Tax fraud is a severe offense, but you might not even know you committed it. The IRS identified $2.3 billion in tax evasion in 2020 alone. You might not think this applies to you, but there are ways you can mistakenly commit fraud on your tax returns.
To ensure you file your taxes correctly, see below for some common mistakes people make on their returns so you can avoid tax fraud.
Not everyone qualifies for the EITC
Do not claim the earned income tax credit (EITC) without qualifying. The EITC is intended to help low-income earners who pay Social Security taxes. Read the requirements carefully if you are not sure you qualify. The limit varies greatly depending on the number of children and your marital status.
Use tax prep software
The simplest way to avoid tax fraud is to file an accurate return. If you have a lot of expenses, you may want to consider paying for tax prep software that handles everything for you. You won’t have to figure out the intricacies of tax returns on your own.
Be careful with your deductions
A seemingly innocent way people commit tax fraud is by misusing deductions. If you are a small business owner or are self-employed, you must have valid reasons for deducting expenses on your tax return. Again, this is not something you want to handle on your own. Speak with an attorney or use software to help keep track of your expenses.
Filing your taxes can lead to many headaches, especially if you are self-employed or a small business owner. Work with professionals to guarantee you do not unknowingly commit tax fraud, and keep careful records of your expenses. Should you find yourself facing tax fraud allegations, though, consider seeking the advice of legal counsel.