All Underpayment Isn’t Tax Fraud

The government expects you to fill out your tax forms properly. You’re supposed to pay the full amount that you owe, and underpayment is illegal.

That said, any underpayment isn’t going to lead to an arrest, jail time, and huge fines. It’s not all tax fraud. If you’re always nervous while trying honestly to do your taxes, don’t be. The Internal Revenue Service knows that you’re probably not an accountant and you likely don’t have any training in how to do your taxes. Most people don’t.

The key is whether you made an honest mistake or if you deliberately lied to get out of paying. Accidents happen, and you’ll be asked to pay the right amount, but they’re not going to land you in jail. Deliberate omissions are illegal, and they could constitute fraud.

For instance, you may have three jobs, and you forget to report a few payments from one of your employers because there’s just so much paperwork. This could result in an underpayment and unreported income. If caught, you’ll have to fix the error and pay, but it’s not a big deal.

However, if you intentionally hide all of the payments from one employer, perhaps by taking payments under the table and acting like you only have two jobs, this could be considered fraud. That’s when you’re really going to get in trouble with the IRS. You may not be a tax expert, but they expect you to try to get it right, not to deliberately hide your income.

If you are facing criminal tax charges, especially if you think it’s all stemming from an honest mistake, be sure you know your legal options. Remember the role that intent must play in the proceedings.