If the Internal Revenue Service (IRS) asks someone why their tax submission is inaccurate, the person will probably say they made a mistake. If the IRS accepted it at face value, some would get away with intentionally paying less tax than they should.
The crime of tax evasion exists to deter people from trying. Anyone found guilty could face years in jail and large fines. That’s on top of the penalty fees they’ll have to pay the IRS on the underpaid amount.
The problem is that if you make an innocent mistake, the IRS may assume it was intentional. Here are two areas to take care with:
Business expenses
Businesses are entitled to set their income off against certain business costs. For example, if you need to travel for a meeting, the mileage, hotel and food might be eligible, and even a percentage of the vehicle cost. Yet you must keep accurate records. You cannot just bring your partner along on a work trip and expect to deduct all their expenses too. You cannot put the entire cost of your new car through your company if you mainly use it to run the kids around.
Failing to declare all your income
If a client asks if you do a bit of work on the side, they may offer to pay you cash in return for a lower price. However much you want to help them out, refuse, as you risk going to jail if caught failing to declare income.
If you make a mistake or a poor decision related to your taxes, you’ll need legal help to understand your defense options.
