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 i s 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. All working residents of every country are entitled to pay their taxes in owe to their government. Many comply and pay their taxes in their most honest way but there are still people who will try to cheat and commits tax fraud. There are certain tax law violations that can cause you big trouble and consequences. Claiming false- The idea of tax deductions is to decrease your taxable income, thus decreasing the amount of tax you owe to the federal government. If you give wrong information and regarding your claims to tax deduction you are liable for tax fraud. Concealing and transferring assets or income- There are many ways on how to hide assets. One of which is using false names and Social Security numbers to file in the same or two or more states listing nearly identical assets and liabilities. And the most common types of assets that can be hidden are cash, bonds, mutual funds, cash value in insurance policies and variable annuities, stocks, traveler’s check, series EE saving bonds, and bearer municipal bonds. They can easily name their assets to other people or imaginary people just to cover up and withhold their taxes. Knowingly change your income- If you knowingly make a statement which is false or misleading or knowingly fail to report important changes, you may be imposed a sanction against your payments. The first sanction is a loss of payments for 6 months. Subsequent sanctions are for 12 months and then 24 months. Overstating the amount deductions- some people will do anything just do lessen their tax obligations, they over report deductions but remember any form of falsification of information is a tax fraud. Possessing two sets of books/using false amounts in books and records- salaries, liabilities and profits are must be declared on a book but what they do is they provide another counterfeit book with false information. Recording personal expense as business expense- Personal expenses are different form business expenses. Business expense should be legitimate necessary expenses of business related purposes while personal expenses have no direct connection to the company that is cannot be deducted along with business expense. Voluntary compliance, this is the term use for paying taxes but although it is being referred to as voluntary, people must know that there are certain laws and obligations that they must meet the terms. Nobody likes paying taxes, but it is an essential component for our economy to continue growing and supply necessities to his people.
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