In: Accounting
So, to recap, in proving tax fraud, the IRS relies on determining what the taxpayer's mens rea is and looks for conduct that may determine illegal tax evasion. Intent is necessary for tax evasion. What are some of those badges of fraud?
Explanation about Tax Evasion
Tax Evasion in general terms refer as concealment Of Income.
It the non disclosure of Income with an intent to avoid taxes. In this case, Intent must be analysed and interpretated because without intent of tax evasion, Mens rea can not be proved.
Tax Evasion is considered as Crime and is penalised in terms of fine and Imprisonement.
Some of the Badges of fraud.
Particulars | Explanation |
Maintaing Double set of Books of accounts | Double set of books out of which disclosing one set of books to authorities. This specifically happens in cash Based business |
Forging Documents/Supportings | Tax Payer Generally forge the documents to claim benefits in Income tax return |
Intentively Non Filing of Tax returns | Non Filing of Tax return with an intent to evade tax |
Claiming False Exemption In Tax returns | Claiming the uneligible exemption in tax return to reduce tax liability. |
Depositing the Assets in different names and form | Tax payer keeps the assets in the name of other person which reults in nondisclosure of tax liability |
Non Maintenance of records | Destroying the records to hide the tax liability |
Giving the False Information to Tax Return Preparer (TRP) | Providing the false information to Tax return preparer to hide the tax liability/Reduce tax liability. |