• Learn the types of tax fraud.tax forms image by Chad McDermott from Fotolia.com
  
  IRS fraud refers to engaging in deceptive practices in order to get out of paying all taxes owed to the IRS. The IRS, or Internal Revenue Service, is the department of the U.S. government vested with the obligation to collect taxes. Tax fraud can involve a number of activities designed to pay less than the full amount owed.
  
  

Under-reporting Income

• Under-reporting income involves not reporting the full amount of money you earned over the course of the year. You are obligated to report any and all income earned to the IRS, although you only receive a W2 or 1099 form if you earned over $600. If you are paid in cash and/or do not receive a 1099, you still must report the income. Intentional failure to do so can constitute tax fraud or tax evasion.
  
  

Overstating Deductions and Losses

• You are allowed to deduct certain legitimate business expenses and losses on your taxes. For example, if you drive for work you may be able to deduct your mileage,or if you take a customer out to dinner, you can claim the dinner as a business expense. In addition, if you lose money on your business, you can use those losses to offset your income. However, you can only claim legitimate expenses. If you claim expenses that aren't really business expenses--such as taking your wife out to dinner, for example--or you overstate your expenses, losses or charitable contributions, this can constitute tax fraud.
  
  

Overstating Dependents

• You are allowed to take deductions for dependents if you support a child or qualified relative who lives with you. However, some individuals list more dependents than they have or even list their pets as dependents. Listing more dependents than you have is a form of IRS fraud.