Like Crime, Tax Cheating Does Not Pay

In reality, no one wants to pay taxes. It is common practice to avoid tax liability partially or completely through tax reduction or abatement strategies. Some strategies are legitimate while others are not. For example: excessive claims for business credits, offshore tax avoidance, and abusive tax shelters. Participation in these and similar schemes are unlawful. Participants will endure harsh penalties when caught and convicted by tax authorities.

Recently, a wife and her husband have been convicted of tax fraud because her husband knew a tax professional who could reduce their tax liability dramatically or to zero total. With total confidence in the tax preparer, the couple accepted the professional's recommendations for tax liability reduction to zero and a decent tax refund.

A few months to a year later, the couple were requested to appear before the IRS and state tax officials to explain how their taxes were done and to validate the claims made the submitted tax forms. The couple found out that the professional has made unverifiable entries on their tax return. The return indicated no income from capital gains, have some businesses that suffered economic hardship and losses, improper deductions, etc.

The couple signed the forms without questioning the entries on the forms. Such behavior demonstrates the confidence level that was placed upon the fraudulent professional. To satisfy the penalties levied against them, the wife has surrendered a substantial amount of her retirement portfolio. Now the couple file returns separately.

Filers of tax returns must realize that tax authorities have access to multiple information streams such as bank records, tax identification numbers, etc. Through data mining– collection of relevant pieces of information – tax authorities can determine the truthfulness of filed returns and act accordingly if irregularities are found.

It is better to be honest about submitted tax returns; the penalties are too steep for tax cheats.