Types of Tax Fraud

GOLDEN, CO, August 28, 2010 (Press-News.org) Tax fraud occurs when an individual or corporation enters into an illegal scheme to avoid paying taxes legally owed to the federal government. It is a serious problem which costs our government billions of dollars a year in tax revenue. In 2005, the U.S. government estimated that approximately $345 billion in tax revenue was not paid due to tax fraud. This accounted for approximately 14% of federal revenues.

Tax Underpayment, Tax Avoidance, and Tax Fraud

There are several different classifications for tax underpayment. Underpayment itself refers to instances where an individual or corporation does not pay the required amount of taxes dictated by federal tax law. There is no connotation of legality or illegality in this situation; it simply refers to underpayment.

Tax avoidance refers to the legal reduction of taxes owed to the government using legally sanctioned practices. Tax fraud implies an intentional use of illegal means to reduce your tax liability.

The distinction between tax avoidance and tax fraud can often be difficult to discern. Generally, the IRS will evaluate the taxpayer's state of mind when determining whether tax avoidance or tax fraud has taken place. In order for an individual or corporation to be found guilty of tax fraud, the IRS must demonstrate willful intent to withhold tax revenue from the federal government. This determination will have important consequences on whether criminal or civil actions will be pursued.

Actions which may demonstrate a willful intent to withhold tax revenue include:

- Failing to file a tax return
- Intentionally underreporting or omitting income
- Claiming false deductions
- Hiding or transferring assets or income
- Overstating the amount of deductions
- Making false entries in records
- Failing to report income earned in a stock exchange
- Keeping two sets of books
- Misusing trusts
- Abusing charitable deductions

Types of Tax Fraud

There are many schemes employed to avoid paying taxes. Common types of tax fraud include:

- Offshore accounts fraud
- Corporate tax fraud
- Employment tax fraud
- Money laundering tax fraud
- Abusive tax shelters

The Tax Whistleblower Program

The federal government has established the Tax Whistleblower Program in order to provide an incentive for individuals with knowledge of large scale tax underpayment to report it to the IRS. Whistleblowers may receive between 15% and 30% of all recovered taxes, interest, and penalties in any case where the recovery totals $2 million or more. The percentage of compensation depends on the whistleblower's level of participation in the investigation.

In order to maximize your tax reward, it is important to work with an experienced tax whistleblower attorney who has the skills to assist the IRS throughout the entire investigation. Your attorney must be able to help you gather your information and present it to the IRS in a compelling narrative that will convince the agency to pursue your case. Once the IRS decides to move forward, it is crucial that your attorneys participate in the investigation every step of the way.

To learn more about tax fraud, please visit the website of Kenney & McCafferty today at www.tax-fraud.net. Kenney & McCafferty provides representation to tax whistleblowers both nationally and internationally.