Most of us dutifully submit our federal income tax returns on time and fill them out to the best of our ability. While a few people may try to cheat the system, most of us certainly do not intend to do so.
But what if after filing your return you realize you made an honest mistake. If so, will you be charged with tax fraud?
What is tax fraud?
Tax fraud exists when there is an obligation to pay taxes and an intent to defraud. For example, a person commits tax fraud when they purposely lie or omit information on their tax return so they can claim deductions or credits they are not otherwise entitled to, and ultimately to obtain a greater tax refund or pay fewer taxes.
But it was an honest mistake!
We are all human, and we will make mistakes now and again, including honest mistakes on our taxes. Will the Internal Revenue Service (IRS) consider these mistakes acts of tax fraud?
Generally, mistakes are not considered tax fraud unless the IRS decides the mistake was a purposeful attempt to commit fraud. Tax fraud must be done intentionally.
Instead, the IRS refers to these mistakes as “negligent reporting.” If you realize after filing a tax return that you made a mistake, you can file a form with the IRS to amend it. You only have a limited amount of time to file an amended return.
Nevertheless, while a mistake is not always a criminal act, the IRS may still assess a 20% accuracy penalty if it deems the mistake was due to negligence or disregard. So, it is in your best interest to ensure you fill out your tax returns to the best of your ability and to pay what the IRS says you owe.