Hyden, Miron & Foster, PLLC Law Blog

Tuesday, August 13, 2019

Tax Fraud

Tax fraud is a pervasive crime in the United States that carries harsh penalties. The U.S. government does not take it likely on those looking to defraud them. They will go after the wealthy and those in lower socioeconomic levels if there is suspected tax fraud. There is a difference, however, between tax fraud and being negligent in preparing your taxes. An important distinction that you will need to be prepared to prove should you be audited by the IRS under suspicion of tax fraud.

Former Arkansas State Senator Pleads Guilty to Tax Fraud

A prime example of no one being immune from the repercussions of tax fraud is former Arkansas state senator Jeremy Hutchinson, who also happens to be a nephew of the governor, surrendering his license to practice law after he pled guilty in federal court to bribery, conspiracy and tax fraud. The guilty plea included admitting to accepting thousands in bribes in Missouri and filing false tax returns. He has not yet been sentenced.

Sentences for tax fraud are severe. The sentence will largely depend on what type of fraud was perpetrated. For instance, if the fraud was an attempt to evade taxes, it will be considered a felony. A sentence for this kind of conviction may include up to 5 years imprisonment, fines of up to $250,000 for an individual and $500,000 for corporations, or both. In addition to the fines, you may be responsible to carry the cost of prosecution. If the fraud involved false statements, the sentence may include up to 3 years imprisonment, fines of up to $250,000 for an individual or $500,000 for corporations, or both. In addition to the fines, you may be responsible for paying the cost of prosecution.

It is important to distinguish tax fraud from negligence. Honest mistakes or oversight in filing your taxes do not constitute fraud. Fraud is intentional. Fraud is willful. Fraud is done with a conscious motive of tax evasion or defrauding the IRS. These intentional acts may include:

  • Failing to file an income tax return
  • Failing to pay taxes due
  • Failing to report all income
  • Preparing and filing a false tax return

The IRS does try to give people the benefit of the doubt when tax errors occur. The U.S. tax code is a complicated thing and difficult for the vast majority of people to expertly untangle. To distinguish whether an error was actually an oversight or intentional, a tax auditor will review the case for signs can trigger suspicions that fraudulent activity has occurred. Tax auditors will look for things such as:

  • Falsified documents
  • Concealing income
  • Concealing transfers of income
  • Overstating deductions or exemptions
  • Falsely classifying personal expenses as business expenses
  • Maintaining two different financial ledgers

Clearing up any misunderstanding that a tax error may be fraud is critical. In addition to criminal penalties, tax fraud carries a 75% civil penalty. The penalty for an honest oversight may carry you a 20% penalty on your tax bill.

Trusted Tax Attorneys

Tax issues are complex, but clearing up any misunderstandings with IRS tax auditors is crucial to your financial wellbeing and future. The dedicated tax attorneys at Hyden, Miron & Foster have a command of the U.S. tax code that serves our clients when they are faced with IRS audits and appeals involving tax discrepancies. Contact us today.

Archived Posts


© 2022 Hyden, Miron & Foster, PLLC | Disclaimer
About | Attorneys | Client Forms | Resources | Practice Areas | News


Law Firm Website Design by
Zola Creative

901 N. University Avenue, Little Rock, AR 72207 | Phone: 501.482.1787 | 557 Locust Avenue, Conway, AR 72034 | Phone: 501.482.1787
3880 N. Highway 7, Hot Springs Village, AR 71909 | Phone: 501.482.1787 | 721 S Main Street Stuttgart, AR 72160 | Phone: 870.673.0083