Recently, an Atlanta man appeared in court for allegedly scamming investors out of money intended to start a fantasy football league. According to The Atlanta Journal-Constitution, the man received $500,000 to start the league, but he instead used the money to dine at restaurants and take personal vacations. He then allegedly withheld information about the money when he filed federal income tax returns. Because of his actions, the man faces charges of wire fraud and tax fraud.
There are several actions that are considered federal tax fraud, including:
- Intentionally underreporting income
- Reporting personal expenses as business expenses
- Failing to deposit cash payments to avoid tax consequences
- Inflating the value of business expenses
According to the Internal Revenue Service, there were over 1000 tax fraud investigations initiated in 2016, and 76 percent of those investigations resulted in incarceration. Most types of federal income tax fraud are felonies, which can result in incarceration and fines.
Tax fraud can also occur on the state level. This can happen when someone knowingly files a Georgia tax return that includes false information or is missing relevant information. Although state tax fraud is a misdemeanor that usually results in fines, it is often tied with other charges, such as embezzlement, money laundering or tax evasion.
Due to the strict penalties for any level of tax fraud, it is important not to try to cheat the tax system. If you are uncertain how to report certain information on your tax return, you should consider reaching out to a tax professional who can help you avoid making costly mistakes.