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Beware of under-reporting your income taxes

It's the time of year when people's thoughts turn to their taxes. This is often when people get bursts of creativity, as well. If you are considering some creative license while doing your 2015 taxes, you should probably reconsider.

Any time companies or individuals intentionally underpay their taxes, it is considered tax evasion, which is a form of fraud. However, mistakes do not constitute fraud because they are not deliberate.

Tax evasion frequently takes the form of under-reported income. This can occur in industries that do mainly a cash business. Some examples could be bartenders, hairdressers and waiters and waitresses.

Other ways of evading paying your lawful share of taxes is by inflating your business expenses to reduce your tax load or fibbing about your household size to claim additional deductions. Even manipulating your credit and debt status can cause you to get in trouble with the Internal Revenue Service.

One of the best ways to avoid allegations of tax fraud is to keep scrupulous records about your wages, expenses and debts. That way, if you are ever audited, you have mountains of paper trails to support your figures.

If you use a professional tax preparer, make sure that you read over your tax return before signing off on it, electronically or otherwise, as ultimately it is the taxpayer and not the preparer who is responsible for any errors or omissions on the return.

If you get indicted or arrested for tax evasion or tax fraud, you will need to mount a vigorous defense against the allegations in federal court.

Source: FindLaw, "Tax Evasion," accessed March 25, 2016

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