What is the difference between tax fraud and a simple mistake?
The difference between tax fraud and a simple mistake is that, generally, tax fraud or tax evasion involves an intentional wrongdoing. Mere carelessness is not tax fraud. Federal and New Jersey state tax authorities decide whether tax fraud has been committed by looking for signs of fraud, including the following “red flags”: • understatements of income; • inadequate records; • failure to file tax returns; • implausible or inconsistent explanations of behavior; • concealment of assets; • failure to cooperate with tax authorities; • engaging in illegal activities; • attempting to conceal illegal activities; • dealing in cash; and • failure to make estimated tax payments.
