Tax fraud is unfortunately a very common occurrence, and state and federal authorities have established processes and rules for screening and auditing suspicious tax returns. With tax season upon us, the state of Maryland has already begun its work of monitoring for fraud.
So far, this year promises to be a busy one for tax authorities, given that at least 615 returns with a value of over $780,000 were flagged for potential fraud within the first several weeks of 2016. Surprisingly, this is more than the entire number of returns flagged in 2007, though the rate of tax fraud has been rising from year to year across the nation and in Maryland in recent years.
It isn't clear yet what authorities will find in terms of fraudulent returns for the 2015 tax year, but almost 20,000 returns worth over $38 million were flagged for fraud last year. Given the scope of the problem, the tax authorities have a significant problem on their hands.
In screening tax returns for potential fraud, authorities look for a number of clues, including reporting refund amounts much higher than expected, failure to document business expenses, inflated business expenses, and incorrectly claiming and/or inflating wages, and even reporting business income when the taxpayer doesn't own a business. In response to the problem, the state comptroller's office is apparently pushing for legislation that would help authorities to better enforce tax laws.
In our next post, we'll take a brief look at the difference between tax fraud and tax negligence, and why the importance of working with an experienced criminal defense attorney when facing a tax audit.