The last thing you need is trouble with the Internal Revenue Service (IRS). Not only can this lead to stiff penalties that will change your life forever but the stress alone is enough to weigh you down.
If you’re faced with any type of income tax trouble in New Mexico, it’s important to learn more about your situation, focus on your legal rights and then take steps to protect them.
What is income tax negligence?
Income tax negligence is not nearly as serious as fraud. Yes, it can still result in penalties, but you won’t find yourself dealing with criminal charges.
A common example of income tax negligence is making a math mistake on your return that resulted in a large refund.
Yes, it’s stressful to learn that you’ve made such a mistake, but you can rectify it and move on with your life.
What about income tax fraud?
Income tax fraud is undoubtedly more serious than negligence. This is a willful attempt to evade tax law for financial gain. Some of the most common forms of fraud include:
- Maintaining two sets of books
- Overstating exemptions and deductions
- Taking credits that you don’t qualify for
- Hiding income, such as if you’re paid largely in cash
- Hiding income in offshore accounts
- Using a false Social Security number
- Using personal expenses as business expenses
- Claiming an exemption for a child that doesn’t exist
What are the penalties for tax fraud?
The penalties for tax fraud are every bit as harsh as you’d expect. Furthermore, the IRS likes to use people as an example, as it helps deter others from committing acts of fraud in the future.
For example, if you attempt to evade paying taxes, it could result in a felony conviction along with imprisonment up to five years and/or a fine of up to $250,000.
Making false statements is just as serious, as this is also a felony that can be accompanied by imprisonment (up to three years) and a fine (up to $250,000).
If you run into any type of income tax trouble, don’t assume that the IRS is on your side. It’s time to learn more about your legal rights and formulate a defense strategy to protect them.