For most of us, the end of tax season is nigh. It's a concept known as tax evasion, and while it's a practice often associated with super-wealthy celebrities and corporations, low- and middle-income earners have been known to do it, too. This is an agreement between a taxpayer and the IRS that settles the taxpayer's tax liabilities for less than the full amount owed.
Tax Freedom Day generally falls around this time each year. That's why it's crucial to understand what constitutes tax evasion and where to draw the line.
As the tax filing deadline approaches, and as refund checks are issued, Samson said, "this is the flawless time for [scammers] to pounce on vulnerable Vermonters, and convince them they need to provide additional information to get those refunds". Tax avoidance, when done correctly, isn't a crime. If you sell investments you've owned for less than a year, and their value has increased, you will have to pay capital gains taxes at your personal income tax rate, which, in early 2017, could be as high as 39.6%. In any case, you'll still come out ahead, tax-wise, by holding your investments long enough to receive the long-term capital gains rate.
Last year, just over 10 percent of taxpayers filed their taxes after the deadline.
Tax evasion or honest mistake?
File electronically - E-file your tax return when you file this year. That's because the IRS can usually tell the difference between illegal activity and an honest mistake.
"Each year, we do undercover operations where we send undercover agents in with a W-2 and other tax information in to suspected unscrupulous tax return preparers to get tax returns prepared", he said. Electronic filing also can also prevent filers from including written explanations for certain deductions.
So how does the IRS know whether it's dealing with carelessness versus outright fraud?
The IRS again attempted the use of PCAs to collect federal taxes in 2006.
The IRS will begin sending letters this week to a few hundred taxpayers with overdue bills to alert them that their accounts will be assigned to one of four private collection agencies. And while you might still face a penalty for underpaying, it shouldn't be an extreme one.
Gather all necessary tax documents - Make sure you have all your tax documents. "Never forget that. You need to be confident that you're preparing an accurate return". If you made money and don't report it - and the IRS catches it - it's going to cost you penalties and interest at best, and open you to a possible audit at worst.
For more information, visit the "Tax Scams and Consumer Alerts" page on IRS.gov. Remember, you don't need to hide millions of dollars in income to be found guilty of tax evasion; all you need to do is engage in activity created to willfully defraud the IRS. It's a far better bet than taking chances and running into trouble with the law.
Given that most Americans have less than $1,000 in the bank, paying off all your tax debt at once may be downright impossible. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income.
"The IRS remains extremely concerned about the many con artists out there who masquerade as IRS employees or contractors", said Mary Beth Murphy, who heads the small business and self-employed division at the IRS.
"I think we learned some things from the last iteration", Banowsky said.
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