Is a mistake on a tax return criminal?
- David Greene
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If you make a mistake on your tax return, that is not criminal. However, filing a wilfully fraudulent return is criminal and can land you in jail. Here are some things you do not want to do that, if done, can lead to a criminal investigaton: (1) failure to report all of your earned income; (2) failure to report all of your unearned income, such as investments, rent, etc.; (3) failure to report any money held in foreign banking institutions or invested overseas; (4) exaggerating deductions; (5) inflating self-employment expenses (now IRS computers compare deductions and expenses year to year and a spike can trigger an audit) (6) claiming non-business expenses as business expenses, e.g. entertainment expenses or home repairs; (7) using your home office for other purposes (it has to be used regularly and exclusively for business, it cannot be your man or woman cave); (8) always rounding numbers to the nearest dollar, especially on your expenses (this tends to make the IRS think you are exaggerating); (9) if you’re self employed, you must make a profit in at least three out of five years. Otherwise the IRS views your enterprise as a hobby and any losses will be classifdied as “hobby losses” and disallowed. This often happens with people who own and show horses or dogs.