There are many types of activities about which Indiana residents should know that can be considered tax fraud.
A report published by the IndyStar gave details about how the state of Indiana has experienced a rise in the number of tax refunds claimed through fraudulent means. By using false identities and other people's social security numbers, it is alleged that many people illegally filed tax returns and accepted the corresponding refunds.
One statistic estimates that up to 12 percent of the money paid out by the state in tax refunds in 2014 fell into this category. These acts are considered one form of tax fraud in Indiana. It is not known if the state has charged anyone specifically in these cases. The article also did not specify what potential penalties defendants could face for this type of tax fraud.
The gray areas
Other forms of tax crimes can be more subtle and may even arise from the innocent act of finding creative ways to reduce an overall tax burden. If certain situations allow the Internal Revenue Service to believe that a person is deliberately trying to avoid paying taxes, that person can end up being charged with tax evasion.
Most taxpayers are aware that the IRS conducts audits. While there is no way to guarantee an audit can be prevented, there are some things that may make people more susceptible to getting audited. The following things can flag the attention of the IRS, increasing this risk:
- An income level that is so low that it is incapable of supporting a particular lifestyle.
- Bank account deposits of significant amounts that are not reported in any manner on a tax return.
- Large dollar amounts for itemized deductions that seem inappropriate relative to other details provided in the return. For example, a $10,000 gift to a charitable organization by a person who earned $50,000 in a year could be more likely to be questioned than a $100 gift would be. Home office deductions and automobile use for business reasons can frequently fall into this category as well.
People who own businesses and operate them on a cash model basis can be more susceptible to these types of allegations by the IRS. A cash operation logically provides fewer ways for the IRS to track income which can raise the risk of questions and even audits.
When can audits happen?
The IRS has a standard three-year period in which it can initiate an audit according to Forbes. There are special situations that can allow the IRS to audit a taxpayer after this timeframe. In general, the process for audits that happen later can be more difficult than for audits that happen closer to the date that an initial return was filed.
What should Indiana taxpayers do?
Being audited or accused of a tax crime can be daunting to anyone. Seeking help from an attorney in these situations is always recommended.
Keywords: tax, fraud, criminal, charges, audit