You may think that the Internal Revenue Service (IRS) only focuses on big-time tax evasion and criminal enterprises. But the reality is that repeated errors or slightly unusual patterns can trigger greater scrutiny and a deeper look into your activities.
Understanding the common causes of tax fraud investigations in Richmond could help you stay ahead and out of trouble with the IRS. If you want to avoid future issues or feel like the agency is breathing down your neck, work with a dedicated tax evasion defense lawyer at Whiteford Tax Defense to make sure that your documents and affairs are in order.
Everybody makes mistakes; it is part of being a human. A small calculation error or incorrect number usually does not result in a full-blown investigation, especially if the taxpayer catches it and files an amended document.
Fraud, which is sometimes called tax evasion, is different from a simple error. It is an intentional action designed to deceive the IRS and hide money or lower the taxes owed. Some of the most common examples of fraudulent activity in Richmond include filing false returns and claiming excessive deductions. The agency takes this crime seriously, and a conviction could lead to prison time, fines, and tax penalties.
However, it is important to know the difference between tax evasion, which is illegal, and avoidance, which is not. Avoidance is taking advantage of credits and other legal mechanisms in the tax law to lower the taxable income and, as a result, pay less in taxes.
An experienced attorney could help taxpayers legally lower their obligations by finding all applicable deductions and credits. If, on the other hand, the IRS has started a fraud investigation, it is vital to seek legal representation for help through the process.
IRS employees and reviewers in Richmond are specially trained to detect potential fraud. One of the methods they use is to look for key indicators, or red flags, in a taxpayer’s history or current documents that suggest possible deception. There are several places where these red flags could be present.
For instance, the taxpayer’s income statements and sources of funds. If someone’s expenses substantially exceed their income, or there are unexplained deposits, or if certain sources of income are omitted, the IRS will take notice and possibly investigate further.
Another example is in the credits and deductions. This could be improperly claiming a dependent, claiming tax credits for which the taxpayer is not eligible for, and applying personal expenses as business deductions.
Perhaps the most well-known form of fraud, mostly because of its use in popular culture, is falsifying the books and records. Some ways taxpayers accomplish this is by making false receipts, implementing irregular accounting practices, and even just failing to keep records. An IRS review could include an audit of the financial records, and any irregularity could raise some eyebrows and trigger extra scrutiny.
Tax evasion is a very serious matter, and the IRS will rigorously pursue alleged cheating. At Whiteford Tax Defense, we are experts on the common causes of tax fraud investigations in Richmond and could provide you with advice and guidance.
If you feel like the IRS is giving you extra attention, it is essential to discuss your options with an attorney. Call Whiteford Tax Defense and tell us about your situation.