Most law-abiding business people would be horrified at the thought of committing tax fraud, but if you don’t pay close attention during tax season – or hire a professional accountancy firm to handle your taxes for you – that’s exactly what you could end up doing.
Below are 6 of the most common ways to commit accidental tax fraud:
6 ways to commit accidental tax fraud
Even unintentional errors at tax time, such as the following examples, could see you face unwanted scrutiny from the IRS:
- Errors and omissions when filing
Forgetting to include the right forms or important information such as your Social Security number, or making errors with the data you provide, could easily flag you up as warranting further investigation with the IRS.
- Claiming earned income tax credits,you’re not eligible for
Designed to offset the burden of Social Security taxes for those on a low to moderate income, the earned income tax credit is only available to those who meet the eligibility criteria, and can see them credited up to $6,660 on their returns.
To know more about whether you qualify for this particular tax credit, seek advice from a tax professional.
- Taking advantage of tax shelters
While some tax shelters may seem tempting when presented to you in the right way, and by those claiming to be professional accountants and tax experts, they may in fact be scams that could end up costing you a small fortune in penalties, back taxes and interest.
- Claiming unnecessary deductions
If you’re a small business owner or are self-employed, you can still deduct necessary business expenses, provided they’re really necessary. While it is possible to make genuine mistakes when claiming such expenses, do so knowingly and you could land yourself in hot water with the IRS, who are always vigilant about such things.
- Inflating deductions
No matter how low the chances may be of your business getting audited, never use that as an excuse to claim deductions that you have no right to claim; inflated deductions are against the law and if you do get caught, the penalties can be stiff.
- Not reporting all income
As with several other tax reporting requirements, it can be easy to forget to claim some of your income, especially if you’re not that organized at tracking it, but it’s really important that you try your best not to do so. Tax fraud and evasion are serious matters, and if you’re caught participating in it – whether unwittingly or intentionally – the IRS will not look kindly upon it, and penalize you accordingly.
Tax fraud is no joke, and if you get caught committing it, you certainly won’t be laughing. To get your taxes in order throughout the year, but especially at tax time, hire a professional accountancy firm who can help you out remotely (preventing the need to spend time and money hiring someone in-house) and keep you on the right side of the IRS, at all times.