There are Many Ways to Commit Tax Fraud

There are Many Ways to Commit Tax Fraud

Most people assume that the only way to commit tax fraud is not to pay it or to lie on those documents.  However, in New York, and probably most other jurisdictions, there are numerous ways to commit tax fraud.

Like the Federal Government, and most other States, New York is short on tax revenue and in response New York has recently signed a new law that increases civil and criminal penalties for fraud and tax evasion. While every State is different (and then there is a whole Federal penal system) it is useful to understand the different acts which constitute Tax Fraud.  The new, New York Tax law took affect in April of 2009, so it wouldn’t surprise me if your jurisdiction recently updated their law.

Eight Ways to Commit Tax Fraud

Every State will differ, but according to William Comiskey, Deputy Commissioner for Enforcement, New York State Department of Taxation and Finance, in his article “New Criminal Tax Laws: Taking Aim at Tax Evaders” there are 8 ways to commit tax fraud in New York.

  1. Willful failure to File a Return or Other Required Document
  2. Willfully and Knowingly Making or Filing a False Return or Report or Supplying False Information (this is actually two ways)
  3. Willfully engaging in a Scheme to Defraud the State in Connection with Any Matter Under Tax Law
  4. Willfully Failing to Remit Taxes Collected on Behalf of the State
  5. Willfully failing to Collect a Sales, Excise or Withholding Tax that is Required to be Collected
  6. Willfully and With an Intent to Evade any Tax, Failing to Pay a Tax Due
  7. Issuing False Exemption Certificates

Note that #2 is actually 2 ways combined.

Every state will differ but New York defines “willfully” under New Tax Law Section 1801(c) as,

to mean acting with either intent to defraud, intent to evade the payment of taxes or intent to avoid a requirement of this chapter, a lawful requirement of the commissioner or a known legal duty.

The question of willful falls under the whole topic of mens rea, which I believe to be beyond the scope of this blog, but understand that if you are trying to willfully defraud the State they set up a stricter penalties with first time evaders possibly being charged as a felon.

Increased Penalties for Tax Fraud

It all comes down the cash (C.R.E.A.M. for any of those born after 1975ish).  Since there is a need for almost every jurisdiction to collect additional revenues, it is not surprising that New York upped the ante when someone is going to decide to willfully defraud the State of taxes it thinks it is owed.

Have you heard about your State drafting new tax laws?

Again refer to my disclaimer, I am not your attorney, there is no attorney-client relationship from you simply reading my anonymous blog post.  If you think you have committed tax fraud check with a licensed professional in your State and not on a random personal finance blog.

4 Responses to There are Many Ways to Commit Tax Fraud

  1. I’m no tax expert but luckily I have an excellent tax pro.

    A message to people who handle these things themselves, a tax pro might cost you a few extra dollars but he should be able to save you what they cost ten-fold.

  2. Hey Evan, thanks for the mention … got it in my Google Alerts for my company name. Let me know if you need any other design tips … always glad to help.

    Happy Holidays & Cheers,
    Chase.

  3. Even tho you have a great tax pro .. You should always tell the truth tho.. We as tax pro’s take your word on what info is given .. so fraud still happens .. We cant report it other than how we are told. All we can do is tell you how the laws and rules work and what works best for you .. Getting the most refund back is what we are here to do for our clients but doing it legal is the only way to go.

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