Types of Tax Fraud in New York (2024)

Tax fraud is a serious offense in New York. Both state and federal authorities frequently crack down on individuals and businesses that violate tax laws. Common types of tax fraud in New York typically involve intentionally falsifying information to reduce tax liability or evade taxes entirely.

The penalties can range from heavy times to demands to pay back taxes in full. Jail and prison sentences are also potential consequences following a conviction. Below are the most common types of tax fraud in New York.

Income Tax Evasion

One common form of tax fraud in New York involves tax evasion. The crime occurs when an individual or business fails to disclose earned income. Individuals who engage in this crime underreport income, inflate deductions, or manipulate business expenses. Taxpayers who engage in this type of fraud can face severe penalties, including repayment of back taxes, fines, and even imprisonment if convicted of criminal tax evasion.

Both state and federal agencies actively look for evidence of tax evasion through audits and following tips from whistleblowers. The penalties for any business found evading taxes can be financially devastating. Criminal charges may be pursued against those who intentionally falsify their income records.

Sales Tax Fraud

Another form of tax fraud involves underreporting or falsely reporting income from sales tax.

Businesses operating in New York must collect sales tax from customers on certain goods and services. Sales tax fraud occurs when a business fails to remit the collected sales tax to the state or falsifies records to lower its sales tax liability.

Sales tax fraud may be more common at certain types of businesses, like restaurants and bars, where accurate reporting can sometimes be more difficult to verify. Local and state law enforcement agencies and departments frequently conduct sales tax audits to detect discrepancies, and businesses caught engaging in sales tax fraud may face fines, criminal charges, and even the closure of their business.

Employment Tax Fraud

Employers in New York are required to withhold state and federal income taxes, along with Social Security and Medicare withholdings, from employee wages. Employment tax fraud occurs when businesses intentionally fail to do so or misclassify employees as independent contractors to avoid paying these taxes.

More egregious forms of employment tax fraud may involve employers who fail to pay payroll taxes altogether. Any business owner found guilty of employment tax fraud may face serious penalties that can include taxes, fines, and possible criminal charges.

False Claims and Falsified Documents

Falsifying any government document is a serious crime. When falsified documents involve tax returns or supporting documents, it can become a form of tax fraud. This white-collar crime often involves inflating deductions, falsifying business expenses, or misreporting financial transactions to reduce tax liabilities.

For example, the business owner or individual may have overinflated charitable donations or business expenses. If they are caught, the consequences could include fines, orders to pay unreported taxes, and potential jail or prison time.

Failure to File Tax Returns

If tax returns are not filed as a means of concealing income, that could constitute tax fraud. There are strict state and federal filing deadlines that must be met. Failure to file tax returns could initiate an investigation. If the state or federal tax enforcement agencies find that returns were not filed as a means of avoiding paying taxes, that could initiate civil or even criminal action against the party that didn’t file.

Corporate Tax Fraud

Corporate tax fraud can occur when business owners engage in unlawful actions to reduce their tax liabilities. Companies that set up shell companies, falsify financial records, or manipulate accounts may be audited or investigated for corporate tax fraud. Any person caught engaging in these practices faces significant financial penalties and legal consequences. Corporate executives may also face individual liability, including prison time, for their role in the fraud.

Property Tax Fraud

Property tax fraud involves misrepresenting the value of property to reduce property tax liability. In New York, property taxes are based on the assessed value of real estate, and fraud can occur when property owners underreport the value of their property or claim exemptions they do not qualify for.

Property tax fraud is typically detected through audits or investigations triggered by inconsistencies in property valuations. Property owners found guilty of fraud may be required to pay back taxes and penalties. In some cases, they may even face criminal prosecution.

FAQs

What Is Tax Fraud in NY?

Tax fraud in New York refers to illegal activities aimed at deceiving the state or federal government regarding tax obligations. These can include underreporting income, inflating deductions, or failing to file tax returns altogether. Tax fraud is a serious offense that can lead to significant legal consequences, including fines and imprisonment.

What Qualifies for Tax Fraud?

Tax fraud qualifies when a taxpayer knowingly and willfully falsifies information on a tax return or other tax documents. Common actions that constitute tax fraud include:

• Deliberately omitting income
• Claiming false deductions or credits
• Using fake documents
• Engaging in any form of deception to avoid paying the correct amount of taxes owed

What Is the Highest Sentence for Tax Fraud?

In New York, the highest sentence for tax fraud can vary based on the specific circumstances of the case, including the amount of tax evaded and whether there are prior convictions. Generally, felony tax fraud can result in a range of prison sentences, with longer sentences for particularly aggravated cases involving large amounts of money.

What Are Common Examples of Tax Evasion?

Common examples of tax evasion include:

• Failing to report all income
• Inflating business expenses
• Using offshore accounts to hide money
• Claiming personal expenses as business deductions
• Submitting false documents to the IRS

Each of these actions aims to unlawfully reduce tax liability and can lead to severe penalties if discovered.

Schedule Your Tax Fraud Consultation Today

Tax fraud can lead to serious problems for people and businesses, ranging from damaged reputations to civil penalties or even criminal charges. If you are facing charges related to tax fraud, it is crucial to seek legal representation from a knowledgeable tax fraud defense attorney.

The Vitaliano Law Firm can represent you if you are being accused of tax fraud. Our founding attorney is a former prosecutor, so he understands the methods and tactics used by the government when they are seeking convictions for fraud. To schedule your consultation, contact our office today.