Tax Law: Tips on How to Avoid Schemes that Constitute Tax Fraud and Evasion

The nature of taxes on income is as complex and varied as the various tax matters agreement across the states in the United States. Every state in the U.S. has its own set of laws, rules and regulations regarding the filing and assessment of income tax for that state, said Missouri tax attorney. Some of the common state tax matters agreements are: personal injury protection insurance, child support, unemployment compensation, worker’s compensation and some insurance policies such as disability income and life insurance. In addition, several states have reciprocal agreements with other states and nations and so a nature of tax on income for these reciprocal agreements may also be a concern for the taxpayer. It is always advisable to seek a professional tax advisor’s advice and recommendations regarding any of the complex tax matters agreement between the state and the federal governments.

 

The Internal Revenue Service or IRS, as an agency of the U.S. Federal Government is charged with the responsibility of collections of U.S. tax returns and all related income tax liabilities. All the income tax fraud that the Internal Revenue Service encounters every year is taken very seriously. The U.S. Attorneys General and their staffs work very diligently on tax fraud cases with the goal of prosecuting criminals who commit tax fraud. The majority of tax frauds and scams are generally committed by the “TAT” criminals (tax evasion specialists) and “skillful tax cheats”. These tax fraud criminals are very smart when it comes to planning their crimes, and they make use of many legal tax avoidance/fraud techniques and strategies.

 

Tax fraud by definition requires an intention to defraud the Internal Revenue Service; however, there can also be scenarios where one does not state any intent to fraudulently defraud the Internal Revenue Service. Under these situations, the IRS is not required to perform a credit check on you as part of the due diligence process it must perform in assessing your income tax liability. The nature of taxes on income cases agreement allows some exceptions to the more common fraud tax strategies; for instance, the most common tax fraud strategy involves structuring your personal financial affairs to avoid detection and/or with the minimum impact on the Internal Revenue Service’s assessment of your tax liabilities. This kind of tax fraud is called “tax evasion”, which is a separate crime from tax fraud.

 

Another nature of taxes on income strategy is misrepresentation about income and assets. As an honest tax practitioner, I am sure that you would agree that it is in everyone’s best interest to be as honest as possible when it comes to filing tax returns and paying taxes. But what about the people you deal with, such as contractors and subcontractors? How do you deal with them in the face of a nature of tax matters agreement that requires them to intentionally and willfully misrepresent information about income and assets?

 

Some tax fraud schemes are much more complex and sophisticated than others. One of the more complex tax fraud schemes that IRS will uncover and prosecute is “cases of mistaken belief”. Basically, what this tax fraud technique is about is an individual making serious misrepresentations about income and assets so that the IRS is convinced that the taxpayer has much more income than he actually does. This kind of tax fraud is very hard to detect, much less prosecute, so many tax practitioners and accountants will attempt to use what is called an “assumption theory” or a “glitch theory”. Essentially, these tax practitioners will assume that every scenario which could possibly occur so that the IRS will deem you as not being able to pay your taxes even though in actuality there may be perfectly legitimate tax reasons which exist which will excuse you from paying your due.

It is my firm conviction that this nature of tax on income strategy is one of the most destructive of all. Its tentacles have spread so far that some tax resolution specialists refuse to deal with any case which has this nature. According to tax law attorney MO, this is to protect the integrity of our tax system and ensure that it is not corrupted by unscrupulous tax practitioners intent to deceive the tax man and the tax authorities. If you have been unfortunate enough to be involved in one of these schemes, I recommend retaining a qualified tax accountant or tax resolution specialist to handle your case. The sooner you get help on this type of tax fraud, the better off you will be.