What Is Tax Fraud?

Tax Fraud Defined

Fraud is a deception deliberately practiced to secure unfair or unlawful gain. Another definition is the intentional misrepresentation of truth in order to obtain something of value by inducing another to rely upon false information.

Examples of Tax Fraud

• Intentionally failing to file individual income tax returns.

• A self-employed individual failing to report all income received.

• Filing an individual income tax return and deliberately understating the amount of income that was earned during the tax year.

• Overstating the number of children or other dependents on an individual income tax return.

• Filing an individual income tax return claiming to be a resident of another state while residing in Louisiana.

• Making false or fraudulent claims for refunds.

• Filing a Louisiana General Sales Tax return deliberately omitting sales tax transactions on which sales tax was collected.

• Failing to maintain records that show the true income and expenses of a business.

• Preparing documents, books and records that understate the true income or overstate the expenses of a business.

• Sales of imported cigarettes and other tobacco products without payment of the Excise Tax on these products.

• Sales of imported beer, liquor or wine without the payment of the Excise Tax on these products.

• Operating a business without registering with the Louisiana Department of Revenue.

• Payment of cash wages to employees for the purpose of avoiding Louisiana Withholding Tax.

• Avoiding the Excise Tax on diesel fuel by using "Off Road Diesel" in the fuel supply tanks of a motor vehicle for use on highways.

• Ignoring the requirements to report and pay use taxes on goods imported into the state.

• Opening and closing of new businesses to evade taxes.

• Operating a business using someone else’s name to avoid business and income taxes.

How Does Tax Fraud Affect Me?

When dishonest people fail to pay their fair share of taxes, it has a negative impact on businesses, consumers and on the performance of vital state services. Tax fraud often leads to higher prices, possible tax increases, inadequately funded school systems, poor roads, bridges and infrastructure and a reduction in other government supported programs. The burden of covering these shortages falls on honest taxpayers and the public in general.

Evasion or Avoidance?

Tax Avoidance:

• Legal tax planning to minimize one’s tax liability.

• Reduce, avoid, or minimize taxes by changing the nature of a transaction to comply with a tax exemption or exclusion. (Details of the transaction are disclosed).

• Not concealed or misrepresented.

• Shapes and preplans events to reduce or eliminate tax liability by taking advantage of favorable tax laws.

• Prepares documents showing the details of the transactions and reports the transactions.

Tax Evasion:

• Willful attempt to circumvent the tax laws through misrepresentation or deceit.

• Involves deceit and deception, hiding the true nature or misrepresenting the facts to take advantage of a tax exemption or exclusion that doesn’t actually apply.

• Intentional concealment and misrepresentation.

• Structures events and transactions to hide the true nature of the transactions.

• Fails to prepare, conceals, alters, or destroys the documents that show the true details of the transactions.