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

November 6, 2025

Filing taxes may be a routine task, but it’s far from simple. Complicated rules, endless forms (and variations of forms that make it hard to know which one you need), and frequent changes to the tax code make it easy for the average taxpayer to make errors while filing their taxes.

In many cases, taxpayers aren’t worried about the actual error—they know they can correct it with the right form or amendment. The real worry is being accused of tax fraud and facing criminal charges.

The good news is that the IRS recognizes the massive difference between unintentional mistakes—tax negligence—and intentional deception—tax fraud. Most taxpayers who make mistakes fall into the negligence category, not fraud. Learn more about what sets negligence apart from fraud, what to do after discovering an error, and how we can help.

Key Takeaways

Most errors made by taxpayers are considered tax negligence, not fraud.

Intent is the defining factor—negligence is a mistake, but fraud requires willful intent to evade tax or mislead the IRS.
There are penalties for both negligence and fraud. The penalty for negligence is generally a 20% accuracy-related penalty, compared to a 75% penalty for fraud.
Talking to a tax professional is your next step if you’re afraid of being accused of tax fraud.

Tax Negligence—Common Mistakes and Lack of Intent

Tax negligence occurs when a taxpayer isn’t reasonably careful when filing or paying their taxes. Consider, for example, entering your income from your W-2 while doing your taxes. Instead of typing $54,000, you type $45,000. That increases your refund, giving you money you are not entitled to.

But because you were not intentionally defrauding the government and just made a mistake, that would be considered negligence. Other common examples of tax negligence include:

Math errors, like subtracting or multiplying incorrectly in a way that unintentionally benefits you
Misunderstanding tax rules
Messy or incomplete record-keeping that leads to incorrect deductions
Forgetting small sources of income, such as bank interest or a side hustle that brought in minimal money

The main factor to remember here is a lack of willful intent to defraud the IRS. A negligent taxpayer is one who should have been more careful while doing their taxes, but who did not set out to get extra money from the IRS.

There are still penalties, of course, but those are a far better outcome than the criminal charges that tend to come with tax fraud. The accuracy-related penalty is 20% of the underpayment attributed to negligence.

Tax Fraud—Deliberate Deception and Intent to Evade

While tax negligence is the result of careless or reckless mistakes, tax fraud is the intentional choice to misrepresent your taxes to cheat the IRS out of money. Fraud requires willfulness, which means that a taxpayer knows the rules and chooses to break them in order to benefit themselves. Examples of tax fraud include:

Concealing or underreporting income
Claiming deductions or credits you know you don’t qualify for
Using fake Social Security numbers to create falsified tax returns
Keeping two sets of financial records to hide tax fraud
Hiding assets to avoid tax

The penalties for tax fraud are significantly higher than they are for negligence. The civil fraud penalty is equal to 75% of the underpayment due to fraud. The IRS is careful to note that negligence or ignorance of the law does not constitute fraud.

However, not all fraud is civil – it can also be criminal in nature. When the IRS suspects that a taxpayer has engaged in criminal tax fraud, they take it very seriously. They refer these cases to IRS Criminal Investigation (or IRS-CI) for further investigation. For example, if the IRS believes that you have committed tax evasion (a type of tax fraud), they may initiate an investigation.

Key Differences Between Negligence and Fraud

Still wondering if your tax error will be viewed as negligence or fraud by the IRS? Remember that the key difference is intent. The IRS will look at the totality of the circumstances—basically, all of the relevant factors and information—to determine if a taxpayer intentionally attempted to evade tax payment or defraud the IRS. Some of the key differences are summed up here:

Steps to Take After Discovering a Tax Error

If you’ve made a mistake on your tax return, you’re not alone, and you don’t need to panic. Many taxpayers find themselves in this position each year as they review their tax returns, and most mistakes are considered negligence. You can resolve your tax error with a few basic steps:

Go over your return and records. Figure out where the error occurred so you know what needs to be changed. Have your supporting documents on hand so you can make necessary changes to your tax return.
File an amended return. File 1040-X, Amended U.S. Individual Income Tax Return, with the same forms and schedules you submitted with your original return. You can either submit payment with your return or wait for the amended return to show up on your IRS account—it generally takes 8 to 12 weeks.
Pay any additional tax promptly. Pay any additional tax, interest, and penalties right away to keep interest from continuing to accrue.
Keep your paperwork so you can explain the error. In most cases, this is the end of the road, and you don’t have to do anything further. However, you should keep your paperwork and supporting documentation on hand in case the IRS contacts you for an explanation.
Reach out to a tax professional for additional assistance. If you’re not sure whether or not you need to file an amended tax return, you’re still concerned about potential fraud charges, or you don’t know how to resolve your tax error, it’s time to reach out to a tax professional. A tax attorney can handle your paperwork, communicate with the IRS on your behalf, and defend you if fraud charges are on the table.

How Wiggam Law Can Help

Correcting mistakes and dealing with the IRS doesn’t need to be overwhelming. When you choose Wiggam Law, you can trust our attorneys to help with reviewing tax returns for errors, preparing and filing amended returns, communicating with the IRS, negotiating penalties, and representing you if the IRS suspects fraud.

Whether your issue is negligence (the most likely outcome) or there’s a possibility of fraud charges, you can trust the team at Wiggam Law to advocate for you every step of the way. Call us at (404) 233-9800 or contact us online to set up a time to discuss your tax problems.

Tax Negligence and Tax Fraud Frequently Asked Questions

What are the signs of tax negligence?

Simple mistakes that anyone could make are generally negligence. These include math errors, forgetting to include small sources of income, or poor record-keeping.

How does the IRS determine if an error is fraud or negligence?

The IRS looks at intent to determine whether a taxpayer has been negligent or committed fraud. If a taxpayer intentionally attempted to defraud the IRS, that is fraud. If they accidentally made a mistake that benefited them, that is negligence.