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What’s the Difference Between Tax Fraud and Tax Negligence?

For many reasons — some of which are justified and necessary, and others that frankly do not make sense and obfuscate rather than clarify — the Internal Revenue Code (IRC) is an excessively complex set of volumes, which contain laws enforced by the IRS (published as Title 26 of the United States Code/USC).

Partly due to this inherent complexity — and also because the web is riddled with incomplete, misleading or outright wrong “advice” on tax controversies— there continues to be significant confusion around two fundamentally separate concepts: tax fraud and tax negligence.  

What is Tax Fraud?

According to the IRS, tax fraud is “an intentional wrongdoing, on the part of a taxpayer, with the specific purpose of evading a tax known or believed to be owing.” To make things even clearer, let’s drill down into each aspect of this definition.

  • An intentional wrongdoing…” The IRS does not believe that ignorance of the law is a defense. Taxpayer’s have a legal obligation to be informed. However, as will be described in the section on tax negligence, the IRS may, at its discretion (or the appeals division and/or U.S. Federal Court’s discretion if necessary), take into consideration that an act or attestation was done without illicit intent. While this will not erase any penalties and interest, it will avoid criminal prosecution.
  • “…on the part of a taxpayer…” This means that blaming your accountant, bookkeeper, parent, spouse, “financial wizard next-door-neighbor” or anyone else for the information on your tax returns is not an option. The IRS doesn’t care if taxpayers went through their return line-by-line, or if they scanned and signed it. If their name is on it, then they’re accountable.
  • “…with the specific purpose of evading a tax…” This means that the IRS doesn’t consider all errors or omissions on a tax return (or any other submitted tax-related document) as fraudulent. The intentional wrongdoing noted above must be associated with an attempt to evade tax. It’s not like a college exam where all wrong answers count towards the final grade.
  • “…known or believed to be owing.” This is a very important part of the definition that can be easily overlooked. The IRS doesn’t care if a taxpayer intentionally attempted to evade taxes that, in fact, it turns out they did not owe. As long as they believed they owed taxes, and attempted to evade paying them, the IRS will classify that action as tax fraud.  

The penalties for tax fraud are severe and can include having to pay all of your tax owing plus interest, plus 75% of the evaded amount. And while jail time is not the norm, it does indeed happen. It is not a false threat.

What is Tax Negligence?

As noted above, the IRS takes the position that ignorance of tax laws and filing requirements is not a defense. However, in some cases, taxpayers submit incorrect information without a willful attempt to evade taxes. In these situations — which the IRS assesses on a case-by-case basis — a charge of tax negligence may be levied.

Keep in mind that tax negligence does not mean that the IRS “forgives” the mistake. It simply means that they cannot justify an investigation that may ultimately turn into criminal prosecution. Taxpayers who commit tax negligence will be responsible for paying their full tax liability, plus interest and penalties (which is usually an additional 20% of the tax owing).  

Learn More

If you have received a letter, phone call or visit from the IRS — or if you are concerned that information provided to the IRS was incorrect, or if you know that it was incorrect — then contact the Law Offices of Jeffrey B. Kahn, P.C. today. All communication is protected by attorney-client privilege, and we have three decades of experience making sure that taxpayers are treated fairly by the IRS.

Also, be sure to check out our FREE eBook to learn what you need to do if you owe taxes to the IRS.

Request A Case Evaluation Or Tax Resolution Development Plan

Get a Tax Resolution Development Plan from us first before you attempt to deal with the IRS. There are several options for you to meet or connect with Board Certified Tax Attorney Jeffrey B. Kahn. Jeff will review your situation and go over your options and best strategy to resolve your tax problems. This is more than a mere consultation. You will get the strategy or plan to move forward to resolve your tax problems! Jeff’s office can set up a date and time that is convenient for you. By the end of your Tax Resolution Development Plan Session, if you desire to hire us to implement the strategy or plan, Jeff would quote you our fees and apply in full the session fee paid for the Tax Resolution Development Plan Session.

Types Of Initial Sessions:

Most Popular GoToMeeting Virtual Tax Development Resolution Plan Session
Maximum Duration: 60 minutes - Session
Fee: $350.00 (Credited if hired*)
Requires a computer, laptop, tablet or mobile device compatible with GoToMeeting. Please allow up to a 10-minute window following the appointment time for us to start the meeting. How secure is GoToMeeting? Your sessions are completely private and secure. All of GoToMeetings solutions feature end-to-end Secure Sockets Layer (SSL) and 128-bit Advanced Encryption Standard (AES) encryption. No unencrypted information is ever stored on our system.


Face Time or Standard Telephone Tax Development Resolution Plan Session
Maximum Duration: 60 minutes - Session
Fee: $350.00 (Credited if hired*)
Face Time requires an Apple device. Please allow up to a 10-minute window following the appointment time for us to get in contact with you. If you are located outside the U.S. please call us at the appointed time.


Reduced Fee Face-To-Face Tax Development Resolution Plan Session (Irvine Office Only)
Maximum Duration: 60 minutes - Session
Fee: $350.00 (Credited if hired*)
Session is held at our main office. 15615 Alton Parkway, Suite 450, Irvine, CA 92618.


Standard Fee Face-To-Face Tax Development Resolution Plan Session (Any Location Outside Our Irvine Office)
Maximum Duration: 60 minutes - Session
Fee: $600.00 (Credited if hired*)
Session is held at any of our offices outside our Irvine office or any other location you designate such as your financial adviser’s office or your accountant’s office, your place of business or your residence.


Jeff’s office can take your credit card information to charge the session fee which secures your session.

* The session fee is non-refundable and any allotted duration of time unused is not refunded; however, the full session fee will be applied as a credit toward future service if you choose to engage our firm.