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Last Modified on Dec 24, 2025
Tax fraud is a white collar crime with serious consequences, ranging from a large fine to a prison sentence.
In broad terms, tax fraud is when an individual or business intentionally and willfully falsifies information in an attempt to limit their tax liability.
This takes on many forms, including but not limited to:
- Claiming personal expenses as business expenses
- Using a false name or Social Security number
- Not reporting earned income, such as payments received in cash
- Adding false deductions to your tax return
About the author: Amy B. Levenson Jones
Principal Attorney at Levenson Law Firm
Amy B. Levenson Jones is a seasoned trial attorney and Principal of Amy B Levenson Jones LLC in Pittsburgh, Pennsylvania. With over 20 years of litigation experience in criminal and complex commercial matters, she represents clients in federal and state courts nationwide. Ms. Levenson Jones is admitted to practice in Pennsylvania, the U.S. District Court for the Western District of Pennsylvania, and the U.S. Courts of Appeals for the Third and Fourth Circuits. She earned her J.D. from The George Washington University Law School.
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But is it tax fraud?
There’s a big difference between negligence and fraud. For example, it’s easy to make a common mistake on your tax return, such as a mathematical error or claiming a credit that you don’t actually qualify for. You didn’t do it on purpose. It was a mistake.
Conversely, tax fraud comes into play if the government believes you took purposeful action to defraud it.
A common example is purposely failing to file an income tax return. You were aware of the deadline, you know that it’s required by law and you realize that it can get you in deep trouble. However, you still neglected to file your income tax return. The IRS considers this fraud.
Business tax fraud
As a business owner, you must also tread lightly, as the IRS is watching you closely. Some common types of tax fraud among businesses include:
- Failure to file payroll tax reports
- Failure to disclose all your income
- Using two sets of books
- Failure to pay payroll taxes
- Failure to withhold federal income tax on behalf of employees
Even if you don’t personally make a mistake, maybe because you work with a third party payroll provider, you’re still on the hook. You must make sure they’re doing what’s required by law.
If you receive notice of an IRS investigation, don’t take it lightly. A tax fraud conviction can change your life forever, so you need to protect your legal rights.
Regardless of the circumstances, there are steps you can take to defend yourself in court. Settling on the right defense strategy early on is crucial to your success.
