How To Avoid Being Arrested For Tax Fraud In New York

by ECL Writer
Being Arrested For Tax Fraud In New York

You could face tax fraud charges if you don’t pay your state or federal taxes. Tax fraud can take many different forms, including failing to file a tax return, filing a return with false information, or tricking an auditor who is looking over your records. In New York, tax fraud is an offense that can result in fines for both individuals and businesses, and it affects both.
Tax evasion typically entails both federal and state penalties. Having a criminal defense lawyer that focuses on both state and federal crimes is crucial when you are facing multiple accusations. Both state and federal laws have their own consequences, and being charged under both can significantly enhance your sentence.

It is crucial to speak with a lawyer that focuses on the criminal prosecution of tax fraud if you are currently under audit with a suspect of fraud or have been charged with tax fraud. If you are accused of tax fraud, you could be sentenced to jail time and pay large fines to make up for any taxes you evaded. An attorney is most prepared to advise you on your rights and what to do if they have a thorough understanding of your finances and the nature of the criminal charges. And in this article, will outline a few steps on how to avoid being Arrested for Tax Fraud in New York.

Both the state of New York and the federal government have legislation that allows for the prosecution of tax evaders. A “taxable event” is triggered almost every time a person receives any kind of financial benefit. If all taxable events are not reported on your federal and state tax returns, tax fraud charges may be brought against you.
The New York Tax Law in article 37 part 2 lays out the foundation of tax fraud acts and penalties. §1801 defines tax fraud as either;

  • Failing to file a tax return or report;
  • Filing a false statement;
  • Supplying false information during an audit;
  • Making false promises to the government in connection to a tax;
  • Not paying any taxes owed;
  • Evading taxes; or
  • Issuing a document that says a sale is tax-exempt.
  • This boils down to the basic assumption that you could be found guilty of trying to evade taxes.

The criminal reproduction of tax fraud varies in New York between a class A misdemeanor and a class B felony depending on how much money was involved:

  • Fifth-degree has no value attached and is a class A misdemeanor.
  • Fourth-degree is charged for an amount over $3,000 and is a class E felony.
  • The third degree is charged for an amount over $10,000 and is a class D felony.
  • The second degree is charged for an amount over $50,000 and is a class C felony.
  • First-degree is charged for an amount over $1,000,000 and is a class B felony.

While the sentence for a class A misdemeanor would be less than a year, a class B felony may result in a 25-year prison term. There is a good likelihood that if you were to be charged with this offense, the fine would be at least $3,000, increasing the penalty to 1 1/3 to 4 years in prison.
Federal tax fraud is punishable under the law, which is outlined in 26 U.S.C. 7201. Tax evasion and tax avoidance are both prohibited by federal law. According to this law, it is not necessary for the attempt to be successful in order for it to be illegal. A felony conviction for the charge under § 7201 carries a fine of up to $100,000 and a maximum sentence of 5 years in jail.

How Does The IRS Determine Tax Fraud?

The IRS estimated in 2016 that underpayments and nonfilings between 2008 and 2010 accounted for around 15% of total gross taxes. This indicates that there is a significant issue with tax fraud, which the IRS and the Department of Taxation and Finance in New York are aware of or believe to be a problem. They have been looking into numerous instances of tax fraud as a result of these income gaps.

The IRS uses a variety of methods to detect tax fraud, including:

Data Matching

The IRS compares information reported on tax returns to information from third parties, such as employers, banks, and investment firms. If there are discrepancies, it may indicate tax fraud.

Computer Analysis

The IRS uses computer programs to analyze tax returns for patterns or anomalies that may indicate fraud.

Fraud Referral Centers

The IRS has specialized units that review tax returns and other information for signs of fraud.


The IRS may audit a tax return if it suspects fraud. An audit is a review of a tax return to verify that the information provided is accurate.

Whistleblower Claims

The IRS may investigate tax fraud based on information provided by a whistleblower.

If the IRS determines that tax fraud has occurred, it may initiate criminal proceedings against the taxpayer. This can result in fines, imprisonment, and other penalties. It is important to be truthful and accurate when preparing and filing your tax returns to avoid the possibility of being charged with tax fraud.

The IRS often considers that negligence caused an inadvertent error to arise if these frequent indicators are missing. Tax mistakes can result in an accuracy-related penalty equal to 20% of the underpayment, even though this normally does not result in criminal tax fraud charges.

Anyone who receives this penalty could be taken by surprise, so it’s crucial to make sure all tax information is precise and true before submitting it to the IRS. It’s crucial to keep in mind that you have a legal right to representation, particularly if you think you have been wrongfully accused of tax fraud.

How To Avoid Tax Fraud in New York

File your tax returns accurately and on time

Make sure to report all of your income, and claim only the deductions and credits that you are entitled to.

Keep Good Records

Make sure to keep accurate records of your income, expenses, and other financial information. This will make it easier for you to prepare your tax returns and will also provide evidence of your compliance if you are ever audited.

Don’t Try To Hide Your Income

Don’t try to conceal income or assets in order to reduce your tax liability. This is illegal and can result in criminal charges.

Don’t Claim False Deductions Or Credits

Don’t claim deductions or credits that you are not entitled to. This includes claiming deductions for charitable donations that you did not make or claiming credits for education or childcare expenses that you did not incur.

Seek The Advice Of A Tax Professional

If you are unsure about any aspect of your tax return, consider seeking the advice of a tax professional. A tax attorney or certified public accountant can help you understand your tax obligations and ensure that you are in compliance with the law.

Cooperate With Tax Authorities

If you are contacted by the Internal Revenue Service (IRS) or the New York Department of Taxation and Finance, be cooperative and honest. If you are found to have committed tax fraud, it will be much harder to avoid criminal charges if you have been uncooperative or deceptive.

What You Should Know

Working with specialists to finish your taxes is one of the best ways to prevent being accused of tax fraud. Although some actions are permitted by both the New York and federal tax regulations, breaking the rules may result in an investigation.
With the assistance of a lawyer, you may proactively rectify the situation if any incorrect information was recorded on any tax return before it becomes a problem. The likelihood of criminal consequences is decreased by having an attorney guide you with updating any information because reporting could result in an investigation.

You should address this problem head-on if you know or believe that your company, or any of your workers, are taking steps to evade paying business taxes. There is a possibility that you could be accused of tax fraud if you own a firm and they are committing fraud against the government.

Speaking to a lawyer should be your first move if you are under investigation or believe you might be in that situation. You might be able to avoid charges or have the severity of any charges reduced if you take proactive measures and cooperate with your counsel. If you don’t have legal representation, communicating with the authorities may become difficult due to complicated taxation, and you risk unintentionally implicating yourself.

Leave a Comment

This blog is ONLY for informational or educational purposes and DOES NOT substitute professional legal advise. We take no responsibility or credit for what you do with this info.