Neil S. Ruskin
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Primary differences between tax fraud and negligence

Tax evasion and tax fraud are two different types of white collar crimes. Both of them can result in serious penalty, however. They also share enough similarities that some people may use the terms interchangeably, despite the heavy differences that also exist.

Tax fraud is defined by the Internal Revenue Services (IRS) as a conscious attempt to evade paying taxes. This can come in many different forms, including:

  • Not filing the tax form or paying due taxes
  • Filing a fake return
  • Failing to report all income on purpose
  • Making false claims

FindLaw takes a look at the comparison between tax fraud and negligence, which can often have the same outward appearance. The primary thing that differentiates the two is intention. Tax laws can be ridiculously complex. The more money you make, or the more sources of income you have, the more confusing it is. That doesn't even get into other complicating factors like exemptions, properties, contract employment, health care, donations, and inheritances. Essentially, the IRS understands that it's a confusing process and they are quite understanding to those who make mistakes. They will usually look for signs of fraud that indicate the incorrect or absent payment was done intentionally. Otherwise, it's assumed to be an accident.

One thing should be noted, however. Negligence in paying one's taxes is considered a genuine mistake or accident, unlike intentional evasion. Despite that, the IRS still has the option of fining the person who committed the mistake up to 20 percent of the underpayment as penalty.

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