Understanding tax fraud and its penalties in Maryland

Tax fraud is a white collar crime that can be prosecuted at the state or federal level and carries with it severe penalties.

It's tax season, which means individuals and businesses are crunching numbers, filling out paperwork and working to send the Internal Revenue Service the necessary items in time. As the deadline looms, it may be tempting for people in Baltimore to rush through tax forms. However, these documents reflect legal information, and there are legal penalties for mistakes - whether they are purposeful or not.

Tax fraud is a serious crime that carries with it serious consequences. Everyone should know what constitutes criminal activity and how to prevent unwanted charges.

What is tax fraud?

Generally speaking, tax fraud occurs when someone willfully attempts to avoid a tax that he or she knows is due. Examples of tax fraud include the following:

  • Underreporting income
  • Overstating expenses
  • Keeping two sets of books
  • Taking deductions to which the taxpayer is not entitled

The operative word in tax fraud law is that the crime must have been committed "willfully"; an honest mistake, while still punishable by civil penalties, typically will not result in a criminal charge.

How are tax fraud laws enforced in Maryland?

On the state level, the Comptroller of Maryland is tasked with enforcing tax fraud laws. Someone who fails to pay taxes to the state could face a number of consequences, including that driving, professional and recreational licenses may not be renewed; a 25 percent penalty tacked on to the amount owed; wage liens on paychecks or tax liens on property; and the state may seize assets.

In addition to these civil penalties, there may be criminal charges filed. In Maryland, the consequences of providing false information with the intent of evading taxes is punishable by fines of up to $5,000 and up to 18 months in jail.

What are the penalties for federal tax fraud?

Willfully trying to avoid paying federal tax is a white collar crime assessed at the federal level. According to the IRS, tax evasion is a felony that is punishable by up to five years in prison and a fine of up to $250,000. If a corporation is found to have willfully attempted to avoid paying tax, the fine could be up to $500,000. There are similar penalties applied to anyone who fails to collect or pay over taxes.

There are lesser consequences for other tax fraud crimes, though the penalties are still serious. Providing false information or aiding in providing false information can lead to up to three years in prison and fines of $250,000 and $500,000 for individuals and businesses, respectively. Failing to file a return could lead up to one year in prison and a $100,000 fine for individuals and $200,000 fine for corporations.

How can I prevent tax fraud from happening?

One of the ways that tax fraud occurs is when consumers or businesses work with so-called tax agents who are not trustworthy. The IRS encourages taxpayers to be wary of scams in which a purported agency asks for bank information. Additionally, people should avoid clicking on any links in emails that are from an unfamiliar tax or financial institution. This could enable a computer hacker to steal valuable information.

Working with a trusted professional regarding all tax information can safeguard people in Maryland from making costly mistakes. Anyone with questions about this issue should consult with an attorney.

Top Tier Firm Devoted to Complex Cases

  • Leadership Positions

    Members of our firm have held leadership positions, including Chair of the American Bar Association White Collar Subcommittee on Federal Sentencing & the American Bar Association Subcommittee on Forfeiture.

  • Knowledge & Experience

    Over 75 years of combined experience and insights into complex federal and white collar criminal defense.

  • Honors & Accolades

    Larry Allen Nathans was recognized by Best Lawyers® as the Best Criminal Defense Attorney for Maryland in 2015 & Best Lawyers in America® for 2008-2017.

Schedule a Confidential Consultation

    • Please enter your name.
    • This isn't a valid phone number.
    • Please enter your email address.
      This isn't a valid email address.
    • Please make a selection.
    • Please enter a message.
Put Us On Your Side