The tax code is complex, and even simple mistakes can have major legal and financial implications. The Internal Revenue Service (IRS) tends to scrutinize returns carefully, especially when there are complex factors, like numerous write-offs or deductions.
When an individual doesn’t just make a mistake but seemingly alters the details of their return for personal benefit, the IRS may hold them accountable for the past-due amount of taxes and also pursue tax fraud charges against them. The penalties for tax fraud include fines of up to $100,000 and up to five years in prison.
Any individual could find themselves accused of tax mistakes, but business owners and executives are at particularly high risk. What sort of behaviors might lead to text fraud allegations because of a business return?
Businesses have the privilege of writing off certain operating expenses so that the money spent on furnishing an office or advertising doesn’t count as taxable revenue. However, some professionals try to write off expenses that don’t qualify. Business owners might get a little bit creative with their deductions to try to keep their costs low, which might lead to tax fraud claims.
Employment taxes are a major obligation for most businesses, and hiring independent contractors is a way to minimize those tax responsibilities. However, if the IRS or another government entity determines that you misclassified workers, you could face tax charges.
Altering financial records or not reporting income
Changing internal records to avoid paying taxes on certain transactions or to minimize what it looks like your company earned on paper could lead to serious criminal allegations and financial obligations as well. When a business intentionally changes its internal records or avoids reporting certain transactions, the parties that made those decisions could face fraud charges if the IRS finds out later.
Taxes fraud charges can mean big consequences for financial professionals, business owners and executives. The business could face penalties, but the prosecution of individuals is also very likely. Such charges could do reputation damage to you as a professional and to your business as well.
Avoiding behaviors that might lead to allegations of tax fraud or other white-collar criminal allegations can protect you as a business owner or executive.