Glossary

Fraud Penalty

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The fraud penalty is a severe penalty imposed by the IRS on taxpayers who deliberately attempt to evade paying their taxes through fraudulent actions. The penalty is 75% of the underpayment of tax attributable to fraud.

Fraudulent actions may include:

Falsifying income or deductions.
Failing to report income.
Hiding assets to avoid taxes.

The IRS takes tax fraud seriously, and in addition to the fraud penalty, taxpayers may face criminal charges, fines, and imprisonment. The burden of proof for fraud lies with the IRS, and they must demonstrate that the taxpayer intentionally committed fraud.

To avoid the fraud penalty, taxpayers should ensure that their tax returns are accurate and complete, and they should seek professional advice if they are uncertain about any aspect of their tax reporting.

Recommendation

Levy

An IRS levy is a legal action that allows the IRS to seize a taxpayer’s assets, such as wages or bank accounts, to satisfy unpaid tax debt.

Tax Offset

A tax offset occurs when the IRS uses a taxpayer’s refund to pay off an outstanding debt, such as unpaid taxes, student loans, or child support.

Form 1040-X – Amended U.S. Individual Income Tax Return

Form 1040-X is used to correct errors or make changes to an individual’s previously filed U.S. income tax return.

Form 4797 – Sales of Business Property (previously noted but central here for business property dispositions)

Form 4797 – Sales of Business Property is crucial for reporting dispositions of business assets for tax purposes.

Letter 3523: Notice of Disallowed Refund Claim

IRS Letter 3523 notifies taxpayers that their refund claim has been disallowed, with details on appealing the decision if necessary.

Form 4952 – Investment Interest Expense Deduction (highlighted earlier under investment categories)

Form 4952 helps taxpayers claim deductions for investment interest expenses incurred during the tax year.

CP251 Notice

The CP251 notice informs taxpayers of discrepancies between their estimated tax payments and the IRS’s records, requesting that they reconcile the differences.

Form 4562 – Depreciation and Amortization (mentioned earlier under multiple categories)

Form 4562 for depreciation and amortization is crucial for businesses to accurately report asset depreciation for tax purposes.

W-4 Form

A W-4 form allows employees to inform their employer of how much federal income tax should be withheld from their paycheck based on their filing status and dependents.

Letter 4903: Request for Employment Tax Payment

IRS Letter 4903 is sent to employers with unpaid employment tax, requesting prompt payment to avoid additional charges and potential enforcement actions.