When you hear the term "tax evasion," you may think of big corporations of wealthy people trying to sneak money around to avoid paying Uncle Sam. While these are often the cases you hear about, there are some common ways regular people commit this crime every year come tax time.
To keep yourself out of trouble with the IRS, you may want to make yourself aware of some of the acts or omissions that add up to an evasion charge. By avoiding these three mistakes, you may keep yourself away from tax evasion charges.
1. Claiming too many deductions
It is tempting to take all those deductions on your taxes. Watching your expected refund climb as you claim away may seem harmless, but really, you may find yourself in hot water. While the IRS audit chances still remain relatively low, there is always the risk that your return will go through the process. If that happens, and your deductions do not match up with what you actually have, you could face criminal charges.
2. Taking the child tax credit
The child tax credit is a common deduction certain parents may qualify to claim. This tax credit is easy to claim when you do not deserve it. If you are not in the lower or low-to-middle class of earners (usually an income range between less than $20,000 to over $50,000), do not expect to get away with claiming the child tax credit if you should not.
3. Not reporting all the income earned
You may have started a side business and now that it is time to prepare your taxes, you wonder if leaving off the little income can hurt. The purpose of filing taxes is to ensure your income history for the previous year is accurate and that you have paid all your taxes. Failing to omit income, even if you do not believe you should have to claim it, is grounds for tax evasion charges.
Penalties for these infractions range depending on the severity. You may want to consult with an attorney should you find yourself facing questioning by the IRS.