criminal charges.