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Don't confuse tax fraud and tax mistakes

Tax fraud is every bit as serious as it sounds, with the IRS on the lookout for anyone who tries to game the system.

Many people face confusion as to the difference between tax fraud and tax mistakes.

The IRS does not consider a basic mistake to be a crime. For instance, if you make a math mistake on your return, you won't face criminal charges. The IRS is aware that its tax code is complicated, and expects these types of things to happen (even though you should try to avoid them).

Conversely, tax fraud is exactly what it sounds like: This is when a person takes calculated steps to avoid paying the taxes that he or she owes.

There are many ways to do so, such as under reporting your income or hiding money in overseas bank accounts.

Degree of severity

As you can imagine, there are varying degrees of tax fraud. On one side of things, you may have a waitress who failed to report a few thousand dollars in tips over the course of a year. On the other end of the spectrum, there are people who funnel their earnings to offshore accounts, with the idea that doing so will help them avoid paying taxes on a large sum of money.

Just as it's simple to make a tax mistake, the same holds true of tax fraud. If you are charged with any form of tax fraud, such as tax evasion, you shouldn't hesitate to learn why you are in this position and what you can do to protect your legal rights.

Your job is clear: You want to prove to the IRS that you did not commit a crime, but instead made a mistake. This is easier said than done, but there are strategies you can use to prove your point. It's imperative to do whatever it takes to put yourself in a better light, as the penalties for tax fraud can be stiff.

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