But first, what is tax fraud?
Not a lot of people know firsthand what qualifies as tax fraud, but the IRS is defining it as the wrongdoing with the intent of evading a tax you know you are owing to the state.
The following acts are considered fraud: hiding assets, omitting income, improperly claiming credits or exemptions.
Keep in mind that tax fraud is different than tax avoidance, which means using improper tax deductions.
Let’s see what actions can mean that you accidentally committed fraud:
1. If you file a return with missing or incorrect details
Remember what I said earlier about the IRS not believing in everyone making mistakes? Well, that’s about it. The most important thing when you file is to file your returns correctly.
If you somehow don’t include the right information or data, even small things such as entering your Social Security number wrong can have the IRS see you.
You can avoid this by hiring a professional or getting a tax preparer software, that can do it the right way for you. It will turn out to be much less pain in the neck for you.
2. Wrongly claiming the earned income tax credit
If you’re not eligible for it and you’re still claiming for it, it can be a major flag for the IRS. It’s designed to help the people that are not earning enough to cover their Social Security taxes.
There are some specific requirements you have to meet in order to be eligible for it. Depending on your marital status, you have to earn between $15,000 and $55,000 a year in order to qualify.
This issue can be simply resolved by not applying for it if your investment income doesn’t exceed $3,584, without adding the Social Security benefits, alimony, child support, or unemployment benefits.
