Tax fraud is a serious offense. One father and daughter team defrauded the IRS out of $3.4 million. They claimed the organization owed them much more in tax refunds than they actually should have received. The federal government takes tax fraud seriously, and business owners have greater risks than individual citizens. There are several ways businesses can inadvertently commit tax fraud, so it is vital to make sure your company’s finances are accurate.
There are various ways businesses can over-report their total expenses on their tax forms. For starters, they can take an unjustified deduction for home office space for business owners who work from home occasionally. Additionally, they may report personal travel expenses as business ones. You cannot claim personal miles as your company’s miles. Business owners need to be extremely careful about reporting any business expenses that are also technically personal expenses.
You must report all income your business makes to the IRS. This includes any income you brought in from cash or barter. Some businesses try to get around this problem by paying some employees under the table with cash. This is illegal and can result in serious consequences.
Failure to report all taxes
Businesses also commit tax fraud when they fail to report payroll and sales taxes. Professionals refer to these as “trust fund” taxes because the business collects them from employees’ paychecks as well as from sales taxes for customer purchases. The failure to report these to collection agencies and pay at the appropriate time is tax fraud. Business owners will end up paying a much higher price by failing to pay all prices properly, so it is best to avoid problems when possible.